Yesterday night, Microsoft Corporation (NASDAQ:MSFT) announced that it will make its Xbox Music service available for Apple Inc. (NASDAQ:AAPL)‘s iOS and Google Inc (NASDAQ:GOOG)’s Android –and free streaming on the Web. The news doesn´t come across as a big surprise, given the fact that the aforementioned operating systems (iOS and Android) power more than nine out of every 10 smartphones sold world-wide.
The service, which was created to replace the unsuccessful Zune, was launched a year ago and, until now, only worked on devices running the Windows Phone or Windows 8 operating systems. However, Microsoft Corporation (NASDAQ:MSFT) lived up to its promises to extend the service to iOS and Android, and now seems to stand a chance in the highly competitive digital-music market.
Microsoft pitches Xbox Music as a more complete product than the other digital-music services. It has features mirroring Spotify’s subscription-music feature and iTunes’ individual song sales, the option to meld songs from CD collections into the Xbox Music digital library, and coming soon Pandora-like “radio stations” built around personal musical tastes (WSJ).
The timing of the launch does not look at all random.
Apple Inc. (NASDAQ:AAPL) is expected to introduce an iTunes Radio service for iOS 7 today, along with its new iPhone. Furthermore, Microsoft Corporation (NASDAQ:MSFT) is trying to attract iTunes users into its Xbox Music Pass subscription service by offering six months of ad-free streaming and access to online content. More, streaming will be free on any web-browser, and, although it doesn´t support offline listening yet, the company promised that this feature will be available within the next few months.
Competition in the digital-music market is increasing constantly, accompanying the growth of the segment. According to ABI Research data, the industry will produce about $5 billion in revenue from premium subscriptions by the end of 2013, and this figure could surpass $46 billion in the next five years. Although Pandora and iTunes are quite worrying, Spotify, which dominates the on-demand music streaming market with a 32% share (ABI Research), poses the strongest threat.
Apparently, the news about Xbox Music helped Microsoft Corporation (NASDAQ:MSFT) start the week better than it finished last one. The stock is up about 1.4%, but still trades cheap at 12 times its earnings, at a 15% discount to the industry average. Whether to buy or not, that remains a question.
Disclosure: Javier Hasse holds no position in any stocks mentioned