Apple, Music Labels Push Against Free Music on Spotify, YouTube

It's not exactly that simple. The license holders essentially negotiate the cost that music streaming services need to pay for content. And these license agreements are all temporary. There actually has already been a lot of pressure on Spotify to push for subscription fees on a large scale. But as long as Spotify has investors keeping them afloat, and as long as the license holders continue to negotiate licensing fees at the same rate, Spotify can continue doing whatever they currently can afford to do with their service.

IMO, it's best to look at all music streaming services as experiments by the recording industry to see what kind of service can generate the most profits — or rather, the profits they believe they have been cheated out of as a result of digital distribution. Pandora Radio, for instance, has appealed to Congress more than once because threatened increases in licensing fees would put them out of business. In general, the license holders are willing to set lower fees when a streaming service is just starting out. But there's a certain point at which they expect an established service to monetize the content in earnest. And they can push for increased monetization just by increasing their licensing fees when the old agreement is set to expire.

So the issue isn't that Spotify is run by smart people. It's that Spotify's investors believe that the ability to stream songs and albums on demand will one day become very profitable, because they think people will put more money towards that business model than others. And they are willing to defer a return on their investment for a little while.

According to the article, Apple is attempting to make the argument to the recording industry that people are already willing to pay for a model that Apple is proposing. Apple is just trying to convince the license holders to give their streaming service a shot. A lot of the impetus behind the recording industry's support for different digital distribution platforms was to reduce the influence of the iTunes Store. Now that Spotify has become a dominant player, the recording industry potentially is now more upset with Spotify than Apple. So it's possible that they will now be willing to allow Apple to set up a service that they would have been unwilling to allow in the past.

I think the article is just overdramatizing the situation in order to make the whole thing seem more exciting than it really is. I mean, the recording industry operates under the assumption that it's owed billions of dollars in "lost revenue." So every argument anyone can make to appeal to the recording industry ultimately is framed as a way of "reclaiming" that revenue. It's absurd, but that's how it gets spun.

/r/apple Thread Link - recode.net