Apple's ambition: to rule the entire music industry

Apple's ambition: to rule the entire music industry (transfer)

Text/sykee

 

There seems to be some misunderstanding of Apple's ambitions in the music industry - most people focus on Apple Music and Spotify competing for the pie of paid music streaming subscriptions. In fact, judging from the series of "interesting" moves Apple has made in the music field, they should not only want to control the paid music industry, but are eager to grab more music market share. Apple is trying to use its financial power to control the music industry, and they're squeezing the last ounce of oxygen out of the music streaming industry.

 

Music is in Apple's DNA

 

If you think back to Apple's earliest iPod products, you'll find that music is actually the source of inspiration for Apple's products, and it's also the most important business for them. Apple's emphasis on the music business goes beyond hardware and software products. The reason why they will enter the "chaotic" digital music distribution and sales market is because Apple believes that it has a strong professional advantage in the field of hardware and software, and This is exactly what other competitors lack. The growing "chaos" in the music industry has also provided an opportunity for Apple to sell its superior customer experience to consumers. However, Apple missed one thing: getting songs.

 

To achieve this, Steve Jobs spent a lot of time "lobbying" the five major US record labels (BMG, EMI, Sony, Universal, and Warner) to explain to them how Apple could deliver a complete, one-of-a-kind music experience . Jobs believes that the traditional model of selling music in record stores in the past can be implemented in Apple stores and on Apple devices where consumers listen to music. Ultimately, the Big Five were impressed, and they realized that there was no other company in the market that could deliver such a superior customer experience as Apple. In the beginning, Apple decided to only sell music in the iTunes store on Mac computers, which was actually a very big risk, because the market share of Mac computers was not high at the time, if the music sales on iTunes were not satisfactory, It is bound to affect the confidence of the five major record companies in the Apple Music model.

 

All went well, though, and the world soon embraced Apple's new music model -- 99 cents to buy a single, and in just six days of iTunes Music, more than a million songs were downloaded. In the years that followed, the iTunes store gradually became the "must-go" place for people to buy music, and more importantly, Apple captured "music attention market share." Now, when people talk about listening to and buying music, the first thing to do is either go to the iTunes store or use an iPod - Apple has "occupied" the music industry.

 

Acquire Beats

 

iTunes' impact on the music industry lasted more than a decade, during which time Apple upended the music industry and almost completely controlled the new market landscape. However, behind the glamorous, cracks began to appear. Startups focusing on music streaming businesses have sprung up, and their market competitiveness has become stronger. By early 2014, Spotify had amassed 55 million subscribers, Pandora was on the rise with the backing of Wall Street, and YouTube became the best platform for listening to free music. While paid music downloads on the iTunes platform continued to grow, it's clear that industry trends are starting to change, and Apple is feeling the threat from competitors for the first time. 

 

In 2014, Apple acquired Beats for $3 billion. You must know that their previous acquisition was only $600 million. Obviously, Apple has realized that the iTunes model is "in trouble". Apple management has never disclosed the specifics of the acquisition, but it is said that Beats co-founder Jimmy Iovine actually provided Apple with a "solution" - if you look at it from another angle, that is, Apple is in a certain Something went wrong, and they desperately needed a solution to their predicament.

 

Apple's strategic steps to rule the music industry

 

After Apple bought Beats, we found that they were more like "pushing their fists back for a better fight" - with the ultimate goal of dominating the music industry. Here are four important steps for Apple to get there:

 

1. Transformation into the paid music streaming industry

 

2. Take advantage of your own strong profit and income advantages to control the structure of the music industry

 

3. Squeeze the “last trace of oxygen” out of the music streaming industry by grabbing revenue share

 

4. Create a sustainable development environment for independent music artists

 

Although each strategic step becomes more difficult, ultimately, the four above are closely linked.

 

Step 1: Transform into the paid music streaming industry. Apple's first and most direct step in its ambition to dominate the music industry: working with music copyright holders to successfully transform the paid download model into a paid music streaming model. The paid music streaming industry is still in its infancy, with only about 90 million people worldwide currently paying for music streaming services of all forms, and there is no doubt that this number will increase significantly over the next few years. In 2015, U.S. paid music streaming revenue surpassed paid music download revenue for the first time. Obviously, Apple has no other choice, they must enter the music streaming business.

 

Last year, Apple began to move into the paid music streaming business in what is considered a hybrid services strategy. For iTunes users, Apple Music's so-called seamless integration of traditional iTunes music and streaming services seems a little bad. However, mainstream music users who focus on listening to live streaming can instead embrace the Apple Music service. At this year's WWDC conference, Apple launched an optimized Apple Music service, mainly to solve some of the bigger problems that users have encountered in the past year.

