Tuesday, July 16, 2013 - 7:00am
This week in RAIN we're featuring contributions from various industry executives, journalists, and experts on the state and future of Internet radio.
BY BRAD HILL
From "unique innovator" to "a face in the crowd." That is the typical startup trajectory of a product that establishes a new consumer category.
The loss of first-mover advantage can happen fast, as with Apple’s iPhone, which first came to market in 2007 and in five years was locked in a global marketshare struggle with Android phones (and Microsoft and RIM products to a lesser extent).
Category competition tends to blunt innovation as it locks in standardization. For many smartphone buyers, there is little to differentiate an iPhone from an Android phone -– from the basic functions to the industrial design to the on-screen interface. What was once unique becomes commonplace.
Streaming music services have become similarly commoditized, thanks to suddenly increased consumer uptake and demand.
The commoditization curve has been relatively slow for Internet radio; during its early years the streaming/subscription platforms were dimmed by the shadow of iTunes and the quick mainstreaming of the music-download market. The Rhapsody subscription service launched at the end of 2001, and while there have been ownership changes and product enhancements, the core listening and discovery system has remained steady. From the first, Rhapsody and similar startups offered music access as an alternative to locally stored music ownership.
Several digital-life changes accelerated the popularity of the access model, especially a core triumvirate of factors: social, mobile, and a lengthening tail of indie music. Pandora, Spotify, Rdio, Rhapsody, and many others now scrabble for a larger share of the stand-alone streaming business.
While that competition rages, 2013 is shaping up as the year that on-demand streaming music becomes fully commoditized, and the signifier is when the major "ecosystem" companies plug in a standardized “radio” feature into their web and mobile apps. Google and Microsoft have launched their entries; Apple has staked out its ground with iTunes Radio expected to debut in the fall.
As these announcements and first product iterations roll out, it is easy to see how little invention has been invested in their development.
Instead, it is as if a punch list of required features has been ticked off and arranged with perfunctory design effort. That punch list includes a big catalogue (20-million tracks is standard), on-demand listening either free or with a paid subscription, user curating and collecting, pre-programmed “stations” (playlists), mobile access for listening anywhere, and (for subscribers) downloading music through the mobile app for offline listening. Independent streaming platforms invented the template; big media companies are copying it for their immense captive audiences.
(Variations distinguish the ecosystem streamers from each other a bit. For example, Google All Access allows users to mix their previously owned music files with their subscription downloads. Microsoft’s system, Xbox Music, spreads across a unique network of connected devices consisting of phones, tablets, computers, and the Xbox gaming console.)
Fine points notwithstanding, the streaming services offered by Google, Microsoft, and Apple are rolling out with a different business model from Pandora and the other stand-alone brands.
The independents exist to attract users to a discrete experience; the ecosystem streamers exist to prevent users from leaving an encompassing experience.
Google, Microsoft, and Apple are mostly non-music businesses -– device manufacturing, operating systems, and advertising. For them, music exists alongside mapping, productivity, general content, recreation, and mobile computing as an attraction to their high-margin enterprises. It’s understandable that their music streaming services would perfunctorily hit standard features.
A recent NPD survey found that respondents in the 13-35 age group listened to streaming music nearly as much (23%) as to terrestrial radio (24%) in Q4 2012. Among streamers identified, Pandora took the clear lead with a 39% share. The question for 2013 is how the Herculean tech companies, with their ability to place a new service on the home screens of millions of mobile devices, will displace Pandora, iHeart Radio, Spotify, and other leaders. Whether the indies survive the elephantine forces stepping into the space remains to be seen. The indies’ advantage is their history of innovation and interface design. They are less commoditized due to unique usability features and highly evolved interfaces.
No matter how it shakes out, consumers are the big winners. The celestial jukebox, a progressive idealist’s dream in the late 1990s, is part of today’s fixed reality.
Brad Hill is a former Vice President at AOL, and the former Director and General Manager of Weblogs, Inc.