More Competition Amongst Streaming Services as YouTube and Amazon Enter the Space

When 2014 began, I wrote that it would be the "Year of the Streaming Service." So far that predication is coming true—perhaps in ways that few of us ever anticipated.

Since that time, Spotify reached the 10 million-user mark. While that was no surprise, attaining that milestone served to solidify their position as the streaming service to beat.

Also, it wasn't much of a surprise that Beats Music launched—it had been expected for a while, and their emergence in the field was welcomed by many.

What is truly making 2014 out to be the Year of the Streaming Service are a couple of events that happened over recent weeks and a couple more that are shaping up now.

While it was no surprise that Beats Music launched, it was a major surprise that their parent company, Beats Electronics, would almost immediately get purchased by Apple. While that purchase included Beats' booming headphone business and will help reestablish Apple as a leading consumer electronics company, it will also help them become a force in the streaming marketplace.

Now comes news that services from YouTube and Amazon are launching.

The recent talk about YouTube's service has mostly focused on parent company Google's treatment of Indie labels and their licensing deals. Setting that aside for a moment, a paid streaming service from YouTube represents a way to leverage the enormous user base of what was originally a free video streaming service that has become a go-to music discovery platform. Though details of the new service are still emerging, being able to monetize all those subscribers through a paid, ad-free service will be a tremendous step forward for YouTube.

The other new service, from Amazon, was just quietly launched. Amazon Prime Music, available only in the US, offers "unlimited, ad-free streaming" of "over a million songs and hundreds of playlists." Because Amazon is advertising Prime Music as a free service, I might say that it is just another way for Amazon to increase membership in its existing Prime service by marketing the added value of streaming music. While the basic offering sounds pretty standard, what is even more interesting is how Amazon is partnering with other services, namely iHeartRadio, to provide further incentives to their users.

In addition, Amazon has introduced the Fire Phone, making both Amazon product launches much more significant. Consumers may not automatically switch to an Amazon streaming service if they already use one of the others. However, that chance multiplies when the Fire Phone and Prime Music are used together. And this synergy represents what Amazon does best: leveraging the company's scale.

Once associated solely with books, Amazon has continually developed new products and services. That strategy is now being applied to streaming music. As I wrote earlier about Apple buying Beats Music to keep iPhone users from leaving the company for another service, it would appear Amazon is attempting to do the same.

Amazon and Google both know their users, and their ability to serve streaming music to them means that expectations for what constitutes a streaming service will continue to grow. This expectation will further shape competition and encourage the other services to change their offerings and thereby strengthen the overall streaming business. In addition, Amazon's strategy of using Prime in conjunction with other services means they can build out without being a direct competitor, taking a little pressure off them while still allowing their business to grow.

A couple of new streaming services will only serve to increase competition and consumer choice. Both are good things in the continued growth of the streaming marketplace.

Guest Post: Why Spotify is the best, and the worst.

Note: Jim Tuerk is the label manager for Greenleaf Music, one of the record companies I work with. This post from early in 2012 recently caught my eye and he graciously agreed to let me reprint it.  The original post is here, but you can read more at their blog. Enjoy! —Mark

I’ve been streaming music on Spotify like it’s going out of style these past few months. The free version was just alright, but as with many in the digital music generation, I hate ads. And as you might guess, I have a pretty expansive iTunes library, so it wasn’t a priority to get in deeper with a paid account—paid accounts remove ads and allow you streaming capabilities on your phone. When I did take the plunge into the paid application, it was mostly so I could stay current with new releases in the indie rock world—something I doze off on sometimes only to be met with, “You haven’t heard _____?!” from one of my friends. And I have to say I am pretty hooked now.

A friend of mine recently equated Spotify to giving pirates the key to the booty, meaning that there really isn’t any reason to pirate a song or record if you can stream it for free online. And I’ve found that to be true. Sometimes, I just want to hear the record before I buy it whether that means scouring YouTube for tracks, or searching out other methods of downloading. What inevitably happens is one of two things: 1) I like the record, and buy the vinyl or digital, or 2) I don’t like it, and delete it from my memory (and my computer if it’s there). With Spotify, I rarely have to search illegal avenues and now have a list a mile long of records I have discovered and now need to buy. And that list grows exponentially due to the social piece of Spotify—which in my mind is the nail-head they hit spot on.

Example: A friend sends me a track on Spotify messenger by a band called White Denim. I dig it, check out their catalog further, fall into fan-dom, see a show, buy all the vinyl they have on the merch table, and go home happy to have supported the band directly with an empty wallet and an arm full of music.

But are there more people like me out there? I assume there are, but in far less numbers than the people who simply pay their $10 and stream all they want without a second thought to buy a CD/LP/download or see a show. For me, there’s something about not owning a piece of music I like that rubs me the wrong way. Call me old-school. Maybe it’s because I’m a musician and want to feel I’ve supported folks like me. But more simply, I think it’s that I can’t quite go all-in on consumption without ownership.

One of my favorite singers, David Lowery, is a smart dude. He wrote this expansive article on the current music business model vs. the old model a couple weeks ago. It’s a helluva read. He writes: “’The consumer wants music to be free!’ [the Digerati] shout as they pound their tiny fists on their Skovby tables. The consumer also wants cars to be free. And beer. Especially beer. But any market involves a buyer and a seller. A consumer and a producer.” And furthermore, that some equate, “the unauthorized use of other people’s property (artist’s songs) with freedom,” but “…when it comes to their intellectual property, software patents for instance, these same companies fight tooth and nail.”

(Note: There is so much more to quote from over there. You should read the full article.)

Spotify hasn’t been forthcoming with their payment structure as of yet (Digital Music News is a good resource for that). While their model allows for a company to join up or pull their content, the “freedom” for consumers at the expense of artist revenues is why a lot of labels are pulling their catalogs from there (one of my favorite labels, Drag City, being one of them). But labels can lose a lot by not servicing Spotify—specifically the aforementioned social aspects of the software. It’s a great tool for artists to get their music out there to the people like me, but none of that matters if people use Spotify as a one-stop for all their music consumption. It really only works for artists if those engaged fans are somehow converted into paying consumers—meaning they don’t just pay Spotify, but rather support the artist directly. Think about the example above: I bought their albums, went to a show, and still listen to them on Spotify. But if I were just listening to them over and over again on Spotify without buying, who’s winning besides me and Spotify?

If you’re here reading this post you probably have checked out some of Greenleaf’s music and gone farther than a cursory Spotify relationship. For us at GLM, pulling our music from Spotify isn’t something we want to do. One alternative we’ve created is the Subscription with streaming and downloadable music not available at Spotify (or iTunes or Amazon or anywhere else). We definitely hope you’ll want to hear this music and join up at one of these plans. For us it’s about having a mechanism in place that helps convert those who find music on Spotify or elsewhere into a more direct relationship with our artists. We’re working with Spotify as just another tool to generate interest in the music, whether it’s live shows, CDs, streams, sheet music, or any creative output coming from artists we believe in.

My larger point in all this is that we all need to be thoughtful about how our consumption patterns affect those who are making the content we’re consuming. Paying your $10 to an aggregator like Spotify every month doesn’t get you off the hook. Get out there and see a show, buy an album or even just a song if you like it. Don’t just sit there thinking, “Man, Spotify rules! I never have to pay for an album again!” because you’ll be left one day without a WiFi connection and a deafening silence that could have been cured for a couple extra bucks—money that will help keep your favorite band alive and kicking one more year.

By Jim Tuerk, May 3, 2012. Follow @jimtuerk on Twitter.