Jimmy Iovine, the record executive who made the leap to Silicon Valley, looks back on the decade in the music business, and sees a major problem on the horizon.
The biggest story in music over the last decade was the industry’s reconciliation with tech — after a decade fighting the internet, the music business fully embraced it in the 2010s. Streaming has now finally returned the business, which was nearly decimated by the shift from physical to digital formats, to growth.
Perhaps no one has had a broader view of this phenomenon than Jimmy Iovine, the producer and record executive who made the leap to the other side. He and his partner, Dr. Dre, sold their company, Beats Electronics, to Apple for $3 billion in 2014 and helped launch Apple Music, the tech giant’s late entry to the streaming market, which now has more than 60 million subscribers.
In a series of conversations in December, Iovine spoke about his career transition from the studio to the halls of Cupertino, and the tangled relationship between music and tech in the 2010s…
The streaming business has a problem on the horizon, and so does the music business. That doesn’t mean they can’t figure it out. [What’s the streaming business’s problem on the horizon?] Margin. It doesn’t scale. At Netflix, the more subscribers you have, the less your costs are. In streaming music, the costs follow you.
And the streaming music services are utilities — they’re all the same. Look at what’s working in video. Disney has nothing but original stuff. Netflix has tons of original stuff. But the music streaming services are all the same, and that’s a problem.
What happens when something is commoditized is that it becomes a war of price. If you can get the exact same thing next door cheaper, somebody is going to enter this game and just lower the price.
MacDailyNews Take: Exclusives are one way to differentiate, but there is also one very large point of differentiation between the U.S.’s No.1 streaming service, Apple Music, and the world’s leading streaming service, Spotify. Apple Music boasts a library of over 60 million songs, 10 million more than Spotify. You’d have to be stupid to pay the same amount for a library that offers 10 million fewer tracks. Another issue for Spotify is that audio streaming is their business. Apple could afford to give Apple Music away for virtually forever if they wanted to do so. Spotify is stuck trying to survive on razor-thin margins. In the end, as we’ve already seen in the United States, Apple wins again.