Apple promised the iPod would put 1,000 songs in users? pockets, turning the iTunes Music Store into an overnight success.
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But it?s not that simple for the next generation of digital music distributors, who are promising to put every song ever in a users? pocket, and it might take years to see whether their services will be anywhere near as lucrative.
A new generation of music services is touting catalogues of millions of songs, largely accessible via WiFi or cellular streaming, to laptops, tablets or mobile phones.?Though not every service is available in all countries, the list of competitors runs long. Relying on either monthly subscriptions, or short, in-stream ads, there are the heavyweights ? U.S.-based pioneer Pandora and the global juggernaut Spotify ? alongside European and Asian favourite Deezer, and smaller but competitive entrants such as Rdio and Songza accessible in Canada.
?The industry right now ? there?s a lot going on,? said Chris Becherer, vice-president of Rdio?s product team. ?It seems like there?s a new streaming service every week coming online.?
These services are popular, which is in part why so many new entrants are eager to compete ? but they they are not yet successful. And while the secret to success remains elusive so far, two recent models show the most promise.
?You can sort of split them between machine curation and human curation,? said Anthony Mullen, a Forrester senior analyst who studies the industry.
?Human curation has always been very important in music ? but the other approach is obviously infinitely more scalable.?
Services such as Spotify, Rdio and Deezer skew towards the on-demand model, where the onus is typically on the user and his or her friends to choose songs and curate playlists from a vast catalogue of music, both new and old.
But for service providers, this level of control comes at a very literal cost, as licensing rights are typically more expensive.
It seems like there?s a new streaming service every week coming online
The other model favoured by Pandora, Songza and others is more akin to Internet radio. A user can choose his or her favourite song, artist or genre, and complex musical algorithms are left to generate endless personalized stations filled with similar types of songs. Licensing rights are cheaper, because like radio, users have less control over what they can listen to at any given time, but is perceived by some to be a more convenient listening experience ? one that is less hands-on.
Both Google and Apple have announced music services with similar radio-like functionality in recent months.
?I think there is a very distinct need for both kind of services, as there always has been. Like listening to physical records and listening to radio, they?re not exclusive,? said Aapo Markkanen, a senior analyst with technology market intelligence firm ABI Research. ?Both of them will be used.?
Rdio, in fact, is betting that the two models don?t have to exist in opposition, but can actually complement one another quite well.
On Thursday, the San Francisco-based streaming service announced a new feature called Stations. It generates personalized radio-like stations based on a user?s favourite songs and artists, as well as Twitter follows and Facebook likes.
Pick a song, artist, genre or even the musical collection of a friend, and Rdio will generate a customizable playlist populated with other songs it thinks you?ll like,?similar to what competing services such as Pandora and Songza already do ? that other side of the streaming music coin.
?We really see these two modes of listening as certainly related, and as something that everyone has a desire for. But the services have been sort of split down the middle,? said Mr. Becherer.
?Everybody has an appetite for both. It doesn?t make sense that people should have to go to two different services.?
Mr. Becherer said the team was surprised to find that nearly half of Rdio?s users go outside of the service to listen to radio-style music stations, and that the new Stations feature was meant ?to provide a seamless transition from passive listening to active listening.?
That makes Rdio unique amongst streaming services, in that it tries to reconcile the two.
The question, then, is whether such features will convince users to pay ? particularly when content no longer will.?In the early days of online music streaming and download services, companies sparred over catalogue quality and licensing agreements. What Rdio had, Spotify didn?t ? and what you couldn?t get from either, from iTunes you probably did.
And while the catalogue of music still matters ? you still won?t find The Beatles streaming, for example, and there are other notable holdouts like Led Zeppelin ? it matters less than it once did. Rather, it?s all about the features, the functionality ? and, increasingly, your friends ? that music services hope will give them the edge.
In an interview with the Financial Post in May, Songza?s co-founder and chief executive Elias Roman said that ?the unit of analysis for most users most of the time is not artists or songs, but playlists, and how those playlists relate to a situation.?
That?s part of the reason why the his team redesigned the interface to make it easier for users to listen to their favourite artists and jump more quickly?into playlists.?For example, when a user shakes their device, a box now appears, in which he or she can type keywords such as ?BBQ? or ?driving? from which, based on listening history, Songza will select a playlist of appropriate songs ? similar in theory to an Rdio or Pandora, but also different.
Earlier this week, Mr. Elias also launched its premium Club Songza service on Apple devices ? an in-app purchase subscription priced at $3.99 per month that removes ads and includes exclusive content such as artist-curated playlists.
Songza, which is only available in the U.S. and Canada, is otherwise available for free.
It?s a similar to Pandora and Spotify, which also offer free listening tiers, and charge heavier users, or those who wish to remove ads. On-demand services such as Rdio and Deezer are similarly priced ? usually between $4.99 and $9.99 a month ? depending on whether a user also wishes to stream music from his or her phone. And if they wish to pay at all.
?It?s partly a cultural thing. I think it also has to do with demographics,? said Mr. Markkanen. ?Some countries with a fairly high medium age, those people are still more willing to pay for downloads and physical CDs.?
He also cited infrastructure factors, where users might be less inclined to pay for subscriptions, particularly on mobile deices, in countries where wireless connectivity is slow, or bandwidth caps make streaming lots of music expensive.
But ultimately, he believes, it?s ease of use that often wins users over.
?It?s more convenient than piracy,? Mr. Markkanen said. ?It?s platform agnostic and follows you around in the cloud.?
A forecast done by ABI Research at the beginning of August estimated a total of 29 million users worldwide would be paying for on-demand music streaming services by the end of 2013.
Spotify leads the pack with an estimated 9 million paid users, or 32%, with Deezer trailing in second. Spotify currently has 6 million paid subscribers, while Deezer claims 4 million.
As of March, Songza had over 4.7 million monthly active users.
And while Mr. Aapo estimates that Rdio only has slightly more than one million paying subscribers currently, he believes that number will reach 1.2 million by year?s end.
Rdio has historically declined to provide official user numbers for the service.
?I think Rdio is just basically extending their offering to look attractive in a very, very competitive marketplace,? Mr. Mullen said of Stations, and characterized the current state of the music streaming business as one where consumers are ?paralyzed by choice?
Mr. Markkanen believes this is part of the reason why consolidation of services is inevitable ? and even employees he?s spoken with at some the big services agree that there are too many players for all to succeed in the long term.
?A lot of services are going to have almost identical footprints in terms of countries they operate, and also identical catalogues,? he said ? making it harder to differentiate on features, and also succeed at scale.
?It?s going to be the natural state of things within the five years time.?
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Public release date: 30-Jul-2013
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