Here's how Apple plans to take down Spotify
And Spotify should be worried.
The tech giant unveiled Apple Music on Tuesday, its big push to catch up in the music streaming business. And while the company showed off everything from curated music based on a user's listening habits to a slick new interface, the most important part of the announcement was how the service will be priced.
For six family members, Apple Music will cost only $14.99 a month. By comparison, Spotify sells a two-person subscription for $14.99 per month and a one-person premium subscription for $10.
Single users of Apple's service will have to pay $9.99. And all those who sign up will get three months free.
While Apple helped revolutionize the music industry with iTunes and the iPod, it missed the boat in streaming.
Spotify, which boasts more than 60 million users and 15 million paying subscribers, has led the pack in the industry thus far. But Apple's aggressive pricing strategy might just be enough to help it catch up in a big way.
"This should be the easiest game of catch-up ever. Apple's aggressive pricing strategy, including three month's free should help it easily attract a critical mass from its loyal user base of 800 million iTunes accounts. A mere 2% penetration would put it even with Spotify," said Lou Basenese, founder of the research and advisory firm Disruptive Tech Research.
"And since streaming is really just a feature of Apple's eco-system, whereas it's the entire product for Spotify, Apple has all the leverage in terms of pricing wars," he said.
Apple Music will be available on its devices on June 30 in more than 100 countries and will also become available on Android devices this Fall.
In response, Apple's competitors may be forced to match its pricing. Spotify said in a statement to The Verge that it already has similar family pricing in some markets, highlighting that in Sweden the company only charges $20 for a family of five.
But besides it's competitive pricing, Apple also has another advantage. The company already has millions of credit card files of users in its system. This could make a transition over to Apple Music a cinch for Spotify users on iOS. Not to mention all those users already inside the Apple ecosystem might be attracted to a service built so integral to the iPhone from the ground up.
All in all, Apple could come out on top even though it took it's time entering the race, Basenese said.
"In the end, streaming will go down as another example of Apple letting others do something well and first, before it ultimately does it better and bigger. Just like they did with MP3 players, tablets and mobile app stores," Basenese said.