iTunes Past and Future: Hypebot’s Spitz and Bylin [Podcast]

Alas, a decade is practically an eternity online, and as such, the download-to-own concept that iTunes revolutionized is already showing signs of age. The growth of subscription-based streaming services like Spotify and Pandora, and the current cultural dominance of YouTube, with its more than three billion videos viewed daily, hint that  that music consumers are now largely content to listen, rather than own. – Time Entertainment, April 28, 2013

In this two-part podcast, Jason Spitz and Kyle Bylin of Hypebot’s Upward Spiral Podcast and I discuss some of the customer needs and behaviors that drove iTunes adoption: the unbundling of the single from the CD purchase, as well as the product characteristics (seamless integration with the iPhone, ease of use, standardized pricing). It’s interesting to hear the generational differences in how we adopted (or didn’t!) iTunes to build our personal music libraries, and to note that iTunes clearly was a substitute product for pirated music, even if an imperfect one.

In the second half of our discussion, we cover the transition of customers from download to streaming and debate where the future may lie for Apple’s iTunes and the consumption of music. We discuss iTunes competitors, and what factors might determine whether Apple will continue to dominate music distribution, such as the ubiquity and seamlessness of wifi, and the deep pockets of a platform player like Google, Amazon or Apple, as compared to a software-only offering such as Spotify or Pandora.

Kyle Bylin is the founder and editor of, a music and tech think tank, and also conducts research and develop music product concepts for Live Nation Labs. Jason Spitz is an ecommerce expert helping bands, comedians, and other artists build direct-to-fan businesses. In addition to being super-knowledgeable about the music industry, Jason and Kyle are expert conversationalists, and they always pick topics that are timely and interesting.

I sure had fun talking to these guys. Please let me know what you think of our discussion in the comments below!

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Streaming Music: A 5 Horse Race?

***UPDATE: Google To Launch Music-Streaming Service (Market Watch, May 14, 2013). This could be a game-changer, as Google is a major infrastructure challenger to Apple. Also missing from my analysis below is Amazon, who could also become a major player, and does have a cloud-based music storage system today.

On the eve of the Future of Music Coalition’s Summit, where music licensing is prominent on the agenda, it appears that the horses in the streaming music race are finally lining up. Now, I could be totally off base on this, I’m just an indie musician with a software background and not a lot of insight into the behind-the-scenes happenings, but I think it’s shaping up to be an interesting race. I believe there are some silent bettors, the major music labels and Google, and it’s not really clear (yet) whom exactly is betting on whom. These players are listed in no particular order:

First, we have the apparent favorite, Spotify (16 million active users, 4 million paying,  subscriber-revenue-driven). They’re about to close another $100 million round of investments led by Goldman Sachs, who knows a good investment when they see one, right? Why is Spotify such a good investment when they are bleeding green? Because it reportedly has licensing agreements with the major labels that guarantee it will make a 25% margin, while handing over 75% of its revenue to the labels. Some view this as a millstone around Spotify’s neck, but if Spotify can hold on long enough to dominate the market and achieve some kind of workable cost model, they become a utility: an entity with a guaranteed margin and guaranteed income.

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The Un-Virtuous Music Industry Business Cycle

***UPDATE: Google To Launch Music-Streaming Service (Market Watch, May 14, 2013). This could be a game-changer, as Google is a major infrastructure challenger to Apple. Also missing from my analysis below is Amazon, who could also become a major player, and does have a cloud-based music storage system today.

***UPDATE: Apple announced a streaming music service on September 7, 2012, causing Pandora’s stock to fall precipitously. The impact of this service, which was also reported by the Wall Street Journal, is likely to be profound, although  EricA Ogg of GigaOM speculates on whether Apple will succeed in this space given the relative lack of visibility of iMatch.***

It’s fall, the season when fruit ripens and leaves let loose and tumble to the ground. As I was walking my dog this morning, I was reminded of the stark difference between fruit and leaves. One is sweet and ripe, heavy with the burden and promise of life. The other, cast off like snakeskin, is the detritus of the season, dry and lifeless.

It’s the fall season in the music software industry as well. Every software business has predictable cycles for startups, and the music industry software startup cycle is no exception. The clock is ticking, and some music software businesses seem on the road to becoming lifeless, a step from being cast off from their investors like so many drying leaves. It’s not clear if any will bear the fruit –  the financial returns – their investors were hoping for. It’s hard not to take as a warning the fact that projected 2012 Facebook revenues were downsized by $1B . Even this relatively successful consumer software platform continues to struggle to generate return on investment. Also in news this week, TuneCore founders Peter Wells and Jeff Price were ousted by the Board (read: major investors in the company take the reins, looking to change company direction to increase profitability). Slightly older news is that Spotify and Pandora are not yet close to profitable as of mid year 2012, and in fact, Spotify profitability appears to be moving in the wrong direction. Rhapsody was revived by absorbing Napster in a buy-in from Best Buy, and they are still owned almost 50% by RealNetworks, so theoretically they have deeper investor pockets. They are supposedly close to profitability, but their revenue and cost structures are less well understood. I’ll believe it when I see the numbers.

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