Apple Inc. (NASDAQ:AAPL) one of the most influential media companies of the internet generation, is falling behind. The Cupertino concern no longer holds a lead in music, and a new generation of video applications is taking the firm’s power of communication. Apple is losing to streaming media, and the company is at risk of falling behind for good.
Apple has never managed to manipulate the content that people use completely, but the company has maintained a certain level of control. The App store is still the only good way to get software on Mac, iPhone and iPad and iTunes was once a media behemoth. Those days are over and Apple doesn’t have the competitive advantage it thinks it does.
Apple gets Jay-Z for competition
Streaming is the way that people listen to music. The download market, which iTunes and Apple brought to mass adoption, is shrinking. Apple has, of course, released its own streaming solutions. Last year iTunes Radio premiered to less than avid attention. This year is the turn of a new streaming service from Tim Cook’s company, this time headed by Jimmy Iovine, Trent Reznor and Dr. Dre of Beats Audio.
Music industry maven Jay-Z has other ideas. The artist, in a project being promoted by superstars Beyonce, Kanye West and Rihanna, is pushing his own streaming application. It’s supposed to be the first streaming platform owned by artists, and it’s actually been on the market since October of 2014.
It wasn’t until recently that Jay-Z purchased the app, however. Today’s announcement revealed that many pother artists, including those mentioned above, had become co-owners of the streaming service.
Whatever star power Apple’s executives think Dr. Dre and Trent Reznor have, they can be sure they’re not going to beat a team like that composed by Jay-Z. The rapper is well known for his business acumen, and his ability to identify and capitalize on opportunities just like he has in live-streaming.
At the same time established competitors like Spotify still control the market, leaving Apple Inc. (NASDAQ:AAPL) with a harder and hard job to catch up. Paul Verna, an analyst at eMarketer, referred to competitors in his analysis saying, Apple will have a hard time threatening that position. So it is not a slam dunk for them.
Apple drowns in streaming pool
With the range of music streaming services out there, and the entrenched positions of some of the most popular, Apple is not going to make a place for itself in the market with ease. The RIAA Reckons that streaming revenue hit $1.87 billion in 2014. That means that Tim Cook & co forfeited billions of dollars in high margin revenue by falling behind in the business.
Sean Udall, Chief Investment Officer of Quantum Trading Strategies, reckons that Apple doesn’t have to have the best streaming service, all it needs is to create something that’s almost as good and it will naturally pick up market share as a result of the company’s brand presence and hardware advantage.
While Apple struggles in the battle over music streaming, several other media sectors are being transformed, reducing the control the company is going to have over the way people buy and consume content. Meerkat, a live-streaming video service has been making headlines this week after Twitter Inc (NASDAQ:TWTR) announced a competitor. Apple has nothing to compare to the service, bar Facetime a different animal completely.
At the same time Facebook Inc (NASDAQ:FB) is orchestrating a revolution in the way its messenger service works. The company is allowing third party integration on its Messenger application, a move that adds a second level of application control on top of that enforced by Apple itself.
Apple has held rigid control of its customer’s media for years, but the streaming of music demonstrates that the firm is just as likely to fall behind the curve as any other company. With its hardware advantage Apple is likely to be able to regain market share in any media it loses its foothold, but shareholders should question what those missteps mean for the future of the business as a whole.
