Just two days after Ostroff’s announcement, The Information reported that Apple was working on a brand-new media bundle that would combine Apple Music, original TV content and news magazines into a single subscription offering. Apple was already showing significant interest in news aggregation back in Mar. 2018 with the acquisition of magazine subscription service Texture -- which, incidentally, is part-owned by Condé Nast, Ostroff’s current employer.
According to Apple’s Q2 2018 earnings report, services accounted for a record $9.2 billion of Apple's quarterly revenue, up more than 30 percent year-over-year. But as for music, there's still a long way to go on a global scale.
"There are easily 2 billion people in the world who can afford to pay for some level of music, yet Spotify and Apple Music combined have only around 100 million subs globally," Apple's company's senior vp, internet software and services Eddy Cue said at South by Southwest in March. "There’s a huge gap there and we both have to grow by a significant amount in order to get to the numbers that we should be at.”
For Apple, much of the growth in music streaming might actually come from investing more in video. A recent memo from RBC Capital Markets analyst Amit Daryanani claims that original TV content alone could more than double Apple Music’s global subscriber base to over 100 million by 2021.
In fact, even without an explicit bundle, Apple Music is already well on its way to taking Spotify’s spot as the top streaming service in the U.S. Internal major-label forecasts project Apple Music’s U.S. subscriber base to reach 27 million by the end of 2017, ahead of a projected 24 million paid subscribers for Spotify, as first reported by the Financial Times.
More than Apple, Amazon presents a tried-and-true case study for the power of non-media bundles to drive media subscriptions. In April, Amazon told Billboard its Music Unlimited subscriber base had doubled over the previous six months -- thanks largely to the growing popularity of Amazon Prime and the Amazon Echo’s dominance of the growing smart-speaker market.
While Amazon has yet to break out specific subscriber activity across music, video and other individual products within its Prime membership, the parent company told Billboard it touts “tens of millions of subscribers” for its Music Unlimited and Prime Music services combined. Analysts have ranked Amazon Music overall as the third-largest streaming service in the world, behind Spotify and Apple Music.
How can Spotify compete? The streaming service recently extended a bundle offering with Hulu’s Limited Commercials plan to all of its Premium subscribers for $13 a month, after eight months of running an even more discounted bundle for college students at just $5 a month. Sources tell Billboard the two companies should get closer together if they want to stand a chance against big-tech rivals in an increasingly cutthroat streaming landscape.
Spotify’s video history in particular has been fraught at best. Sources tell Billboard the company made several handshake acquisition deals for scripted TV shows over the last year -- including a music-related series involving Moby and Rashida Jones -- but those deals ultimately fell through. Several years ago, even before Hulu or YouTube launched their own online TV services, Spotify reportedly tried to assemble a proprietary TV bundle for a live video service in Europe, but abandoned the launch after failing to settle on the right price for the offering.
Multiple senior video and content execs have left Spotify over the past year, making it even hard for the company to nail down a solid video strategy. Tom Calderone, Spotify’s former head of video, left the company in August 2017 and was replaced by former head of Disney’s Maker Studios Courtney Holt a month later. Ostroff’s predecessor Stefan Blom departed shortly thereafter last January. And, most recently, Tuma Basa, who was one of Spotify’s most public-facing figures as its global programming head of hip-hop, abruptly jumped ship to join YouTube as director of urban music in March.
It doesn’t help that Apple and Amazon have upwards of $1 billion and $4.5 billion to spend on original video content in 2018, respectively, while Spotify is still far from turning a profit.
When asked to comment on upcoming content bundles in the pipeline, a Spotify rep simply referred Billboard back to the existing Spotify/Hulu deal -- but leaked user surveys suggest much deeper plans.
In May 2018, TechCrunch reported Spotify was surveying users about a hypothetical three-part bundle with Hulu and Scribd, which would encompass music (Spotify Premium for Family), video (Hulu’s Limited Commercials) and audiobooks (one free book credit from Scribd) for a total of $17.98 a month.
Interestingly, Spotify has been fighting for years to do a better job itself at hosting non-music audio content on its platform. The company has been signing seven-figure podcast deals with stars like Amy Schumer, and even developed its own multimedia format for podcasts and audiobooks called “Spotlight,” which counts media brands like BuzzFeed News and Cheddar as key partners. But Spotlight has failed to gain any meaningful traction on the platform compared to music and playlists, likely triggering Spotify to reach out to Scribd and other third parties for brand-association help.
It also makes sense Spotify’s Family and Student Plans have become the focal points for the company’s existing and potential bundles: both plans have higher retention on the service than normal Premium and ad-supported offerings and the Family Plan in particular was a driving force behind Spotify Premium subscriptions growing 46 percent year-over-year in 2017, according to the company’s SEC filing.
That said, Spotify is aggressively exploring and testing content and data bundles with normal Premium accounts as well. In Jun. 2018, Android Police reported Spotify was surveying users about a potential mobile unlimited data-only bundle (i.e. no calls or texts) with Spotify Premium for $30 a month -- perhaps a nod at the increasingly significant role of telco partnerships in the platforms' global user-acquisition strategy.
Earlier in March 2017, Spotify mistakenly offered some users the opportunity to upgrade to a hi-fi tier for an extra $5 to $10 a month -- which would have also included a free vinyl record every month and discounts on other limited-edition vinyl, à la VNYL and Vinyl Me, Please. In fact, Spotify already partners with Vinyl Me, Please to sell vinyl editions of Spotify Singles on the latter’s website.
But even if Spotify were to follow up on all of these partnerships and integrations, it would still glaze over the fact Amazon and Apple’s long-term competitive advantage lies in bundling music with proprietary hardware and services, not with third-party content.
The one place where Spotify might have a leg up: advertising. Amazon is clearly the global winner when it comes to retail at large, but neither Amazon nor Apple offers an ad-supported version of their music services beyond a free trial. This gives Spotify slightly more wiggle room to court advertisers with granular listening data, as well as with upcoming self-serve tools such as Ad Studio.
“Music data, I think, is really unique,” Danielle Lee, Spotify’s vp/global head of partner solutions, said at Cannes Lions in June. “We really believe that we can extract unique insights based on how you stream. You can understand habits. You can understand moods, mindsets, tastes. And you can start to predict behavior.”
By tying music to behavior, “music has become a metric system, perhaps for AI-related services to be rolled out in the future,” an advertising source tells Billboard. “So I think one needs to look beyond the single platform to understand what the end game might be -- how user data can be used outside of Spotify’s platform.”