The music streaming wars are starting to heat up

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Image Credit: David Paul Morris/Bloomberg via Getty Images

The past decade of music retail have been dominated by two things: the MP3 and Apple. But an ever-expanding field of new digital platforms are changing all of that by offering huge libraries of music available in all-you-can-eat plans — which make the idea of buying MP3s suddenly seem as outdated as buying CDs seemed when the first iPod dropped in 2001. There’s a war brewing over the market for music streaming, as well as the subscription fees these companies are hoping you’ll pay for it. As industry giants like Apple and Amazon have begun joining the battle, things are starting to heat up.

When Apple launched the iTunes Music Store in 2003, it had number of clear advantages right out of the box: an easily navigable interface, deep integration with the already massively popular iPod, and almost no competition. At the time, record labels and traditional music retailers were still single-mindedly focused on selling CDs. Competing tech companies seemingly hadn’t even entertained the idea of going into the music business. The few small-scale digital music stores that were up and running at that point were easily swamped by Apple’s heft, which allowed the tech giant to launch with offerings from all five of the major labels in existence at the time.

Over the past couple years, Apple’s grip on the market has been loosened—not by a competing mega-corporation but by Spotify, which when it launched in the US in 2011 was worth less in total than what Apple made from music in a single quarter. But although Spotify had a number of significant factors working against it–it was small, required a constant Internet connection to work, and didn’t allow even the users who paid for the service to actually own the music they listened to–it managed to turn the digital music industry on its side.

Apple has had what until now has seemed like an unshakable monopoly–they claimed 75 percent of the digital music sales worldwide last year, and over a third of music sales overall. And with the company’s willingness to use its clout to keep prices across the market down and kill digital rights management as an industry standard, it seemed like a fairly benevolent dictatorship. But as usually happens when a dictator begins to fall, a power struggle is now underway.

Last week, Amazon began offering free streaming from a catalog of over a million songs to subscribers to its Amazon Prime program. Amazon, Google, and Microsoft have all been rumored to be considering purchasing Spotify, which is currently valued around $10 billion. And Apple, looking to shore up its position, recently purchased Beats, which is best known for making headphones but also recently launched a robust music streaming service that could potentially offer a real challenge to Spotify, although it’s still too early to tell.

The difference between the war to control streaming and the war over the MP3 market is that streaming represents more of a zero-sum game. While consumers can shop a la carte from different MP3 retailers and combine everything they bought into a single library, streaming services are designed to lock users into using just one–you can’t share playlists or friend connections across platforms, and if you’re one of the rapidly growing number of people who are paying for premium access to one service, you likely won’t want to shell out for another as well.

Considering the higher stakes, it’s not surprising that the competitors are already starting to play a little dirty. Apple’s $3 billion Beats acquisition proves that they’re willing to use financial brute force. Meanwhile, the timing of Amazon’s Prime Music launch—and the relatively paltry catalog it launched with (1 million songs versus Spotify’s approximately 20 million)—seems more like a stopgap attempt simply to keep users who are already in its retail ecosystem from considering signing up for whatever Beats-derived streaming service Apple eventually brings to market.

The future of music consumption seems to lie in streaming, at least for the time being, and no one in the industry wants to be caught flat-footed the way they were during the beginning of retail MP3 revolution. As a result, the digital music marketplace is far more chaotic than it was in 2003, but there are potential benefits for consumers: more competition should lead to lower prices, better user experience, and more attention being paid overall to getting us to sign up (and to keeping us there once we do). While the streaming paradigm doesn’t give users ownership of the actual files, it gives them a lot more power in the form of month-to-month membership fees–whoever eventually comes out on top will have to win you over 12 times a year.

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