Can Apple Convince Spotify Users To Pay $10 A Month For Music?
After allegedly attempting to stop Spotify from streaming free music, Apple Inc. (NASDAQ: AAPL) is reportedly ready to announce its own on-demand streaming music service.
Unlike Spotify, Apple's service isn't expected to offer a free listening option. This might explain the firm's concern with Spotify, but it also begs an important question: can the Mac maker persuade consumers to pay $10 a month for music Spotify provides for free?
"Free Spotify isn't gonna be free forever," Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, told Benzinga. "And really the business model is all about getting enough people to pay."
Moorhead said that consumers always pay a price somewhere, whether it's in the form of a monthly fee, advertisements or some other element.
"There are no free lunches out there," he said.
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iTunes Radio: Is It Enough?
Apple is expected to use its existing music service, iTunes Radio, to combat the free listening options from Pandora Media Inc (NYSE: P) and Spotify. That may not be the most attractive option to users who are already accustomed to other services, but tech expert Sean Udall doesn't see that as an issue.
"To me, you pay $10 a month if you're willing to pay $10 a month to any of the other services," Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga.
Udall said that there are currently two companies that have successfully persuaded consumers to pay for streaming music: Pandora and Spotify. He believes that Spotify has the bigger audience in this regard. However, he expects Apple to have the largest library of music, which could give it the upper hand -- in competing with Spotify Premium, at least.
"I like the free [version of Spotify] as well," Udall added. "I do understand the plight of the artist. It's hard for me to feel bad for some of the more popular artists. Band of Horses is a band I like. I don't think the Pixies are worth $100 million."
Thus, if he was going to pay for a monthly music service, Udall said that he would choose the one that pays artists the most amount of money.
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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