Music streaming monster Spotify boasts some 60 million users. That’s nearly the population of the two biggest states, California and Texas, combined. But only 15 million—just 25%—of those subscribers actually shell out for the premium service, which means the vast majority of the service’s business model depends on less-lucrative advertiser support. And if Apple has its way in convincing major record labels to cease participating in that free basic membership, Spotify would suddenly find itself in trouble, a fallen giant on a digital beanstalk.
With the re-launch of its Beats streaming service imminent, the Mac mafia doesn’t want, or intend, to offer any no-charge options beyond an initial free trial, a method that is right up the alley mega-labels such as Warner Music Group, Universal Music Group, and Sony are lurking in.
“We want to accelerate paid subscription,” Universal honcho Lucian Grange told the Code/Media conference earlier this year. “Ad-funded on-demand is not going to sustain the entire ecosystem of the creators as well as the investors.”
Basically, they want to make more money. It’s understandable considering the music industry has been folding up like a salted slug ever since Steve Jobs dropped his iTunes bomb on it a decade ago. And now even digital sales are declining for the second year in a row, as more and more people flock to the streaming model. The future is clearly streaming, but that means, in order for corporate music megaliths to maintain their financial status quo—or even viability—the average person needs to start coughing up some more cash for their tunes.
Luckily for the labels, Apple likes to make money, too. And they’re really, really good at it, often allegedly resorting to less-than-savory methods to maintain a happy bottom line. It’s the “less than savory” accusations that reportedly has those killjoys at the Department of Justice sniffing around, especially with Apple losing that pesky eBook antitrust suit to the tune of nearly half a billion dollars.
Of course, that’s not such a punishing sum when you consider the iPhone maker has a cash reserve of $178 billion in its bank.
But it’s not just the DOJ that has interest in Apple’s music power moves. According to the New York Post, the European Union’s Competition Commission has started looking into whether Apple and other streaming services are in cahoots with labels to extinguish free subscription models.
For its part, Steve Jobs’ baby is planning on leveraging a combination of exclusive content, their near-ubiquitous market saturation, and the hard-to-tarnish hipster cool of the Apple name to leave the competition in the dust. Coupled with the same attitude inherited from Jobs himself at the birth of iTunes, and they have more than a fighting chance. But they’re in a crowded space. Even before Jay-Z and friends re-launched their Tidal service a couple weeks ago, the number of players in the streaming game was uncomfortably high.
Plus, let’s not forget that Spotify, the streaming world’s Coke to everyone else’s generic cola, still hasn’t done anything but consistently lose money every year, like its competitor Pandora, which paid Pharrell $2,700 for 43 million plays of his hit track, the ironically titled “Happy.”
No matter how you spin it, the whole racket comes out sounding pretty damn crummy. With news like this the norm, it’s certainly no surprise that vinyl record sales are at a 20-year high. Forget irony or nostalgia, the people just don’t want the bullshit.
Correction: A previous version of this story incorrectly said Spotify had paid Pharrell only $2,700 for streaming his song "Happy." Instead, it was competitor Pandora that paid him that. This article has been updated to reflect the correction.