Armed with a co-sign from Toronto rapper Drake, Apple Inc. finally entered the streaming-music world on Monday, offering its users a new way to hear songs as its dominion of downloaded music dwindles.
The hip-hop artist joined Apple's executive team onstage during the company's annual Worldwide Developers Conference opening keynote address.
The new $9.99 (U.S.) monthly service, called Apple Music, will launch on June 30 in more than 100 countries, augmenting the downloads the company offers through its iTunes Store, which revolutionized the way music could be consumed online when it launched 12 years ago.
A lot has changed online since then, especially in the past few years, as numerous upstart companies such as Spotify, Deezer and Rdio began offering streaming-music services that give access to tens of millions of songs, usually for about $10 a month. Big-spending music fans have begun dumping their disposable income into these all-you-can-stream services; they grew by 39 per cent in 2014, while download revenues fell 8 per cent, according to the International Federation of the Phonographic Industry.
With the heady, high-margin days of the iTunes Store's digital dominance slowing down, streaming music is a natural play for Apple. While competitors such as Spotify have built the market from the ground up, they have yet to reach either sustainable profitability or the ubiquity of iTunes.
Apple has an enormous advantage: name recognition. It is the world's largest company by market share, so its entry into streaming could once again change the industry standard of music consumption.
Apple Music will let users stream unlimited music, just like its chief competitors, and will offer numerous frills that aim to make the product the centrepiece of fans' music universes. Its Beats One 24-hour digital radio station, helmed by former BBC Radio 1 DJ Zane Lowe, is an attempt by the company to become the world's taste maker. And like Jay Z's new high-fidelity streaming service, Tidal, Apple Music will offer a "Connect" portal to keep fans up-to-date with content, such as new songs and lyric previews, uploaded directly by artists.
Drake, who often waxes poetic about his role in popular culture, appeared mystified by the product's capabilities to bridge the gap between artists and fans. "This is something that simplifies everything for the modern musician like myself and the modern music consumer like you," he said.
Apple's chief executive officer, Tim Cook, also praised how it will change the game, calling it "the next chapter in music."
At the conference, which also announced updates to Apple's mobile wallet and desktop and mobile operating systems, the technology company repeatedly made reference to its pre-eminent dominance in the music world.
David Bakula, Nielsen Entertainment's senior vice-president of analytics, said it was "very important" for Apple to bring its muscle to the nascent streaming-music industry. "There's still a lot of room for growth in the all-access streaming music business," he said in an interview, noting that the service probably will not cannibalize Apple's existing iTunes business.
While many of Apple's users will jump into the streaming option, Mr. Bakula said, "I don't know if they're going to be monetized any less than in the past. … It remains to be seen how consumers adopt it."
Tyler Goldman, the North American chief executive of streaming service Deezer, felt underwhelmed about the announcement of his new would-be competitor, which is similar to many streaming competitors. "Obviously, Apple is an incredible consumer-facing company," he said in an interview, "but I wouldn't say anything about the announcement was revolutionary."
He said that while the new service will probably help Apple stave off declining downloads, he believes that the huge company will eventually focus more on its new free radio products than subscription streaming, because of its need for massive numbers to declare new products a success. "For music to matter to Apple," he said, "it needs to get hundreds of millions of users."
Rdio, another global streaming leader, issued a statement mocking Apple's 1981 "Welcome, IBM. Seriously" ad. "Welcome, Apple. Seriously," the company wrote. "… We look forward to responsible competition in the massive effort to make music available legally for anyone to enjoy anytime, anywhere."
Apple has toyed with streaming music before, including with its iTunes Radio service, which lets users stream customizable stations of its music to their audio player. Apple watchers have long speculated a move into the on-demand subscription market, especially since the company acquired acclaimed headphone maker Beats Electronics in 2014 just after it launched its own Beats Music streaming service earlier that year.
Apple's entry marks a major moment for subscription streaming music, which has helped to boost the otherwise sluggish global recording industry. The sector saw no growth in 2014, sitting at $15-billion (U.S.) in revenues, according to IFPI. But content licensing costs – royalties to labels, publishers and artists – are expensive and music-streaming companies have shown no indication of sustaining profits of their own.
Most streaming companies have argued that that will change with scale, but scale has not happened yet – for the original services. Apple, which has sold hundreds of millions of iPhones, now has just as many potential users for Apple Music. Well known and wildly profitable, Apple has the chance to bypass the scaling struggle its competitors have long had. (In a company first, it will also make the Music service available for Google's Android mobile platform later this year.)
Apple declined to say if Canada was among the more than 100 countries in which the service will launch this month.