While watching the Apple special event from last night I was really touched when Steve Jobs thanked the 20 something year old who had donated his organs and whose Liver he was the recipient for. He encouraged everyone to be an organ donor, something I would encourage everyone to do as well.
I wonder if the donor’s generosity inspired Steve to open up the Apple App store to the Spotify and Real Media’s Rhapsody music streaming services.
I have to admit I didn’t think Apple would approve these apps, especially after their decision with Google Voice. So why? Why did Apple do this? Here’s my thinking on this.
I think there’s three prongs to this strategy:
Firstly the sales of iPods and iPhones to people who want these apps, then getting a number of these users to fall in love with the product and then move up to purchasing a mac will outnumber the loss of revenue that Apple will suffer on the iTunes music platform, I’m sure the margins on music are no where near the margins on hardware for apple so of course you push the hardware at the cost of the music service.
Secondly, this isn’t new, Apple allowed the Last.fm app and other music apps before, but Last.fm is not as good as Spotify and the Rhapsody apps, although Last.fm is free and Spotify and Rhapsody are pay for apps. And there in lies the rub, I bet the bulk of users spend less then the £10/month you need for Spotify or the $15/month you need for Rhapsody. Also there’s probably a group of users who want to own the music they buy, the old school users. And between these two groups of users the number of users who are left to move to Spotify and Rhapsody is not significant.
The third and most interesting prong is open competition. I love the Sun-tzu line “keep your friends close and your enemies even closer” and I think this is what Apple’s doing. Apple’s competing with the likes of Real Media and Spotify on their own turf. Apple’s launching things like liner notes (iTunes LP – think extra’s on a DVD), homesharing and other services with iTunes and trying to compete with these streaming services. I believe Apple is betting that their service is more integrated, easier to use, and all and all better then their competitors.
With all three of these prongs Apple comes out ahead. But Apple doesn’t stand still. My guess is if Spotify and Rhapsody do show a significant uptake Apple will offer a streaming service in the next 3 years.
I love Spotify and will probably subscribe to a premium subscription so I can use Spotify on the go, but if I were to bet on who will come out on top I’d find it hard to bet against Apple. Apple might not be as totally open as people would like – Goog Voice anyone? But you have to admit when they are open they really know what they are doing.
