Especially in light of its recently surge in trial memberships, Apple (NASDAQ:AAPL) Music's status as would-be Spotify killer seems more justified than ever. Competing against the likes of Apple poses problems for even some of the world's largest and well-funded companies.
However, Spotify remains appropriately far from throwing in the towel. A recent series of moves from the streaming upstart helps illustrate its willingness to go toe-to-toe against Apple for the future of streaming.
Spotify's new war chest
In order to continue its explosive growth, Spotify recently closed another round of private fundraising that values the closely held private company at $8.53 billion, more than twice the value of streaming radio pioneer Pandora Media. The investors, who consisted of a broad mix of international investors spanning from Abu Dhabi to Canada, provided the company with $526 million in fresh capital.
This new financing will allow Spotify to continue its ongoing international expansion to more than 60 markets across the globe. More importantly, perhaps, Spotify will also likely use at least some of the proceeds to scale its expansion into content beyond just digital music. Several months ago, Spotify announced plans to enter the streaming video business with video and news features from media titans including ESPN, BBC, NBC, ABC, and others.
Spotify goes on the counteroffensive
In addition to raising capital and expanding into new content types, Spotify recently released a feature that addresses the perceived key weakness in the service that Apple sought to exploit with Music -- curation.
By far the most defining feature of Apple Music is its curated playlists and 24/7 radio stations. If you see this as an accident, you need to rethink how you understand Apple.
The redesigned Apple Music iPhone App features five main navigation icons. The "New" tab leads its users to a host of playlists created by the growing hoard of music industry veterans Apple has aggressively hired in recent months.
Similarly, the "Radio" navigation button allows listeners to browse and play from an extensive selection of genre-driven radio stations, at least some of which are also driven by Apple's nascent music editorial staff. When 40% of the core navigation in any app provides curated content in some fashion, you can fairly conclude the creator of that app sees said function as an important opportunity, and those observing the unfolding Apple Music-Spotify feud should do so as well.
However, Spotify has also taken several active steps to remedy this area of their service that many felt left room for improvement. In the past few weeks, Spotify has unveiled two new features that each leverage the company's machine learning chops to curate playlists -- Discovery Weekly and Fresh Finds.
At a vastly oversimplified level, Discovery Weekly analyzes a user's listening history and creates a playlist of unknown tracks that should match the user's taste. Similarly, but with the explicit goal of identifying up-and-coming tracks before they break, Spotify's Fresh Finds scans the listening tendencies of users it somehow identifies as trendsetters, and makes them available for a more general audience.
At the core of each product lies the technology Spotify acquired when it bought the machine learning start-up, The Echo Nest, for a reported $100 million last year. Like Apple, Spotify also employs a large number of music editors who help create many of its playlists; but as a recent profile in Fast Company noted, Spotify hopes its combination of expert insight and machine learning chops will put its perceived curation abilities on par with Apple Music's.
Looking at the streaming market more broadly, a cursory analysis suggests Apple Music and Spotify will soon likely compete for users. Each company has its own strengths and advantages in this budding streaming war. While Spotify's recent fundraising and new products certainly strengthen its competitive position, expect more fireworks as this rivalry continues to evolve in the coming months.