How The Business Of Music Streaming Is Only Just Getting Started

On Monday, Jay Z launched a music streaming service called Tidal.

With Spotify, Beats and others already deep in the game, you might wonder what Jay Z is bringing to the table here. Is this just a hubristic attempt to pull his own Dr. Dre and flip the service to a big tech company for a few billion?

The truth is, something big is happening in streaming.

Spotify – and the other “all you can eat” for $9.99 a month services – was built around access and convenience.

It's brilliant; there's no need to ever download music from iTunes again when you have on-demand access to all the music you can think of at your fingertips. Music was Uber-ized before we got Uber.

Yet, in 2015, with several players offering the same access and convenience for the same price, there’s a growing realization that somewhere along the way, music streaming became boring.

Before we go there, you have to admire what Spotify has accomplished. It got labels to embrace streaming as the second-coming of the music industry.

The iTunes replacement grew into a multi-platform experience with 15 million paying subscribers.

All of this will be a key chapter in the early story of music streaming, but this is also the age of WhatsApp and Snapchat.

This is the age of massive global mobile scale and services that can explode to hundreds of millions of users and tens of billions of dollars in value in half the time Spotify’s been in the market.

The total addressable market for music consumption is undeniably large. iTunes, for example, has 800 million credit cards on file.

So, we ask, why hasn’t the Spotify model exploded? Based on the rate of growth and the massive swath of the market that hasn’t yet adopted an on-demand streaming service, it appears something is missing.

The problem for on-demand streaming services relates back to its core value proposition. Access and convenience can be game changers when you need a taxi, but music has never been about those things.

Music is supposed to be a more magical experience that connects you to friends, memories, moments and artists.

When we think of music we’ve enjoyed, we remember who we shared it with and what we talked about; we remember mixtapes, listening parties and radio luck. All of this made music an exciting, interactive and fun experience.

Today’s on-demand music streaming apps don’t deliver on this experience.

And, while there are no easy answers, there are a few actionable starting points that could go a long way in making streaming more fun:

Let users interact with each other in meaningful ways.

When you share a song with your friends on today’s services, there’s no feedback loop; you don’t know if they played it, loved it, hated it or had something to say about it.

The experience ends there and that feels disappointing because it could be the beginning of a rich, social music experience.

Involve artists more deeply.

With a few recent exceptions, artists don’t have an intimate presence on today’s on-demand music services. Their music is there, but they’re not.

Mobile connectivity should make it easier for artists to be part of the music fan’s experience in dynamic and spontaneous ways. New fan interactions can also create new, scalable revenue and brand-building opportunities.

Make the content feel special.

Every week, dozens of new albums are released on these services, and from that moment on, users can stream them without limitation.

That’s what access and convenience is all about, except we’ve lost the anticipation and conversation around new releases and the sentimentality of experiencing them for the first time.

Access to the new content starts to feel routine after a while.

There’s been some thinking about windowing content, exclusive releases and other ideas to solve this problem.

While it’s unclear which will be the right formula, it’s clear fans don’t approach streaming new music with the same excitement and emotion with which they attend Coachella -- the standard we strive for.

This brings us back to Jay Z: With an iconic ability to define what’s cool and what’s next, Jay Z sees the opportunity to innovate in a music-streaming world where the existing model may be past its prime.

And, then, there’s Apple: Apple’s new streaming service is expected to launch this summer and could achieve major scale on day one through iOS device preloads and formidable marketing resources.

Potential scale aside, it’s refreshing to hear Apple is intent on doing things differently. Rumors point to an increased focus on the fun aspects of music engagement: social features, exclusive content, artist interaction and curation.

There’s a relevant side note on economics here. Apple spent months trying to get the labels to agree to a price point below $9.99 a month for its new service. The company understands there’s a lower sweet spot for mainstream consumers’ willingness to pay for music.

In fact, as analyst Russ Crupnick points out, consumers have historically spent about $50 a year on music. Apple, however, was unable to bring the labels on board to a lower-cost service.

These are watershed times in music streaming; someone’s going to get the experience (and economics) right, and whoever that is will win big.

The winning music streaming experience needs to be authentically fun and compelling. It needs to be great at creating the magic and context that enhances our enjoyment of music and goes beyond the listener and their library.

Look at the behaviors of Gen-Y on mobile devices. Look at the home screen social apps like Instagram, Snapchat and maybe Meerkat or Periscope soon. There are some common patterns around self-expression, social interaction and good old-fashioned fun.

But, where is the killer social music app?

It’s still the early days for music streaming and new players are still arriving to the party. Grab a drink because it’s just about to get fun.

Mike Wagman and Jesse Dallal are two of the three cofounders of Rithm, a new music messaging service that makes it fun and easy to share and play music with friends. Rithm is free to use and offers a $3.99 monthly subscription for its premium tier.