Spotify is currently the darling of the music industry, and for good reason. They staked their claim in streaming music ahead of the mainstream competition, especially overseas, and they have reaped the rewards. Well, at least in terms of subscriber base, because they still aren’t making money. More on that in a moment.
Google is still experimenting and trying to figure out how to get people to pay for music via YouTube, rather than getting it for free like they have with ease up until now. Amazon’s music base is growing thanks to Prime and the popularity of Echo devices. However, neither is growing at a rate that will get them beyond third place. Right now, it’s a Spotify and Apple race, with everyone just trying to keep pace.
The music streaming battle between Spotify and Apple will look different depending on which angle you look at it from, and the proper context. While the subscriber gap between the two worldwide has held pretty steady, with Spotify still well out in front, Apple has made up ground quickly here at home. According to recent reports, they have actually pulled ahead of Spotify in paid subscribers here in the United States. Spotify still has more users if you include those using the free, as supported tiers, but this milestone is still significant for Apple.
While Spotify is all bluster on stage when talking about their market position, you had better believe they know Apple is a real threat to their dominance. While converting the world will be more difficult than the US, Apple will have a good opportunity to make major inroads in countries where its products sell well. Then there is also the fact that, despite a successful IPO, Spotify still isn’t profitable. For all of their subscriber base, and their proven ability to keep growing just as fast as Apple’s newer streaming service, they only have one product to sell. So far, that hasn’t been enough to get them into the black. That isn’t sustainable long-term, especially when battling foes for whom music streaming is a side business that doesn’t have to deliver huge profits.
For these reasons, Spotify’s new long-term partnership with Samsung looks like a very smart move. Apple, Amazon, and Google are all able to sell to captive audiences using their own hardware and service ecosystems. While this new deal doesn’t deliver quite the same level of advantage, it does make Spotify the default option for one of the world’s top smartphone and tablet manufacturers. Spotify will work across all of Samsung’s mobile and home automation hardware, and will also be the default service for music searches performed using Bixby. That is not a trivial thing. Some users want to take the easy path, and will use the services they are steered toward when they set up a new device. That, or once they pick a service, will stick with the defaults that come with it. Spotify now has the ability to take advantage of this using a major hardware player in Samsung.
If Spotify could go it alone, they probably would. However, their moves to partner with other media and hardware companies such as Samsung demonstrate that their leadership knows going solo isn’t a winning strategy against three of the most dominant companies in the world. They know that all three, especially Apple, are threats to their current lead in subscriber base. Even more important, these three are also Spotify’s biggest barrier to profitability. This partnership with Samsung gives them some leverage to push back with. It will be very interesting to see how Spotify’s subscriber and revenue numbers change over the next year with this partnership in place.