Spotify is the underdog in this streaming war
In the early days of Amazon’s life, they stressed they were a “technology” company, not a “e-commerce” company. However, the reality was a bit different. Amazon at the time was just that: an online store. Today, Amazon is known for much more than that. Amazon is many things, where the storefront is the mascot and the technological marvel is the skeleton.
But Spotify is not that. They were one of the first music streaming services, alongside Rdio, Pandora, and so on. In many ways, Spotify’s story is similar to Amazon’s. Initially, Spotify was just a music streaming service. These days, Spotify is known more for their algorithmic prowess, being able to deliver personalized playlists every week with shocking compatibility. Not even Apple, a technology company, can compete.
Yesterday, Apple has started to roll out lossless audio and Spatial Audio with Dolby Atmos (initially) to iOS and Mac users. And for the first time, Spotify users have finally received a sense of FOMO. For years, Apple Music subscribers felt discontent with Apple’s implementation of “Spotify Wrapped”, a recurring tradition of Spotify that summarizes a person’s listening habits for the year. I guess Spotify users are getting a taste of their own medicine.
While Amazon has immediately responded to Apple’s lossless tier when it was announced, Spotify has remained silent ever since. The silence is quite notable, as Spotify announced their Hi-Fi plans a month before Apple. Spotify felt like they were in a dominant position, and felt they could squeeze more money from Spotify Premium subscribers.
Spotify said that their Hi-Fi tier would be an additional paid add-on on top of an existing Premium plan. But Apple shuffled their plans by giving not just lossless audio and Hi-Fi 48kHz/24-bit fi, but Spatial Audio as a nice bonus for free. No additional charge for any Apple Music subscriber, including Family Sharing plans!
Clearly, that made Spotify reassess their plans of Hi-Fi audio. It is no secret that Spotify is not very profitable right now. Besides offering a Free tier, Spotify is just that: a music streaming service. Apple Music, on the other hand, is just a small part of the large multi-billion business. They can afford to put lossless audio and recoup their losses in, you know, more iPhones? More AirPods? Beats headphones? Heck, they’re investing hard into Apple TV+ when the service isn’t even profitable yet. That’s how much money Apple can burn just to make their services succeed.
I cannot help but think there was a boardroom meeting (or Zoom call) where they were like, “What the hell do we do?” Keep in mind: Amazon changed their prices immediately after Apple’s announcement. Spotify could’ve, but they didn’t.
The whole situation is just a reminder to all of us: Spotify may be the dominant player, but it is competing against more secure, multi-billion dollar companies. Competition is good, obviously, but it can also kill companies who cannot afford to match their neighbours in features or experience. Spotify’s efforts to enter the podcasting space was perceived as increasing revenues; podcasts are cheaper to produce, they can settle their own terms instead of dealing with labels, and gives them an exclusivity advantage.
Spotify is really good at creating a sense of exclusivity. Spotify Wrapped FOMO moments every December is the prime example. They know that their own service has killer features that Apple Music does not have. Mainstays like Spotify Connect, Discover Weekly, seamless integration of podcasts, Spotify Wrapped, and many more are features that don’t exist (or are worse) on Apple Music. Spotify knows that these features are “sticky” because unlike an Apple Music playlist, these personalized features return to the listener a sense of ownership that was lacking in the streaming era.
I don’t think I’m going to be switching to Apple Music anytime soon. No matter what you think of Spotify — not paying artists enough, always changing the UI, and so on — , keep in mind that Spotify is surviving on just one pillar, while their competitors have vastly more of them. So, Spotify, Apple Music made its move. What’s your play?