 

When we judge Apple's performance in the paid music streaming industry, the main measure is the number of paid subscriptions. In fact, the "feud" between Apple and Spotify, the current industry leader in paid music streaming, has been under the spotlight, and the latter has now surpassed 30 million subscribers for its service, two of which are Apple Music paid subscriptions. times. However, Apple Music seems to have more potential, as it took them less than a year to reach the 15 million subscribers milestone of the service, while Spotify took six years.

 

Although it took some detours, Apple still successfully completed the first step in its strategic goal of "dominating the music industry". In less than a year, Apple Music became the second most popular paid music streaming product in the world.

 

As you can see in the chart below, subscriptions to Apple Music's paid music streaming service are growing much faster than Spotify's. Now, relying on a strong mobile ecosystem, a large software and hardware audience user base, and a more mature music streaming market, Apple has gained a huge competitive advantage,

 

However, if you pay attention to the recent growth in the number of subscribers to streaming music services, you will find that the analysis seems to be even more "spooky". The reason why Spotify has attracted a large number of service subscribers in the past is because of discounts and promotions. In other words, Spotify's service subscriber numbers are "water-filled". Spotify currently has nearly 70 million free users, and the company is likely to continue to use discounts and promotions to entice free users to upgrade to paid ones. On the other hand, Apple Music has never used any price concessions, which means that in the next few months, if the "Apple Music vs. Spotify" confrontation is evaluated, it seems that other evaluation indicators should be selected. .

 

As for other paid music streaming competitors, we found that the industry is still "disconnected": Tidal, owned by famous rapper Jay-Z, should be the third largest paid streaming service provider, with more than 40 million subscribers; according to service Deezer, Rhapsody and Pandora are close behind in order of subscribers. In addition, SoundCloud also recently announced its entry into the paid music streaming industry, but it seems to be "thunder and rain" and did not achieve the expected sensational effect.

 

Step 2: Apple uses its strong profit income to control the structure of the music industry. Apple's second-step strategy is more "savage and violent". It is no exaggeration to describe Apple as rich and willful. In order to fight against several of the largest companies in the streaming media industry, Apple intends to use part of the $234 billion in cash on hand, Do these three things:

 

1. Get exclusive music copyright. Apple is betting big on music exclusivity. By working closely with top musicians, Apple believes that exclusive music rights will not only help boost subscriptions to the Apple Music service, but will also help keep Apple Music at the center of music public opinion in the long run. Music exclusive copyright can bring more topics and reports. Here, let’s take an example to illustrate the powerful influence of music exclusive copyright: The reason why music streaming service platform Tidal can have 42 million subscribers, most of them All because of exclusive music rights to Beyonce, Kanye West, and Rihanna. Musicians currently holding exclusive music rights to Apple include Drake, Future and Chance the Rapper.

 

2. Develop original content. In addition to focusing on acquiring exclusive rights to songs and albums, Apple is also eager to partner with labels or musicians to produce other forms of original content, including feature-length videos like the Taylor Swift concert documentary, Beats 1 Shows, even TV series (like Dr. Dre's "Vital Signs"). All these exclusive copyrighted contents illustrate a trend, that is, if you want to be successful in the music industry in the future, it is not enough to just obtain "music". Music and video are two important content industries that interweave and influence each other. A two-pronged approach is required.

 

3. Sponsor musicians. Today, Apple has become more and more like a record company. Although they have not disclosed their involvement in the music industry, we all know that Apple has subsidized the marketing and promotion expenses of a number of musicians. MTV production costs are paid by Apple, including Drake, MIA, The Weekend, and Eminem.

 

Relying on the above three means, Apple's goal is actually very obvious, that is, to make Apple Music the center of people's music discussion. If something big happens in the music world, Apple wants to be on Apple Music. In order to achieve this goal, in addition to spending a lot of money, Apple is also actively building connections in the music industry - it is reported that Apple spent $19 million just to compete for Drake's exclusive music rights. Clearly, the battle for paid music subscribers has only just begun, with Spotify recently poaching Lady Gaga's manager Troy Carter as global head of original music services and making music exclusives a priority.

 

Step 3: By grabbing revenue share, Apple is trying to squeeze "the last breath of oxygen" out of the music streaming industry. With its successful transition into the paid music streaming industry, Apple is one step closer to its ultimate goal of "dominating the music industry." To build stronger relationships with music rights holders, Apple will seek to capture a larger share of music streaming revenue. In the process, Apple hopes to squeeze out the "last oxygen" in the streaming media industry.

 

Apple's ultimate goal is to create a feedback loop in the music industry. If Apple Music is at the top of the revenue pyramid, then Apple will be more determined to strengthen its relationship with music rights holders. In turn, a stronger relationship would make the Apple Music service even better, as Apple could offer more exclusive music content and attract more musicians to join. Better music content attracts more paying subscribers, which in turn captures more industry revenue share. Once this loopback is completed, Apple will be able to bring more income to music copyright holders and stimulate more musicians to “work” for Apple. It is this tactic that allows Apple to maintain a close relationship with music rights holders, while Spotify has opted for a free trial model to lure users.

