As predicted, Google unveiled its own all-you-can-stream music subscription service to compete with Spotify, Rdio, Deezer and MOG. It's a crowded space with challenging economics, but if anybody is well-positioned to win this game, it's Google. 

Google Play Music All Access will offer on-demand access to millions of songs for $9.99 per month, which is the same as every other music subscription service's premium tier. Unlike the existing market leaders, though, All Access won't include a free tier of access, a fact originally reported by the New York Times.

All Access will include "millions" — Google didn't say how many — of songs within 22 genres, a Google-powered recommendation engine, Pandora-style radio stations, editor-curated playlists and the ability to blend your own library with Google's. 

At first glance, it's a pretty compelling offering. If you sign up before the end of June, it will cost $7.99 per month. And that's just the first competitive advantage Google has over the incumbents. 

Google Is Already A Streaming Music Giant

Spotify is virtually synonymous with streaming music, but it's worth noting that Google is already plays a massive role in the discovery and consumption of music. These days, when teenagers want to hear a new song, they don't turn on the radio or buy a CD. They go to YouTube.

That's because the Internet's biggest repository of videos also happens to host millions of songs, which are readily available to stream for free. It's the world's biggest accidental music streaming service. 

With All Access, Google is making a far more official foray into  the streaming music space, having recently signed licensing deals with all three major labels in the U.S. It's not linked directly to YouTube and its massive repository of free music, but rumor has it that the video giant could get its own paid subscriptions for on-demand music. In the meantime, All Access is another attractive gateway into Google's content ecosystem, which hosts a hell of a lot of music. 

Google's Biggest Advantage: Being Google

The only reason we're talking about this new music service is because of who made it. By virtue of being a Google product, All Access has the potential for massive cross-promotion throughout Google's array of popular Web services.

More important, All Access will be built directly into the world's most popular mobile operating system. That's where the magic of streaming music really lies: In our ability to take it with us. It's why Spotify, Rdio and MOG all wager that the simple ability to access all that music on our phone is enough to convince people to shell out $10 per month. Spotify has done a decent job of proving that thesis by amassing 6 million paid subscribers at an impressive 25% conversion rate. 

Of course, Spotify, like Rdio and the rest of its competitors, has to compete for users' attention via app store rankings, social integrations and plain old marketing. All Access, by contrast will be much more front-and-center within the Android ecosystem. That's huge.

Who Needs A Business Model? 

Another advantage of being a Google product is that All Access won't have quite as much pressure to make money. Spotify and Rdio will ultimately need to find a way to profitability (or get acquired by a giant), something that isn't easy under the current economics of the streaming music business.

A company like Spotify will have to find a way to minimize its enormous music licensing costs, which are easily its biggest expense. Google's entrance into this space might make that harder, since the company can afford to pay out huge sums without investors holding the profitability gun to its head. 

Spotify and Rdio's other biggest challenge is converting paid subscribers. The streaming model, the theory goes, will work much better when there are many millions of people paying for services like this.

So far, Spotify has done the best job of converting those free listeners to paying subscribers. But with a competitively price competing service now shipping on hundreds of millions of handsets, the incumbents may have to get much more creative about courting subscribers. 

In a recent interview on WYNC's On the Media, technology journalist Tim Carmody suggested that this might be how the streaming music business will work:

Probably the most likely thing that will happen is that someone, whether it's an Apple or a Google or an Amazon or a Sony, comes along and essentially agrees that we’re gonna run music at a loss and we’re going to support it with these other businesses. How do you make money on the music business? Don't make money on the music business. That's the answer to that question.

That may well turn out to be true, but it's probably not quite what Spotify, Rdio and their ilk had in mind. 

All Access: Merge Your Library With Google's 

Last week, I wrote that as good as Spotify and Rdio both are, neither is perfect. Spotify's user experience could be better, while Rdio doesn't let its users upload or merge their own music. What I described as the ultimate streaming service would need to nail both design and music selection, at the very least. From the Google I/O stage, the All Access interface certainly looked nice, although I have yet to get my hands on it to try it out.  

The second part of that equation — the ability merge one's own library with a cloud-based repository of music - appears to be a feature that All Access subscribers will indeed enjoy. By launching alongside the Google Music cyberlocker first unveiled in 2011, All Access effectively allows users to blur the line between Google's library of licensed music and their own collection of tunes. 

One detail that was glossed over at Google I/O was exactly how wide of a selection All Access users will have. Rdio and Spotify both have about 20 million tracks in their libraries, which includes not just the major labels, but a partnership with indie label rights body Merlin and countless smaller labels. How many tracks does All Access have? The Google Music integration makes that question a little less crucial, but more casual listeners without hard drives full of MP3s will want to know when they're eyeing up $10 music services. 

