How Facebook And Google Are Taking Over The Business Of Online Music Streaming

Facebook and Google are spreading their arms into the online music streaming business that is struggling to generate revenues. We look at what Facebook and YouTube have to offer to music listeners.

The music streaming business is brutal. The economics of the business has been laid out very clearly – go big or go home. The latest startup to bite the dust is Rdio which recently announced that it is filing for bankruptcy. The streaming company that owes $220 million to creditors was losing anywhere between $1.85 to $2.4 million each month.

However, the silver lining is Pandora, the granddaddy of streaming music is acquiring “several key assets” from Rdio. The purchase price is $75 million, and the acquisition includes technology and intellectual property.

While the market is jinxed for any entry level player, the social networking giants one by one are trying to own a sizable share of the market, at a time when streaming’s effect on music industry revenue is a flat zero. It doesn’t make money for the recording companies, and it doesn’t lose money, highlighted a new study by the National Bureau of Economic Research.

Facebook Music Stories

Facebook, the social networking giant that wants to own every mobile activity performed by a user, recently began rolling out a new music feature that will let you sample the music shared into your feed. A new post format called Music Stories will let users preview 30 second clips of songs and albums shared to Facebook from Spotify, Apple Music, and iTunes.

Available right now on Facebook’s iOS app, it pulls in streams shared to the social network from Spotify and Apple Music and repackages them in Facebook’s new audio player, allowing users to sample the songs and albums without having to leave the app.

Without having Spotify or Apple Music installed on your phone, or be a subscriber to either service you can hear clips on Facebook, save songs or buy it from iTunes by clicking a button on the post. More services are in the pipeline.

With this fresh attempt Facebook now wants to be the platform of sharing instead of being a dumping ground for everything you listen to on Spotify. An integration that Facebook had executed with Spotify in 2011 that helped it grow in the United States but didn’t please the users at all.

At the moment you can’t stream a full song inside of Facebook but if done it will only benefit the music streaming industry. For records more than a billion users visit Facebook every day and 1.39 billion mobile monthly users (up from 1.31 billion in Q2) and 894 million mobile dailies. Will Facebook, other than being a distribution network also become a music hosting company and release an app in 2016 like YouTube? It’s already doing this for videos, will it do for music as well?

YouTube music app

Earlier this month the granddaddy of video social network, YouTube owned by Google came up with a much awaited YouTube Music for iOS and Android. The enhanced, paid, experience is free during a 14-day trial. After that, you can drop the $9.99 for YouTube Red.

Prior to this, YouTube launched Red - a new $9.99 ad-free video and on-demand music subscription service that will allow subscribers to enjoy videos across all of YouTube without ads, save videos to watch offline on your phone or tablet and play videos in the background.

If you are subscribed to Red in US, you’ll get ad-free viewing and listening, audio-only mode and offline play in YouTube Music. But free version of YouTube Music has ads enabled, you lose portability and there’s no playing music in the background, checking texts or accessibility to mixtapes offline. In other words you will have to pay if you want to have the app as your music on the move.

With more than a billion people accessing the service, the paid bet is rational move from YouTube which is facing competition from Facebook.

This isn’t YouTube’s first move into this market, last the company launched Music Key Beta last year, a monthly subscription service that became the seed of YouTube Red. Music Key Beta was focused exclusively on music videos, and for $9.99 a month, users could remove ads and use the app in background mode.

However, the biggest pain point of the app was that it wasn’t all-encompassing. This time YouTube Red will work across every video on YouTube as well as inside the dedicated Music and Gaming apps, informed Robert Kyncl, YouTube’s chief business officer to The Verge.

Twitter #Music

Facebook and Google both are making moves in the music streaming business, Twitter did it too with Twitter #Music but it failed. The app, which attempted to harness conversations around music and artists on Twitter to create a new way to discover music, failed to peel listeners away from the many competing music apps in the market. The app ceased working for existing users on April 18th, 2014.

While the app integrated with popular apps like Spotify and Rdio, recommending tracks based on artists you had followed and tweeted about, it never got much traction among mainstream users.

Later in the month of October Twitter came up with a similar thought process that Facebook is now following - just improve the music listening and sharing experience inside the network. Twitter launched Audio Card on iOS and Android, which allowed users listen to music from embeds in tweets, and dock the music player so the jams play on as they surf around Twitter. The first launch partners were SoundCloud and iTunes but post that nothing much happened in the music arena. Right now it is too busy in simplifying the product and spike users.

“Music will eventually end up as just a feature in somebody else’s product,” Forrester analyst James McQuivey says. “This transition may take time, but eventually, nearly every digital service we depend on will toss in music as a nice feature to sweeten the deal.”

Will the mobile first Snapchat targeted towards the younger lot walk the same path at a time when it is recording 6 billion daily video views?

With social networks and tech giants entering the music streaming space and content costs killing revenue growth, existing players like Pandora, Spotify, and others will have to figure out more lucrative revenue streams, or they will face the same fate as Beats Music and Rdio.

Google and Facebook have their backs covered since music isn’t their core business.