Apple might be playing up its subscription model because it’s playing up to music labels, whose download revenues are being cannibalized by streaming services.
“The labels think that if you turned off ad-supported streaming all together, people are going to start downloading music again,” Higbie said, adding that such a scenario won’t happen.
“But the good thing is that audio advertising is going to be better than it ever has been because the content consumption model for audio is phenomenal. People can listen to audio while they’re doing other things.”
David Kert, COO of TargetSpot, a digital audio advertising platform, agreed that ad-supported models are an industry mainstay.
“Ad-supported models are not going away anytime soon,” Kert said. “And with all the ways people can listen to digital music and the amount of time spent listening, ad tech will continue to connect advertisers with digital audio listeners.”
Although not widely reported, sources said Apple could be plotting an ad-supported model baked into its offering with Beats 1 Radio, an international radio streaming station which will sit inside Apple Music.
And a counterattack from Google last week, when it launched an ad-supported listening platform to complement its existing subscription-based service, may convince Apple to do just that.
“Google is going to draw advertisers faster because they’ve already seen what happens in the subscription-only model,” said Higbie. “If Apple wants to grow subscriptions, they have to grow ad-supported listening.”
While free streaming services could entice consumers to test Google’s offering, the winner of the streaming wars will ultimately be the company that can offer audiences the most compelling product. More than half of all Americans stream audio on a weekly basis, according to Edison Research, and Apple and Google will fight over that new audience growth in the months to come.
“Advertisers are going to follow the listeners,” Higbie said. He predicted that people love Spotify too much to simply jump ship, and that Apple and Google will simply increase the overall size of the market.