Related Stories

• Why Google's Rumored Spotify-Killer Makes Perfect Sense
• 6 Million People Pay For Spotify - Is That Good Enough? 
• Next Round In The Google-Amazon Death Match: Streaming Music
• The Ultimate Streaming Music Service: Just Merge Rdio and Spotify

Images by Nick Statt for ReadWrite

The unofficial leaders of the streaming-music market, Rdio and Spotify, are both awfully good services. But neither is close to perfect, which led me to wonder just how you'd create the ultimate online music service.

The answer isn't hard: Just merge Spotify and Rdio. Alternatively, the two sites should just copiously steal features from one another. Or someone could found a new service that blends the best of both. Whatever. I want the best of both, and I want it now.

Allow me to explain. Almost two years ago, when Spotify finally launched in the U.S., I signed up. Within 48 hours, I had canceled my Rdio subscription and agreed to pay Spotify $10 per month to access its service on my phone, ad-free. 

(See Also: How To Choose The Right Music Subscription Service)

But for the last few weeks, I've had the luxury of using a premium Rdio demo account, and I've gotta say: It's sometimes tempting to switch back. As impressive as Spotify is, Rdio is much, much better designed. On the other hand, Spotify has a few excellent features Rdio lacks. (Both sites offer approximately the same amount of music, which is often available via high-quality 320 kbps streams.)

Frankly, I'm torn. But I'd rather not have to choose at all. I suspect many other music fans — whether they know it or not — feel the same way.

What Rdio Gets Right: Design and Music Management

When it comes to design, Rdio wins, hands down. Spotify's apps aren't terrible, but Rdio sports what feels like a cleaner, more minimalist design. The blue and white color scheme is more refreshing and it feels like the company put some thought into typography. 

More importantly, Rdio organizes your music much, much better than Spotify does. It has long blown my mind that Spotify refuses to display your music library in a way that's at all analogous to how you'd organize music in real life. There's no collection. There is no "Albums" tab.  It's just playlists, starred tracks and search. If I find a new album I want to routinely listen to, I have to star the whole thing or add it as a playlist. It's bizarre. 

By contrast, Rdio lets me easily add albums to what is intuitively labeled my "Collection," which is organized by artist. To anybody who's ever used an iPod, scrolling through a list of artists is an familiar, almost expected interface. Spotify users, for whatever reason, don't have this simple luxury. 

Rdio's built-in music discovery is also superior. The "Heavy Rotation" tab recommends music to me based on what I listen to and who I follow on Rdio. Depending on those two details (especially who one chooses to follow), the suggestions can actually be pretty spot-on. I don't know what powers the "Recommended Albums" carousel in Spotify's "What's New" tab, but the fact that it thinks I'd enjoy Kelly Clarkson's new album suggests it's not paying very much attention.

What Spotify Gets Right: Add-On Apps & Infinite Music

What Spotify lacks in native recommendation features it makes up for via third party add-ons available through its built-in app platform. Spotify might not be aware of what I actually like, but Last.fm is — and its Spotify app is a mere click away. If I want music to match my mood, there's MoodAgent, which builds playlists based on things like tempo and the emotional qualities of a given song. 

For less robotic, more human-curated recommendations, there are apps like Hype Machine and Shuffler.fm, both of which corral the best new stuff from influential music blogs, broken down by genre. Then there are good, old-fashioned hand-picked recommendations from individual critics via the Rolling Stone, Guardian, Pitchfork or NME apps. 

Spotify's third party app platform is by far its most promising feature, aside from the music itself. Realizing that it can't build the end-all, be-all music service for every listener, Spotify has smartly opened up its platform to developers, who can use HTML5 and related Web technologies to build applications that plug into Spotify's vast music library.

These add-ons have yet to find their way into Spotify's mobile apps, but they continue to push the desktop experience forward in a way that makes it hard to break the Spotify habit. 

And Another Spotify Win: Imports

The other chief advantage Spotify offers — and that Rdio and others should just steal outright — is the ability to import your own MP3 collection into the service. This is a huge perk.

No matter how many licensing deals these companies strike, their music libraries are never going to include everything. There will always be big-name holdouts like The Beatles and Led Zeppelin, not to mention a score of smaller, independent artists who either haven't done the leg work to get their music onto streaming services or simply don't want to. 

Allowing users to effectively merge their personal music collections with Spotify's music library makes for an experience that feels more comprehensive and focused. As more of our music consumption moves online, the listening experience inevitably becomes fractured across sites and apps. We might not be able to avoid this entirely, but Spotify's integrated approach makes it easier to at least minimize the problem.  

There are, as always, technical limitations to implementing this feature. Since Spotify primarily exists as a desktop app, it can easily scan your hard drive for music tracks and index them, iTunes-style. The alternative would be to allow users to upload their tracks directly to the service, a la Google Music and the Amazon Cloud Player.

Waiting for thousands of songs to upload doesn't present the most compelling user experience, but it is one possible technical solution. For the most part, Spotify's local indexing approach works pretty well. 

