The competition between Spotify and Apple Music has been getting increasingly unfriendly in the past months, with the companies using some ugly tactics against one another. What comes next?
Spotify has been accused of altering its search mechanisms as a way to retaliate against the artists who release their exclusive records on Apple Music (NASDAQ: Apple [AAPL]). Anonymous source told Bloomberg that Spotify has been using such practices as burying songs of some artists in the search results as well as not including them in the Spotify's featured playlists for over a year, as a way to pick on Apple Music securing more and more exclusive deals with the top artists.
Spotify, with its 30 million users, is facing a rapidly growing competition from Apple Music that has already gained a 15 million user base since its launch in June 2015. Apart from offering a similar on-demand music streaming services, Apple Music has been recently inviting top artists to release their newest materials on their platform for a generous compensation. Spotify saw this as a monopolistic move as Apple Music limits the access to the exclusive records to subscribers only, until they become available to others in some weeks.
In the past year, several top artists such Drake, the Weeknd, Taylor Swift, Adele and Beyonce have released their records in a collaboration with Apple Music. In addition to that, Beyonce has allowed her latest album, "Lemonade", to be streamed exclusively through Tidal, a streaming service partially owned by Sony (NYSE: Sony Corp Ord [SNE]) and managed by her husband Jay-Z.
In the light of the growing popularity of the limited exclusive releases on Apple Music and Tidal, Spotify has been rumoured to retaliate against the artists collaborating with the rivals and lower the quality of promotion they receive. However, the company has declined all allegations about this matter and claimed the rumours to be "unequivocally false”. Yet The New York Times has mentioned receiving similar information regarding Spotify's secret promotion manipulations from the executives of 2 major record labels close to the company.
However, the "war" between Spotify and Apple Music has begun long before. Shortly after the Apple Music's launch, Spotify accused the company of blocking the Spotify app's update for the iOS platform. Prior to that, Spotify started encouraging iPhone users to subscribe for their streaming platform directly online rather than using Apple's iTunes that is asking $13 per month as compared to $10 outside of Apple's store.
Even though Spotify had already been using Apple's payment system for years, after the launch of Apple's own music streaming service, Spotify started promoting against Apple. Recode has reported that Apple went as far as to threaten to remove Spotify's app from the App Store if the company continues the promotions against Apple among iPhone users. Both companies declined to comment on this.
However, Spotify isn't the only one who has problems with Apple Music. Just a few days ago, Frank Ocean has done something that made Spotify and the major record labels turn against Apple Music. Ocean released his new album "Blonde", awaited by the fans for 4 years, exclusively on Apple Music. The album is only available to buy on iTunes and is completely independent from any record label.
What is more, the "Blonde" album has topped the Billboard's 200 albums rating, again, without the help of any record label. The artist has finished his contract with the Universal Music shortly before the release, and said to rely solely on the promotion through Apple Music. As The New York Times puts it, the album's release has brought to the surface the "long-simmering tensions" between the record labels and streaming platforms.
As the record labels have already seen a decline in sales in the past years, Frank Ocean's "rebellious" move has made the industry even more anxious about the future. Similarly, as the album will be available only on Apple Music for approximately 2 weeks, Spotify will be challenged with keeping its users from switching to the rival service.
The album's release was shortly followed by an announcement of the Universal Music Group's CEO Lucian Grange, the most influential executive of the music industry, asking to put an end to the exclusive deals between the artists and streaming music platforms.
The debate around exclusives is definitely not something Spotify is looking to deal with right now, as the company is in the midst of the long-term licensing contracts negotiations with the large music record labels. According to Bloomberg, Spotify is currently struggling with profits as it gives more than half of the revenue to the labels and external publishers. The company plans to go public by the end of the next year and the experts say that without secured long-term licensing contracts Spotify will have a hard time pitching to investors. The growing dangers of competition will not help either.
It's yet to see whether Apple will get away with its exclusive record deals strategy that looks like the worst nightmare of the music industry.