Google (NASDAQ:GOOG) (NASDAQ:GOOGL) entered the streaming music market years ahead of Apple (NASDAQ:AAPL), launching Google Play Music in May 2013. Like Apple Music and Spotify, Play Music subscribers get access to a catalog of millions of songs they can stream on demand for $9.99 per month.
While it's unlikely to make much of a difference to Google's bottom line, Play Music stands out as a key strategic service underpinning its broader mobile ecosystem ambitions. The search giant has made a number of notable improvements to the service since its debut, but one of the more significant ones may have come late last month.
Google finally adds a free component
The market for on-demand streaming music services is increasingly crowded. In addition to Spotify, Apple Music, and Google Play Music, there's Rdio, Tidal, Rhapsody, and Xbox Music (among many others). Some are partially free; others are strictly paid.
To enjoy ad-free, on-demand music, Spotify subscribers have to pay a subscription fee. But the majority of Spotify's users don't pay anything: Spotify says it has over 75 million active listeners, but only 20 million paying subscribers. The discrepancy isn't particularly surprising -- those that don't pay still get plenty of benefits. Spotify allows ad-supported on-demand listening on the desktop. Mobile users are slightly more restricted, but can still access shuffled playlists.
But not all streaming music services cater to those unwilling to pay a subscription fee. Xbox Music offers new customers a 30-day trial period, but any further listening requires regular payments.
The same had been true for Google Play Music until an update the search giant made late last month. Last summer, Google bolstered the service with its acquisition of Songza, bringing human-curated playlists on board to supplement its mammoth catalog of streaming tracks. Those playlists are now accessible to all -- subscribers and non-subscribers alike. Those that don't pay have less control over them, and must put up with ads, but can still get some value out of Google Play Music.
Google Music All Access vs. Apple Music
Apple is offering something similar. To access Apple Music's full streaming catalog, users must pay a $9.99 per month subscription fee. But if they don't pay, they can still listen to ad-supported versions of the Beats 1 radio station and other Apple Music radio stations.
Apple Music is only a few weeks old, and despite its age, Google has declined to give exact subscriber figures for Play Music. But having a free tier appears to be an important aspect to a running a successful service: Over the last two years, Spotify has grown its paying members (from 6 million to 20 million) at a rate faster than its active listeners (from 24 million to 75 million) -- free listeners, happy with the service, may eventually convert.
As it stands, it's hard to declare that their music services are particularly important to either company's earnings. If Apple converted 10% of the 800 million iTunes accounts it has on file -- a figure that's likely to be overly optimistic -- it would add less than $10 billion to its annual revenue. That sounds significant, but it's hardly so, as Apple generated more than $180 billion in sales last fiscal year.
Nevertheless, they seem to serve crucial, long-term goals. On its landing page for Google Play Music, Google highlights it as an easy way to replace an iTunes collection -- a way to win iPhone owners, entrenched in Apple's ecosystem, over to Android. Apple Music, in turn, allows Apple to remain relevant in the world of music, as demand for digital downloads is slowly replaced by streaming subscriptions.
As the two tech titans continue to face off in the mobile market, music has opened up as an interesting ancillary play. Both firms appear to be offering compelling services, and with Google Play Music's latest update, both are intriguing even for those unwilling to pay.
Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.