While the Internet of Things takes center stage when we talk about connectivity, the future of streaming music presents consumers with a whole new set of opportunities and challenges as it moves beyond the desktop and smartphone. With digital music now embedded in car apps, smartwatches, headphones, Google Glass and home appliances, the dizzying array of niche players has manufacturers confused about the right brand with which to align.
"There better be a breakout, otherwise there will be a shakeout,” warned a technology executive who works with several of the digital streamers. “They can’t sit there and rely on their desktop audience. It’s about the other devices. We will learn a lot this holiday season—who’s got the best partnerships?” Streaming music services Pandora, Spotify, Songza, Rdio, TuneIn, Rhapsody, Deezer, Slacker, iHeartRadio and Beats by Dre are all feeling the heat to either build market share or be tuned out. Just last week wearable tech company Jawbone bought social radio service Playground.FM on the heels of the better known Last.FM shutting subscriptions down.
Music’s heavy hitters welcome the proliferation of devices using their services. “At this point, I see it as a six-screen world, whether it’s Web, smartphones, tablets, in cars, in homes, TVs and now wearables,” noted Brian Lakamp, president of Clear Channel Digital, parent of iHeartRadio.
Spotify communications lead Graham James added, “The goal is to make Spotify ubiquitous across every platform.”
Lizzie Widhelm, Pandora’s digital vp, agreed. “There’s going to be lots of devices and lots of new places where consumers are connecting,” she said.
To Lakamp’s chagrin, the consensus among analysts is that Pandora and Spotify stand the best chance to win in the long run—mainly due to the former’s robust ad strategy and the latter’s popularity in Europe and with young Americans. (iHeartRadio’s execs contend that the power of Clear Channel’s terrestrial radio, billboard and concert franchises is being disregarded by such experts.)
But in some circles, the narrative—like the industry itself—is more fragmented. “There’s so much money being invested into this space by a lot of different players that I think it’s too early to call,” said Jaimee Minney, who was a three-year rep for Rhapsody before recently moving on to shopping app Slice. “There is going to be more consolidation though.”
While music services like Rhapsody, Songza and Slacker have technological strengths, the belief is that they will either be acquired or go away entirely. Investor cash flow cannot last much longer, and deep-pocketed retailers could jump into the fray. Walmart has been a rumored entrant (the big box retailer declined to comment), which is interesting after Amazon last week included Pandora, iHeartRadio and TuneIn as part of its Amazon Fire TV entertainment products suite.
Beats by Dre’s headphones are its cash cow, but its new curated music service Beats Music is growing users by the thousands daily. Its larger strategy befits a digital music universe that’s colliding rapidly with physical devices. Even so, not all observers are bullish on Beats. “They are probably too late to the game,” contended Forrester analyst James McQuivey. “It’s going to come down to Pandora and Spotify.”
Automakers may prefer this sort of consolidation. Adding $100 to $300 for a bundled service won’t phase shoppers already shelling out $40,000. “We’ve heard auto guys talk about offering a bundled music service,” said Ty Roberts, co-founder of music tech company Gracenote. “Obviously, automotive is global. And right now they are partnering with music services in each region. They could really use one go-to streaming service and then ship it around the globe.”
Update: An earlier version of this article suggested that Last.FM had shut down altogether, but the company says it is focusing on leveraging partnerships with other services.