Apple vs. Spotify: Can a New Music Service Topple the Streaming Leader?

By Markets Fool.com

Apple finally released the details of its new music service to the public at its annual Worldwide Developers Conference.

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The subscription-based offering was introduced with a flourish featuring videos, live performances, and plenty of razzmatazz. In reality though, once you strip away the pageantry, you're left with a music service which looks an awful lot like Spotify, the current market leader.

Apple Music was presented by the company as something revolutionary, but in reality it's a "me too" product from a company that's somewhat late to the game. That may not matter because the iPhone and iPad maker has such a large user base it should be able to leverage an audience.

The iPod changed the course of music as did iTunes. Apple has been a key driver in moving what was once known as the record industry away from physical "album" sales. Apple Music may put the final nail in the sales coffin moving the music industry firmly into a subscription-based all-you-can-listen model.

That, however, was happening anyway and Apple's effort will accelerate the trend, but it did not cause it. The question however is whether the company's efforts simply come too late in the game or whether they can challenge Spotify.

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Apple has released some images of what the new service looks like on its website. Source: Apple

What is Apple doing?
Apple Music makes every song in the iTunes library available to subscribers for a $9.99 a month subscription or $14.99 as month for up to six family members. It also offers human curated playlists and a radio station programmed by DJs called Beats Radio.

"We love music, and the new Apple Music service puts an incredible experience at every fan's fingertips," said Eddy Cue, Apple's senior vice president of Internet Software and Services in a press release. "All the ways people love enjoying music come together in one app -- a revolutionary streaming service, live worldwide radio and an exciting way for fans to connect with artists."

The company seems to be banking on human curation as a game changer. During the keynote at WWDC introducing the product the example was given of how computer-driven playlists could miss the mark by picking the wrong song for a romantic playlist.

That's certainly possible -- nobody wants to go from "Let's Get It On" to "Why Can't We Be Friends" in the bedroom, but it remains to be seen whether that will be enough to get people to subscribe.

Apple Music launches June 30 with a three-month free trial. It will be available on Android devices as well as one running Microsoft Windows.

How big is the market?
Apple's service is not fundamentally different from current market leader Spotify which has 60 million active users in at least 58 countries, according toTime.The problem for the streaming mini-giant is that only 3.5 million of those people pay $9.99 for the company's premium service. The rest listen for free to a somewhat limited ad-supported version of the service.

When you consider how big Apple's customer base is, you realize that Spotify's total user base hardly matters and its paid customer number is laughable. Apple sold 192 million iPhones in 2014 after building upon the 153 million it sold in the previous year, according to IDC. Add in 139 million iPads in the same two-year period and you can see just big a market the company can reach.

These are people whom Apple already has a credit card on file that it can market to simply by autoinstalling the Apple Music app icon in a prominent place on their home screen. Giving three months for free -- which requires laying down payment info -- makes joining (or transitioning from Spotify or another paid service) even easier.

Apple wins just for playing
Despite all the hype, Apple hasn't built anything that spectacular. Human-curated playlists are not new and a 24/7 radio station with no format sounds like a good idea, but how many people simply like "good music" and not specific genres?

The draw of Apple's service, Spotify, or any of the other smaller players is simply being able to listen to whatever you want whenever you want. Everything else is just window dressing. Apple has not changed the game, but the sheer size and loyalty of its customer base likely makes it a winner.

Apple may not steal Spotify's existing paid user base, but they will make it harder for the company to get new subscribers. Offering three free months is a major carrot and once people try Apple Music -- especially those who own an iPhone -- are unlikely to switch back. It's not that Apple has a better product. It's that the company has a good enough one at a comparable (or better for families) price and a huge marketing advantage.

The article Apple vs. Spotify: Can a New Music Service Topple the Streaming Leader? originally appeared on Fool.com.

Daniel Kline owns shares of Apple and Microsoft. He still buys CDs. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.