The cutthroat market for premium on-demand music streaming keeps claiming casualties. Microsoft (NASDAQ: MSFT) announced on Monday that it will be shutting down Groove Music, the former Xbox Music streaming music that it rebranded two years ago.
Microsoft will be discontinuing its Groove Music Pass subscription service by the end of the year, and Groove Music app users will no longer be able stream, purchase, or download music at that time. Microsoft is teaming up with Spotify to allow Groove Music Pass customers to port their curated playlists and collections directly into Spotify. The migration swag bag will also include 60 free days on Spotify's premium platform for Groove Music accounts that aren't already there. It's a peaceful surrender to the market leader, and it makes sense. Microsoft and Spotify have worked together before, and there was no way that the software giant was going to hand over its displaced music buffs to Apple (NASDAQ: AAPL).
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Premium on-demand streaming has become a two-horse race. Spotify is the undisputed leader with 60 million paying subscribers and 140 million active users. Apple Music -- despite its late entry to the game -- topped 30 million premium accounts last month.
If you're looking for the bronze medalist here you will probably have to squint. Pandora (NYSE: P) may have 76 million active listeners on its platform, but they are mostly freeloaders. Pandora has less than 5 million premium accounts. Pandora finally rolled out a Spotify-like on-demand offering earlier this year, but that was only good for a net sequential gain 150,000 subscribers during the second quarter. Spotify gains that many net new premium users in just two or three days
This is clearly Spotify's race to lose at the moment, a good thing as it inches closer to an IPO that could value the company at around $20 billion later this year. Apple Music isn't sulking. The world's most valuable tech company has taken advantage of controlling the iOS experience to nudge its captive product users to Apple Music. Everyone else just seems to be shut out of the race.
There was a time when the titans of tech were all over the on-demand streaming revolution with dreams of being the new Spotify. Microsoft thought that branding its music platform to its popular Xbox gaming console would help it attract paying customers, but that didn't happen. Other tech behemoths have tied their premium music offerings as included goodies for Prime and YouTube Red subscribers, primarily because they haven't been able to stand out on their own the way that Spotify and Apple Music have so far.
Microsoft didn't reveal how many Groove Music Pass subscribers it would be evicting by year's end, but it obviously wasn't a number large enough to make its platform successful, or even viable. Groove Music will join the many indie apps and platforms that have called it quits in the wake of Spotify's dominance, and it won't be the last.
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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Rick Munarriz owns shares of Apple and Microsoft. The Motley Fool owns shares of and recommends Apple and Pandora Media. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.