Why Apple's Eddy Cue Thinks the App Store Is the Next Popularity Benchmark for Music Streaming

Jason Bollenbacher/Getty Images for SXSW
Eddy Cue, Apple’'s senior vice president of Internet Software and Services attends Eddy Cue: Curation in Media - Why It Matters during SXSW at Austin Convention Center on March 12, 2018 in Austin, Texas. 

He also announced Apple Music now has 38 million subscribers, an increase of 2 million from last month's update.

Minutes after Apple announced its acquisition of magazine subscription service Texture on Monday morning (March 12), the company's senior vp, internet software and services Eddy Cue took to the stage at South by Southwest to share his vision for media curation across music, TV, film, sports and even healthcare.

Interestingly, moderator CNN senior reporter Dylan Byers introduced music into the conversation as “formerly the core product of Apple” -- signaling how the corporation's product strategy has undergone a sweeping, tectonic shift in the years since the release of the first-generation iPod Classic in 2001.

For much of the first half of the 21st century, music drove Apple’s hardware sales, particularly across the spectrum of iPod models including the Nano, Shuffle, Mini and Touch. In contrast, Apple officially discontinued production of the iPod Nano and Shuffle in Jul. 2017 and the company's overarching strategic vision today -- and, subsequently, Cue’s keynote -- seems to lean heavily on news publishers, original video, augmented reality and the App Store, with music a mere drop in the commercial bucket.

Byers asked Cue whether he felt threatened by Spotify attracting nearly twice as many paid subscribers as Apple Music; the former service has 71 million subscribers, according to its SEC filing. Cue countered by announcing that Apple Music has 38 million subscribers now (and 8 million free-trial users), an increase of 2 million from the previous update in Feb. 2018.

Yet, Cue also added that music streaming metrics as they currently stand “are not really that important” in the context of the larger, sprawling digital media landscape.

“If you look at the number of subscribers Spotify and Apple Music have together, versus the number of people listening to music around the world, or even the amount of traffic to our App Store -- we have half a billion people visiting the App Store every week -- music is just this big in the grand scheme of things,” said Cue, pinching his fingers closely together. "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. 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.”

Cue’s emphasis on the App Store as a traffic benchmark for music’s future aligns well with his company's latest product and mergers and acquisitions moves. In Dec. 2017, Apple acquired music recognition service Shazam, the seventh most popular Music app in the App Store by number of downloads as of press time. The deal brought Apple one step closer to owning the entire media consumption cycle for its users, as well as becoming a legitimate leader rather than simply a bandwagon-rider in the music-streaming landscape.

Throughout his talk at SXSW, Cue also cited AR as an important growth channel for Apple, claiming that over 2,000 apps in the App Store now leverage its ARKit software development kit -- granting these apps the potential to reach hundreds of millions of ARKit-compatible devices, as opposed to staying confined to a smaller, premium niche as the VR headset industry is currently facing. Major sports leagues like the PGA and MLB are already working on their own ARKit-enabled products, arguably paving the path for a future in which AR is "a mainstream product that people use every single day," said Cue.

Byers then discussed how, unlike video streaming services like Netflix and Hulu, the dominant music services have more or less the same millions of tracks as each other, forcing them to lean on UX and distribution rather than content alone for differentiation. This may leave Spotify in the weeds behind Apple, Google, Amazon and even terrestrial radio when it comes to owning the physical distribution channel for music (smartphones, voice-enabled speakers, cars and more).

In response, Cue said kindly that “I think Spotify is doing just fine,” prompting chuckles from the SXSW audience. “The opportunity here  -- and it’s not just about us, Spotify, labels or artists -- is about sheer growth for music streaming, about compensating for that audience gap.”

Apple itself seems to be stumbling on its first moves into the smart-speaker space, with its new HomePod suffering from a late release schedule that missed the holiday rush, as well as from lackluster sales performance ever since its release on Feb. 9. Recent research from VC firm Loup Ventures found that the HomePod had only a 3 percent penetration of the smart-speaker market as of Feb. 2018, compared to 23 percent for Google Home and 55 percent for Amazon Echo devices.

Despite this under-performance, “we’re actually very pleased about the HomePod,” claimed Cue. “It’s a new category of product. It’s by far the best-sounding speaker on the planet and it’s also the best musicologist: You can listen to [Bruce Springsteen's] Born To Run and ask the HomePod who the drummer is at any point and it’ll tell you.”

Just last Monday (Mar. 5), Apple released a promotional short film directed by Spike Jonze for the HomePod, starring FKA Twigs dancing to Anderson .Paak’s latest single “‘Til It’s Over.” The film's message fell in line with Cue's thesis at SXSW: the music experience of the future must become even more interactive and augmented across multiple touchpoints in order to compete with the App Store, video streaming and other media sources for traffic, revenue and share of attention.

"The industry is excited about streaming, but we are driven to make it much more," Apple Music chief Jimmy Iovine told Billboard last January. "We have a road map and are committed to making that leap to where it is more than a utility.”

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