Apple 'puts the scares on Spotify'

Spotify was supposed to launch in the United States last year - but it may not now even launch this year. An intriguing explanation for the delay has been floated by Greg Sandoval at CNET - Apple is putting the scares on the music business by pointing to doubts about the viability of Spotify's business, he suggests, and playing on the labels' fears that revenues that the digital download market may be affected.

(There are other factors cited which may be more concrete - but these will be familiar to you.)

Major labels love Spotify so much they're the largest investors in the start-up, with an 18 per cent stake - something Spotify initially denied. The rationale was that free on-demand music provided an alternative to unlicensed file-sharing. Yet the passion isn't uniformly shared, and shows distinct signs of waning - without any prompting from Apple.

Warners' Ed Bronfman thinks free streaming services give away the farm for peanuts, and aren't viable in the long term. In February he pulled Warners back from supporting ad-supported streaming services describing them as "not a net positive".

More recent research contradicts his fears.

That hasn't stopped world+dog from following the Spotify and building me-too services. Google and Apple are believed to follow Microsoft (via Zune Pass), veterans such as Rhapsody and We7, and startups such as Rdio, into the same space. Sky Songs also includes streaming - one of many ISP-bundled streaming options expected to trickle out.

To be fair, Spotify has responded quite rationally - by closing the garden gate, and making paying for the music access easier and more flexible. The free, ad-supported Spotify is no longer open to all-comers, and you may have to wait as long for admission to the club as for a phoneline in the Communist GDR. If you want in, you really have to pay.

For Apple there's really only one concern, and that's to protect and enhance its device revenues. That's the strategy, and everything else is a tactic. Apple is much more likely to be concerned by Google's entry of into the music business, rather than Spotify's arrival - for a successful Google music service would weaken the demand for an iPod or iPhone.

Apple almost certainly has a streaming service up its sleeve, and market testing suggests that thanks to its entrenched position it would be a success. This isn't a given, considering that its social network Ping carries a bit of a pong, but Ping isn't very good at all.

Finally, the dreary saga of "will it, won't it" launch again shows how the territorially-divided music business can use delays as a tactical weapon, when it suits them. ®

Related link

Spotify crashes into Apple [CNet]