Apple Chief Executive Tim Cook unveiled the company's long-anticipated music-on-demand service Monday, offering this assessment: "It will change the way you experience music forever." That's just the sort of humility we've come to expect from Apple. The fact is, consumers' music habits have been changing for more than a decade, and would have continued to do so with no help from Cupertino. Nevertheless, Apple's belated entry into the market for subscription music services could turn what has long been a niche product into a mainstream one.
Like the iPod, the iPhone and the iPad, the new Apple Music service isn't trying to create a new category of product. Instead, it's entering a field already occupied by several other companies, none of which has been able to turn a cutting-edge product into a mass-market must-have. The most popular on-demand music service is Spotify, which reported 15 million paying customers in 58 countries in January. Given the number of music fans around the world, that's barely scratching the surface.
Part of the challenge for on-demand services is that they're offering a fundamentally different way to pay for music: They sell access to a huge library of songs and related programming for a flat monthly fee, rather than selling copies of songs that people can keep. As a group, however, they've spent very little to market this idea to the public. If past practice is any guide, Apple will promote Apple Music with the same vigor that elevated iPods and iTunes to dominance.
No amount of marketing will make a difference if Cook's predecessor, the late Steve Jobs, was right about consumers not wanting to "rent" music. But consumers are rapidly losing interest in buying music too. Not only have CD sales plunged but paid downloads are slipping as well. The question now is whether the typical music fan can be persuaded to spend more on monthly fees for access to that huge online library.
Unlike Spotify and YouTube, Apple won't be offering a free, advertising-supported tier to whet customers' appetite for a paid subscription. That could slow adoption of Apple Music, although it will answer complaints from the labels and artists about free services that share a much smaller amount of revenue. The larger problem for many artists is that the contracts they sign entitle them to only a sliver of the revenue their labels collect from on-demand services. Meanwhile, the popularity-based formula for dividing royalties favors chart-topping acts, leaving many small artists worse off as their fans switch from CDs and paid downloads to streams.
These problems would be easier to solve if the pie being divided were significantly bigger. That is Apple's goal. But all of its predecessors have been aiming for the same target, and it's proved to be particularly hard to hit.