Apple Inc. (AAPL)’s Trying to Keep an Old Business Model Alive

Consequently, Apple has a vested, long-term strategic interest in keeping people happy iTunes customers — the more songs they buy, the less likely it is that they’ll consider leaving.

Streaming, on demand music services weaken this component of Apple’s ecosystem. If a customer is shelling out $10 a month for a Spotify subscription, it’s unlikely that they’ll purchase music, from iTunes or anywhere else.

Google Music could be the biggest threat

When Google first unveiled its music service, the big draw was the ability to upload mp3s. Any gmail user can upload 20,000 mp3 files to the cloud and access them from anywhere.

As few people likely own more than 20,000 songs, this makes dumping iTunes (and by extension iOS) a much more pain-free process. If an iPhone user wants to make the switch to a device running Google’s Android, they can simply upload their songs to Google’s servers and get them on their new Android device.

Google pushed it even further when, at the company’s I/O conference, it unveiled All Access, a subscription service add-on to Google Music that gives the application on demand functionality.

Now, All Access is said to be coming soon to iOS, meaning that Google’s effort to wean people off iTunes will soon be front and center for all iPhone users to experience.

Streaming music as a threat to Apple

Apple Inc. (NASDAQ:AAPL) wants people to keep buying their music from iTunes. Not because the company makes a lot of money selling music (they don’t), but rather, because it helps keep customers loyal.

Thus, unlike its competitors, Apple Inc. (NASDAQ:AAPL) has reportedly chosen to copy Pandora, rather than offer a streaming music subscription service like Google.

Ultimately, the rise of on demand music services is a threat to the viability of Apple’s ecosystem. Those that buy into Apple based on the strength of that ecosystem should keep a close eye on the success (or failure) of these services.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google.

The article Apple’s Trying to Keep an Old Business Model Alive originally appeared on Fool.com.

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