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How are Apple’s plans impacting on the freemium debate?

By | Published on Monday 9 March 2015

iTunes

So speculation continues to mount about what Apple has planned for its new fangled iTunes-Beats mash up service, and about the general mood over at Universal Music about all things streaming music. And fans of colliding speculation will be pleased to know, the two topics came together in gossiping circles last week.

We all knew that, with download revenues peaking, and streaming growth not yet significant enough to compensate for that and continued CD sales decline, freemium streaming services would come under the spotlight this year.

While Spotify argues that its freemium level is the main marketing channel for selling £9.99 a month premium subscriptions, some reckon (not Spotify mind) that the high numbers of people now using freemium streaming services is responsible for the decline in download sales in many key markets.

And even if you don’t buy that, it seems certain that the digital music sector needs to develop some mid-market streaming services for the majority not willing to pay £9.99 a month – so that streaming can go truly mainstream – but services like Spotify Freemium are so good, it’s not clear what a £2 a month or £6 a month service might look like.

Recent rumblings around Universal Music’s HQ in LA, not to mention some remarks made by the major’s chief overseer Lucian Grainge, have suggested that opinion there is swinging towards the mantra “Spotify Freemium Bad”, with some wondering whether that shift in mood was in anyway linked to the recent departure of seasoned UMG digital execs Rob Wells and David Ring.

Which makes the latest round of licensing talks between Universal and Spotify very interesting indeed. It was previously thought that the majors wouldn’t rock the boat regarding Spotify’s freemium-to-sell-premium business model this side of the streaming service’s IPO, they being set to benefit from the big-bucks sale of the company from their minority equity stakes. But with Spotify now reportedly raising another half billion in finance, it’s looking likely that Wall Street flotation is someway off, and maybe the labels can’t wait.

Meanwhile, as Universal possibly tries to persuade Spotify to make some radical changes to its freemium options, the major is also talking to Apple as it gets ready to relaunch the Beats Music streaming service within the iTunes ecosystem later this year.

And according to Re/Code, Apple’s music chiefs – including former Universal exec Jimmy Iovine – are likewise down on Spotify-style freemium, possibly because of the financial hit those digital firms offering such a service have had to take. Apple won’t want to take that kind of hit, despite being one of the few companies who could afford to. Which means Apple is planning on retaining the Beats Music strategy of offering only a paid-for tier for its fully on-demand streaming set-up, albeit with a free trial period.

Though that would make it harder for Beats to compete with Spotify, so presumably Iovine et al are putting further pressure on the Universal digital negotiators to persuade a rethink from the Swedish streaming firm. And word has it Apple reps are also talking up windowing and exclusives, making the newest and most prime of content only available to premium users, and preferably only Apple’s premium users.

That said, it’s thought that the new-look iTunes platform will still include an element of freemium streaming in the form of iTunes Radio, the Pandora-style set up already live in the US. Which would put iTunes/Beats in similar territory to Rdio, which offers ad-funded personalised listening for free, and fully on-demand streaming for paying customers.

Which all makes some sense, until you throw the YouTube issue into the mix. Which Spotify always will. So, fun times ahead. There are more thoughts about the problem with freemium in this CMU trends article from late last year.



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