Cloud Wars Episode II – The Swedes Strike Back

Back in April I correctly predicted that Spotify would soon offer their mobile service to all customers, including free accounts, following their restrictions placed on non paying users; this is a huge step for them in the ongoing battle to get a full cloud service out there. To be clear, this update does not allow non-paying users to stream music that they do not own – only the tracks they have synced from their personal computer to their device. The desktop version of Spotify has been able to sync a users owned music over WiFi to a the mobile device for some time, a smart move on Spotify’s part to save streaming bandwidth costs. This new update now includes iPod syncing, something that has required the owners to always be tied to iTunes. Today’s announcement is really significant in terms of getting users into the Spotify ecosystem and in my opinion really puts Lorentzon & Ek’s company out there as the leaders in the cloud race.

Apple, Amazon and Spotify already account for 90% of  worldwide digital music revenues for and I think this move could prove to be a significant shift in Spotify’s publicised revenue problems if they can get customers to move away from Apple. This is all the more likely given their pending US launch and the hype around the lack of launch for the last yeat. Having worked on the original purchasing implementation, which was powered by 7digital, it was actually quite interesting to see how many purchases were made through it when users could still listen for free – it really points to users’ preference to own their music over the “rental” streaming model.

I think the most interesting outcome from all of this will be the backlash reaction from Apple. In the past, Apple have changed the way that music is stored on iPods during software updates to prevent third-party software from being able to move music onto the device. It wouldn’t take much for Apple to do this and I wouldn’t be surprised if the next software updates will cause problems for the engineers  over in Gothenberg & Stockholm.

The other question surrounds the iOS app and whether Apple will allow future updates to it or if they will even just remove it from the app store entirely. At 7digital we’ve struggled to get our iOS app through the submission process; an app that does considerably less to compete with iTunes and the iPod compared to that from Spotify. Unless Spotify has an agreement with Apple – which I find highly unlikely, I wouldn’t be surprised if the app store guidelines change to say if your app name contains the word ‘Spot’  and your logo is green then it can’t exist in the app store.

On top of this there is the well documented case of Apple wanting 30% of any app subscriptions which would effectively ruin Spotify’s model as they will not be able to operate on these terms. I guess the ball is now in Apple’s court.


Amazon Prime to include free streaming – another signal of impending hardware launch?

Amazon have announced that they are to offer free unlimited streaming movie and TV show to Prime customers in the US . The are offering about 5000 videos including many of the usual TV series, The Sopranos, The Office, Friends etc. The movies aren’t big new hits but do contain some fairly recent releases.  Non of this is new to Amazon though, they have had the Unbox service for some time (now rebranded as Video on Demand) which has the big hits for rental, but this is a great way to introduce some new customers to that service. The device support is great, there are a lot of supported systems most of which are connected TVs or media centres but they also offer the option of Windows Media so you can stream via a Windows PC or an Xbox.

As I mentioned previously, following the complete acquisition of Lovefilm, Amazon looks to be on the start of a major content play which in my opinion signals them taking a serious step into the world of connected devices.  The signs are all mounting up for an Amazon device to be released or even set of devices:

  • Amazon bought touchscreen technology specialists TouchCo at the start of last year and have previously stated that they weren’t going to integrate these capabilities into the Kindle product line….so where are they planning to use them?
  • Lab126 is the arm of Amazon that developed the Kindle and it’s thought that is where the next generation devices are being designed and built. They have been on a hiring frenzy since last year for engineers.
  • Amazon’s App store is due to launch soon and the developer portal is now open for content submissions. They are planning to run a similar 70:30 split like Apple for developers wanting to sell their apps. Apps will be sold inside the regular Amazon store.
  • The Amazon MP3 store and Kindle bookstore have been around for ages and will be staple additions to any hardware release.

The talk of an Amazon device has gone quiet of late but I wouldn’t be surprised if that rumour mill kicks up again following today’s announcement of an Apple press event on March 2nd – rumoured to be the iPad 2 launch.

Just stop giving in to Apple’s demands!

So the internet has been awash with condemnation at Apple’s recent decision to impose it’s monopolistic tactics onto content publishers with their announcement to kiabosh any out of app purchasing. And somewhat rightly so; 30% is a lot of margin to be giving away, especially when the margins are so tight anyway that a sale can often result in a loss.

The fanbois may argue that Apple has the right to charge what they want as they have spent money building their platform over the years and I would say that they are right. Apple spent millions billions in R&D to create the iPhone, iPod, iPad and the iOS and it’s their prerogative to make it work for them financially.

However, that’s certainly not to say that publishers should just stand by and let the “suits” from Infinite Loop have their own way. The music industry learnt this lesson a long time ago, after they let Apple define the rules and set the path for digital music downloads for almost a decade. It finally seems to have started to pick itself up and work its way out of that hole, although I do worry it’s is a bit like an absentminded old man who regularly forgets that the kettle gets hot when its boiled and happily picks it up with both hands whenever it whistles.

Apple won’t drop their prices voluntarily, despite mounting pressure and the more favourable Google rates, because they just don’t have to. Unfortunately it isn’t a fair market so they won’t be forced to change their pricing through natural market forces. My point here is, that if publishers don’t like the 30% surcharge that Apple is about to impose then they should pull their content from the platform. If no one provides their content through iOS devices then those devices become less appealing and as happens in a normal fair market economy Apple will be forced to drop their prices to get the publishers back on board.

Working for an iTunes competitor I am somewhat biased on this, but if the already slightly senile music industry doesn’t want Apple to right the rules for the subscription streaming market in the same way it did with a la carte downloads then they should stand their ground. They should look to pull their content from the iTunes platform or at least stop the impending Apple streaming service from launching. Services like Spotify, MOG, Rdio at al. won’t be able to afford to give £3 per month to Apple whilst giving the lions share to the labels. The aforementioned must also avoid backing down on what they take from music subscriptions just to make this work under the Apple dictatorship or they’ll end up bending over again while the Cupertino giant gets its way.