 

By seeking to control more revenue in the music streaming industry, Apple is making the music streaming market its own "kingdom" so that other competitors won't take more interest in it. Squeezing out "the last breath of oxygen" out of the music streaming industry means that the rest of the music streaming industry won't have much profit. There have been recent rumors that Apple plans to acquire Tidal. If the deal goes through, Apple will not only gain access to its 42 million subscribers, but more importantly, they will gain access to exclusive music rights to Jay-Z and his friends. Hana, Kanye West's album exclusivity has already made Apple very uncomfortable. Ultimately, Apple Music aspires to get all the exclusive rights to the music industry, and the attention and “breathing room” Tidal is getting is clearly unhappy with Apple. By acquiring Tidal, Jay-Z will be added to Apple Music, which will not only give Apple more attention, but also more revenue share.

 

Step 4: Create a sustainable environment for independent music artists. This is the last step in Apple's "domination" of the music industry, and it's also the most difficult and fun. So far, we already know that in order to gain more control in the music industry, Apple has "paid for" the top music artists in the industry, and they have a very large influence in the music industry. If you're going to make some acquisitions, investment deals, or make music in the music business, these people will play a key role. Frankly, these artists don't need to rely on the music streaming industry to find sustainable self-development. .

 

The missing piece of the puzzle, though, is the indie music artist. Musicians try to find a way to not only reach out to their fans, but also to make a noise about sustainability. However, paid music streaming doesn't seem to be for these artists, what they need is something else - a platform that helps indie musicians connect as much as possible with their fans, and then make money off their work, which is the music industry. The "true meaning" of sustainable development. If Apple manages to have one of the most valuable music listeners, they could potentially provide the platform for independent musicians. However, if we look at the App Store platform, it seems that many independent app developers do not have many opportunities for sustainable development on it, so if Apple wants to complete this step, it is still some way off.

 

Owning the majority of music industry revenue, coupled with a sustainable platform for all musicians, could give Apple a bigger presence in the music industry. By consolidating such influence, Apple is stepping on the road of "domination" of the entire music industry.

 

Potential Issues and Risks

 

In every step of Apple's "domination" of the music industry, there will be challenges and risks. Spotify is very familiar with what kind of music consumers like to listen to, so they will use technology and talent to expand their influence - at least for now, Spotify cannot be underestimated.

 

Also, there seems to be some issues with exclusive copyrighted music content. Music copyright owners often want to make their music more heard, which seems to run counter to Apple's strategy of exclusivity. In addition, the exclusive copyright model that only relies on a few streaming services to distribute music is not user-friendly, because this model is very similar to the "brick and mortar video store" of the past, and what is even more frightening is that this kind of "music control in a few" The "in the hands" model could easily lead to a resurgence of pirated music.

 

And grabbing streaming revenue share, if anything goes wrong with Apple Music's design or user interface decisions, it's bound to affect the consumer experience. The last one, and the biggest risk Apple has to face, is the sustainable development of independent musicians. The risk facing Apple is not only that there are not enough music resources, you must know that social media has begun to play an important role in the music industry, which is also another new channel for independent musicians to find sustainable development, and in this field, Apple doesn't seem to be too competitive yet.

 

future impact

 

If Apple can once again succeed in gaining control of the music industry, as it did 15 years ago, there's a lot to be said for that. First, despite being a little late to the market, Apple has shown that it is still capable enough to transition from a legacy technology (paid music downloads) while winning a new business model (music streaming).

 

Second, Apple will use its user platform advantages to establish a "beachhead" in the field of new technologies, and then use its strong financial strength to occupy a favorable competitive position in the industry by grabbing market revenue share. Obviously. This strategy has been tried and tested, and Apple is likely to replicate this strategy to "invade" the next content territory - video. Of course, some people may say that the music industry is easier to be "controlled" by giants like Apple than video, but in fact, Apple will no longer miss the best time to enter the music streaming industry like in the past, they It will accelerate the exploration of the video industry to gain a first-mover advantage.

 

Apple's main lesson over the past few years has been to focus too much on user experience and ignore changes in overall industry trends. When an industry is chaotic and there are many unknown factors, Apple can use its advantages in customer experience to bring more value to customers and attract more users to its platform. Therefore, one of Apple's strategies for "dominating" the music industry is likely to create some "chaos" for the music industry - in fact, Apple, which holds $233 billion in cash, has achieved this through acquisitions, competition and other means. purpose, but Apple will not stop there, they will continue to expand their musical ambitions.

 

 

Original link: http://36kr.com/p/5049665.html

 

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