Apple's Jimmy Iovine on Music Woes: "The Ecosystem Is Messed Up"

Apple Music Announcement 2 - H 2015
AP Images

Apple Music Announcement 2 - H 2015

How many people will pay for the company's new streaming service? Plenty, say analysts, as Iovine and Eddy Cue talk to THR about how the new streaming service plans to take on Spotify, Pandora and the rest.

A version of this story first appeared in the June 19 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

To Jimmy Iovine, Apple Music is the long-awaited savior of the troubled music industry. "It's in really rough shape. The ecosystem is messed up," the music veteran tells THR. So Iovine believes he and other Apple execs simply are reordering that ecosystem with Apple Music, the subscription streaming service unveiled June 8 in San Francisco that will launch June 30.

Apple Music isn't quite the revolution, say, that iTunes was when it launched in 2003. Competitor Spotify, for example, already has more than 15 million paying subscribers, while Pandora has more than 76 million free users and about 4 million who pay for premium service. Rhapsody, Google Play, the Jay Z-backed Tidal and others are in the mix, which begs the question: Who really needs Apple Music?

Plenty of people, say analysts, who believe that the growth in the category, along with Apple's massive imprint with consumers (and support of all the major music labels), make the success of the service (and a global radio station Apple is launching) practically a given. Music streaming in the U.S. is expected to be a $1.8 billion industry by 2018, bigger than downloads, according to PricewaterhouseCoopers. Morgan Stanley analyst Katy Huberty figures that Apple Music could account for 5 percent of Apple's revenue and 2 percent of its earnings per share by fiscal 2016.

"Consumers will absolutely pay for this service," says Nick Petrillo, an IBISWorld analyst. "With Apple's dominant share of the market for smartphones, it's difficult to imagine a scenario in which Apple Music doesn't pose a significant competitive threat to pre-existing streaming music services."

Almost 1 billion people worldwide will have access to Apple Music via their iPhones, iPads, Macs, etc., and Eddy Cue, senior vp Internet software and services, says Apple has about 800 million registered users that already have handed over their credit card numbers.

"People are willing to pay more for Apple products. It's always been that way," says Peter Csathy, CEO of Manatt Digital Media.

Cue also figures Apple Music's $14.99 family plan makes a difference. "You have a spouse, a boyfriend or girlfriend, kids … the concept of signing up for these individual plans multiple times is just not going to happen," he tells THR.

But analyst Ben Bajarin of Creative Strategies is less bullish. "The overwhelming majority of people want whatever is free," he says, adding “What it’s really going to come down to is how Apple sets themselves apart. The way they set themselves apart is with the artists. The artist will be what helps them differentiate. If it’s just the same thing as everyone else, they probably won’t get the masses to subscribe because right now the masses don’t subscribe, they just listen to free radio.”

He also notes that not everything Apple does is a slam dunk.

"The common wisdom is that the default app that just ships on your operating system has an advantage over the other players," Bajarin says. "That wasn't true with iTunes Radio. It didn't take off. When they released iTunes Radio, people were concerned that Pandora was dead, and it didn't kill Pandora." 

Cue, though, has confidence that the subscription music industry is big enough for multiple players.

"It's not, in order for us to win, everybody else has to lose," he says. "We want make the best product on the planet, … but that doesn't mean it has to be the only product."