$5 Per Month for Music?

In the coming weeks, both Amazon and Pandora are expected to upend the digital music industry and offer streaming services to consumers that start at just $5 per month. Will this be enough to disrupt the market leaders?

Let’s think about that for a moment.

Like many of you, when I think about subscription music services, I often think back to Steve Jobs’s quote about such offerings.

“People want to own their music,” Jobs said, infamously, in 2007, when Apple owned the market for digitally purchased music. “The subscription model has failed so far.”

As with Steve Ballmer’s quote about the first iPhone—which coincidentally happened the same year that Jobs opined on subscription music—things didn’t go down the way you probably remember it. That is, we love the pat narrative, where Jobs is made to be lying, perhaps, because Apple has been known to poo-poo technologies when it is secretly working on that exact product type.

Or maybe Jobs was just … wrong. People do love to pull down the heroes of others, after all.

But just as Ballmer was right about the iPhone in 2007, so too was Jobs about this topic: Subscription music hadn’t found its footing in that distant decade ago. And just as Ballmer has been misquoted through omission in the years since—“Can you believe that guy wasso clueless about the iPhone? What a jerk!”—so too has Jobs.

“Never say never, but customers don’t seem to be interested in it,” Jobs also said at the time. That’s the part you don’t hear about. Because people—critics, in some cases, but also Jobs disciples—are selling you a story, not the truth.

In the years since, some truly great music subscription services have emerged. Spotify, for example, which is perhaps the poster child for the full-featured music subscription offering. Or even Apple Music, a latecomer in that classic Apple way that nonetheless has quickly caught up and is now an established and credible offering.

Microsoft’s offering—which, incidentally was the reason Jobs was asked to comment on subscription services in the first place—has evolved from Zune to Xbox to Groove, and hasn’t garnered much attention though it, too, is a full-featured, cross-platform service.Groove’s lack of a family plan is a problem, but then the world just seems to ignore Microsoft regardless.

Spotify, Apple Music, and, yes, even Groove all offer a wide range of functionality and each are roughly comparable. They’re also comparable on pricing, where individual plans are usually $10 per month for the so-called “all you eat” subscription plan and family plans, when offered, are about $15 per month.

When Apple was plotting its own subscription music about a year and a half ago, it sought to undercut Spotify, the market leader. But as with its attempts at revolutionizing the TV and car markets, Apple ran aground by entrenched forces beyond its power. In this case, the music industry, smarting from the smaller royalty payments seen on digital, simply said no. So when Apple Music came to market in mid-2015, it was priced just like every other service. Apple had to fall back on actually competing. Which, by the way, it has done credibly.

So how could Amazon and Pandora undercut Spotify and Apple Music (and Groove, for that matter)?

The answer appears to be in the nature of their offerings. That is, while Spotify, Apple Music, Google Play Music, and Groove Music Pass today offer what I call full-featured music services, the Amazon and Pandora $5 offerings will be something else. Something … less.

Consider Pandora today. The service is available for free, and you “pay” for the music with advertising. But it’s just streaming radio: You can choose a genre, or select a favorite artist or song, but from that point on, what you hear is selected for you, and you can only skip a few songs per hour. Optionally, you can pay $5 per month for Pandora One, which is ad-free, offers high-quality music, and more daily song skips.

The new offerings—Pandora’s and Amazon’s—will apparently bridge the gap between today’s Internet radio services (like Pandora) and the full-featured music offerings like Spotify. They will do so by offering offline playback, more song skips and, I think, more ability for the consumer to hear what they want to hear. That is, instead of just being radio stations, they will offer a limited ability to hear actual albums or music by a single artist. (Pandora is also plotting a full on-demand service at, yes, $10 per month, to better compete with Spotify and Apple.)

Amazon’s service is perhaps the more interesting because the online retailer can absorb costs by mixing and matching between physical and virtual benefits via its Prime service, which costs $100 per year. So while a standalone music service might need to cost $10 per month per user to be financially viable, Amazon can charge less for its best customers: Those who already subscribe to Prime, perhaps, or even those who own Alexa devices like the Amazon Echo.

The Pandora approach, as I understand it, is comparable to that of Fitbit, which competes with Apple in the wearables market. It is working from the bottom up, getting consumers hooked on free and low-cost offerings and improving its service over time. Perhaps it can entice some to pay a bit more for a better service somewhere down the line.

Amazon, meanwhile, wants to be at the center of your life, and if you value saving money above all else, it has created a credible digital ecosystem for consumers that one could argue is basically free, since you’d pay for Prime anyway. There is a cost to those services, but you never really see—or, as important—feel it.

I’m curious to see if Spotify and Apple—and maybe, Microsoft, somewhere down the line—will be able to compete at the $5 level if and when these new offerings arrive. And if the $5 services expand the market for digital music.

It should: If you figure the cost of a music subscription at $120 per year for an individual or $180 for a family, that’s a lot of money to ask of casual fans. Citing Music Watch, the New York Times notes that “music consumers” will pay about $67 per person, on average, this year for music. That’s a lot more than the $55 they paid last year—thanks, I bet, to the success of Apple Music and Spotify—and it’s edging to the all-time high of $80, from 1999, at the height of the music CD era.

I spend a lot more than that on music, and for other content, for that matter. I do so because I value choice and flexibility, and because we enjoy entertainment of various kinds, whether it’s Netflix for movies and TV shows, Rifftrax for comedy, Spotify (for my family) and Groove Music Pass (for me) for music, Audible for audiobooks, or the various services we get through Amazon Prime, which extend to reading (Kindle), music (rarely/never used) or video.

But many spend far less. And that, of course, is the goal of these services. I just wish Steve Jobs was still around so he could explain why customers aren’t asking for a less-capable music service.