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Can Apple Bring About the End of Free Streaming?

Jimmy Iovine and the major labels are conspiring to get rid of free. Not only the free tier on Spotify, but on YouTube too. Apple writes a check to the labels at 40 million subscribers for years, whether they reach that number or not, and everybody pays for music.

Or do they? It only works if they get rid of CDs and files.

This is why the European Commission is investigating Apple.

But is this a way to make a boatload of bucks or a road back to piracy? Is it a brilliant end run or a delusional rear-guard effort? Free, ad-supported models like Spotify’s kill piracy; that’s been proven. And the idea that piracy increases sales is a crock.

Once upon a time, there was piracy in the cable business. You could steal channels like HBO by removing the filters in the chain. But now, everybody pays, because cable went digital, and the premium channels are now scrambled. And even though HBO recently announced the launch of HBO Now, an over-the-top Internet service that doesn’t require a cable subscription, the move doesn’t really hurt the cable companies, which are selling the Internet, too, and can just jack up prices to meet their numbers. But content providers are up in arms, because once we really do go a la carte, marginal channels will disappear.

That might be the fate of marginal acts in the world of subscription-only music, too — acts that can at least get sampled in the current ad-supported, free-music environment.

One thing is clear: People have been refusing to pay for music for about 15 years. And the only way to prevent piracy in a subscription-only world is to get rid of all CDs and files. As long as there’s a CD, as long as there’s an iTunes Store file, piracy will reign.

Is the music business willing to kill off the CD and file?

Of course not, because they’re not in the business of taking big risks. Shut down YouTube, and people will just use BitTorrent or IM or a hard drive/USB stick to swap — assuming they want the music at all. That’s what’s ignored: the promotional value of all these free services. How are consumers going to be motivated to pay for music if they haven’t heard it first? And who’s gonna pay for it if they haven’t been able to listen to it?

Some people will stick with Pandora. Back in the pre-Internet era, most people did not buy music regularly; radio was enough. Is everybody now going to sign up for a music subscription?

Certainly not if there are files to transfer. But what if there are no files? Who is going to capture a stream and then transfer it? It’s doable, but it’s a huge pain in the ass. Convenience argues for payment. And payment could be baked into a cable or cell-phone bill, so it doesn’t feel like you’re paying.

Now you know why Iovine wanted to offer Apple’s subscription streaming service at a lower price than the competition. He was right.

Is he right about killing piracy/getting everybody to pay?

First and foremost, he’s leveraging his industry relationships for exclusives. So you’ve got the Apple brand and the content, and you can kill Spotify if it’s got no free tier.

Never underestimate the ability of fat cats to stack the deck, to put their thumb on the scale to their advantage. The recorded music business has lost half its revenue, and it wants it back, and fast. Labels don’t care what artist hits — whether anybody hits — as long as they get paid.

This is their strategy.

You’ve been forewarned.

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