Ipsos MediaCT: Has Apple made a mistake allowing Spotify on the iPhone platform?
In our latest Research Focus report, Ipsos MediaCT looks at whether Apple’s decision to allow users to access Spotify on the iPhone, a music streaming service that is in direct competition with iTunes, is a mistake?
You can please some of the people all of the time and all of the people some of the time, or so the saying goes. It applies to most areas of business where companies are often trying to establish either a loyal group of consumers who will continue to buy a product or service and who are price inelastic, or reach a mass market audience with a product or service that will appeal to them for long enough to make the investment worthwhile.
Mobile applications have remained very much in the latter camp, competing for mobile user spend in an increasingly granular market, where handset providers, network operators and application providers all continue to jostle for a slice of the action. Then along came the iPhone. Let’s not forget that Apple remains a small fish in this pond – its share of handset and mobile service revenues remains low in comparison to the likes of Nokia and Vodafone. But what it has done is effectively bring together mobile network access and mobile applications into one single device, the iPhone. In doing so it has effectively united a wealth of choice, which for so long has rather baffled end users and resulted in a highly fragmented market, with some of the most loyal, passionate and tech savvy customers in the world.
However, not much of this is new. What has taken a few people by surprise is the recent announcement that Spotify, a music streaming service, has been accepted on the aforementioned iPhone platform – mobile application nirvana. With the pre-eminence of iTunes as a music delivery service, surely Apple is taking a risk allowing its users access to a streaming service which puts it in direct competition with iTunes? Perhaps, and it’s a question that can be addressed in part by market research.
Ipsos MORI has recently carried out research into the area of digital distribution models including testing a Spotify-type proposition accessed via PC and on a mobile phone. In the first instance, we looked at how many people were interested in the proposition (presented as a free music streaming service with 20-second audio ads every 20 minutes) when accessed via a PC. The answer – about 40%. Decent enough as there’s around 2 million users of that version of Spotify in the UK currently. What about if you could pay a subscription fee and not have to listen to any adverts? Less interest overall, just under a third, but more interestingly, at the price Spotify are currently charging for this service, only 4% of our respondents were interested. Right, so less than 1 in 20 would actually pay £10 a month to not listen to adverts along with music on their PC.
Where does this leave Spotify on a mobile then? Well, we looked at that too, and found that around 1 in 4 mobile users were interested in the free with ads proposition. Not bad but less than the PC-based application as you might expect, and although iPhone users are generally willing to try out all sorts of new applications, it’s a relatively safe bet based on what we know from the PC-based version, that not many of them are going to pay the sort of subscription fees Spotify are after for their premium subscription service.
How successful Spotify is as an iPhone app remains to be seen but it seems, at least for now, that Apple have got their sums right, again.