Issue No. 119: Spotify v. Apple

Apple’s Weapon in The Battle Against Spotify is Hip Hop

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In my original tweet here, I cite a few points on the on-going saga between Apple Music, Tidal, and Spotify. Tidal has been rumored to be an M&A target and I’ve made a few assumptions as to why. In the battle of hip hop exclusives, it’s between Tidal and Apple Music. Spotify, who does a great job of unearthing indie records and musicians, doesn’t compete for the hip hop audience. Tidal, who took a different approach to the streaming wars, owns the rights to much of RocNation’s rights (Jay Z, Rihanna, etc) and G.O.O.D. Music’s rights (Kanye West and signees). Apple has grown to adopt this model and a Tidal M&A will complete the cycle.

And like I mentioned in yesterday’s letter, Spotify is suffering the cost of paying labels. Profitability is nowhere to be found.

Apple on the other hand, is buying the rights to music and exclusive releases. In essence, rather than reselling a vendor’s product for a 7% margin, they’ve acquired the brands and reaped much higher (and sustainable) margins. Apple’s model of negotiating with artists for exclusive rights is one step closer to Apple owning the machine. Universal and Sony could one day go the way of record stores.

I don’t expect much from music press but this one article tips the hat. If this Kanye West signee gave Apple Music an exclusive, Apple’s all but finalized the acquisition of Jay Z’s Tidal. Rdio’s former employees are probably salty about that.

See more of the issue here.

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