Spotify's Hangover From Apple's Hard Cider -- 5 Daunting Dilemmas

It's the morning after yesterday's Apple WWDC bender.  Spotify, how's your head?  May be time to grasp for that Motrin -- because it's now officially "game on" with Apple Music (Cupertino's decidedly non-Beats music subscription streaming service announced yesterday and launching June 30th).

Spotify, yes you have a 15 million paid subscription lead over Tim Cook's gang.

But, here's what Apple has that you don't:

(1) Fundamentally more business freedom as a result of a business model that you can never match.  Apple Music is one big advertisement for Apple hardware (iPhones, Macs) -- a marketing expense, if you will.  Apple Music can be a success even if it doesn't generate a single stand-alone $1 of profit.  You, Spotify, can't say that.  Here's my earlier detailed analysis that lays this all out.    Here's my earlier analysis that lays this all out in the context of Apple's inevitable OTT video service vs. Netflix (just insert "Spotify" in place of "Netflix" in my digital media version of Mad Libs) (and here's a second "bonus" analysis that adds further color).  You have only one obvious antidote to cure that ill -- and that is to be acquired by another "big fish" with an Apple-like multi-pronged business model (Google, Amazon, Samsung anyone?).

(2) Native distribution via Apple's ownership of the OS, iOS 9 that is.  Apple Music comes natively to iPhones and Macs with new iOS 9.  That's a lot of immediate and pervasive distribution (i.e., virtual real estate) that Spotify can't match.  Let's face it, membership has its privileges.  (And one more important thing, Apple Music will not exclusively be for the Apple core anymore -- it will be available for Android too in a few ... kind of like when iTunes crossed the chasm 10 years ago into the world of PCs, a seismic strategic shift proudly enabled by my former company Musicmatch);

(3) Massive marketing dollars & "real" real estate outside your grasp.  How about this for a 1-2 punch?  Apple Music surrounding you both natively and online on iPhones and Macs, but also in offline real estate -- i.e., in Apple's stores around the world.  Expect to be bombarded with Apple Music pitches (elegantly, of course) with every breath you take, and every move you make in the store near you -- and also via the Apple marketing machine turned up to "11" everywhere you glance (on TV, buses, subways, billboards, cabs, pedi-cabs ....).  There will be no escape.

(4) Significantly deeper and "invested" artist relations.  Apple Music has Jimmy Iovine and Dr. Dre leading the way in its overall artist-first narrative (and many of the service's announced features leverage that positioning).  Spotify, on the other hand, can count a very vocal and very bitter Taylor Swift.  You see, family heritage also matters -- and Spotify's hails from a distant land (foreign to most major music artists, at least) and proudly proclaims its tech-first bent -- while Apple and Jobs always (from the very beginning) played to artist sensibilities and were Californians just like many of them;

(5) Direct immersive artist-fan engagement opportunities to enable deeper connections and ultimately deeper monetization.  In fact, Apple calls this new feature "Connect" -- with the immediate benefit being that all artist social feeds are brought together in one place.  But, more interesting is the tantalizing possibility of artists giving their fans what they really want -- and that is, special access to them!  Rabid fans will pay for rapid access.  Rhapsody's recent deal with BandPage hints to these exciting new possibilities (here is my separate post about that new deal).  Artists win.  Fans win.  Apple wins.

Spotify.  Make no mistake.  Apple's threat is real.  It is daunting.  And, just because Apple Radio and Beats Music have done no damage to you or Pandora, doesn't mean that Apple Music will meet that same fate.  Apple is invested in every possible way to see Apple Music succeed.  It paid $3 billion for Beats.  But, much more than that, iTunes has been the "soul" of Apple (and the foundation for its rocket launch to becoming the #1 valued company in the world) for the past decade.  Apple Music is its hope ... nay, its mission! ... to transition effectively away from the download-driven world of yesterday to the subscription streaming-driven world of today and tomorrow.  In other words, Apple must succeed.

So Spotify, what's your next move, especially when daunting dilemmas #1, #2 and #3 are simply out of your reach by definition?  You are betting big on video of course to expand your current one-dimensional business model (here's my recent post about that major new strategic move).  But, will that be enough, especially when Apple inevitably launches its own "Netflix Killer" OTT video service later this year?  (More on that Apple v. Netflix discussion here.)

Or, will you need a little help from your friends ... the other 800 pound tech gorillas who feel threatened like you do today?