Rdio has desktop apps, but they're more or less a clone of its Web interface without much extra functionality tacked on. If Rdio were to include the ability to import and manage music, I'd be that much closer to ditching Spotify. The desktop app is also a crucial component to syncing local MP3s to users' phones and tablets, another feature unique to Spotify in the U.S. (Deezer does this, too). 

Toward The Ultimate Streaming Service

Music is a pretty personal thing. If these companies want us to shift our listening habits into their respective clouds, they need to be particularly sensitive to what works for users. I've presented one framework here. Perhaps you have your own ideas, which I encourage you to leave in the comments. A flawlessly-designed, super-comprehensive, extensible and flexible music subscription service would be well worth the money. 

It's a little frustrating, because Spotify and Rdio collectively have most of the pieces required to build the ultimate streaming service. It's almost as if the two could merge and we'd be set. It'd be unlikely, but if this new hybrid music dream service could steal a page from Tomahawk's playbook and integrate additional music sources like SoundCloud and YouTube, it'd be even better. 

Whether or not Rdio, Spotify or any of its current direct competitors deliver this mythical dream service, somebody will. The music subscription space is going to heat up substantially this year, as Google and Amazon are both rumored to be entering this market. Meanwhile, MOG will be reborn as Daisy and Deezer is expected to launch in the U.S. 

We already have a few very awesome, yet imperfect music subscription services. As the space gets more crowded, there exists a real opportunity to launch something truly, thoroughly compelling. Who will it be? 

It's going to be an interesting year in online music. The all-you-can-stream music subscription space is set to heat up, with rumored Spotify competitors from Google and Amazon potentially in the offing and an already-huge European service called Deezer planning to launch in the U.S. 

In the meantime, there are already a number of music subscription services to choose from, depending on where you live. None of them are perfect. Spotify and Rdio generally the lead the pack, each with its own impressively massive library of music. Spotify wins points over Rdio for letting you import your own MP3s, whereas Rdio's interface design, especially on mobile, is vastly superior to that of any other offering.

Then there are solid offerings from Grooveshark and MOG, both of which face an uncertain future, for completely different reasons. MOG was acquired by headphone maker Beats Audio, which plans to launch a new service called Daisy this year. Meanwhile, Grooveshark has faced a barrage of lawsuits from record labels, who accuse the startup of copyright infringement, but remains standing... for now.

Which service is right for you? It depends on how much you value things like audio control, design aesthetics, music selection and user control. 

A year from now, the landscape may well look totally different and we'll be updating this post accordingly. For now, here's a comparison of the major all-you-can-stream music services. 

Spotify

Rdio

Deezer

Rhapsody

Grooveshark

MOG

Do music subscription services threaten music sales? Not if you ask Justin Timberlake.

The rise of all-you-can-stream services like Spotify have made some artists nervous about the model's potential impact on music sales. It's why bands like Coldplay have delayed the arrival of new albums on Spotify and others, like the Beatles and AC/DC, are holding out all together. Logically, it makes sense: If you make your music available to stream for free, people are less likely to buy it.

Right? Not always.

Ahead of its release on March 19, Justin Timberlake's new album The 20/20 Experience was streaming in its entirety not just on Spotify and Rdio, but at the iTunes store itself. Anybody who wanted to could quickly and legally access the album for a week. Then it was released. And it became the most pre-ordered album in iTunes history, surging past his record label's sales expectations by 63%.  

It's good news not just for Timberlake himself, but for the music subscription model that he plans to embrace when MySpace — of which he is part owner — launches its own service later this year.  MySpace will join Google, Amazon, Beats and God knows who else in entering the digital music subscription market in 2013. 

Timberlake's experience would seem to debunk the thesis that streaming can't support artists and thus isn't in their best interests. Indeed, his success will likely make him a poster child for the music subscription revolution as the industry marches toward a future in which music is rented more than it's owned. 

Music Subscription Services: Not a Silver Bullet

But hold on a second. For one thing, we're not all Justin Timberlake. The pop megastar released his first solo album over a decade ago, after years of global success as a member of a massively popular boy band. In the same way that Radiohead's 2007 experiment in "pay-what-you-want" record sales didn't create a new model that worked for everybody, artists can't necessarily look to Timberlake for cues about where their careers might be headed. 

It's also worth noting that streaming alone wasn't enough to constitute "success" in this case: Selling individual copies is still the ticket to revenue and publicity for artists. Timberlake's new album quickly became one of the most streamed records on Spotify, but that's not what everybody's talking about. It's the sales numbers. That's where the lion's share of the revenue for this record is going to come from. 

What The 20/20 Experience launch does show is that subscription services, while not ready to replace paid downloads as a revenue stream for the industry, can be a critical tool for marketing and ultimately driving sales. In time, the revenue available to streaming services may reach more sustainable levels. In the meantime, it's nice to know the artists who embrace them aren't shooting themselves in the foot by doing so. 

Streaming may have promise, but it's no silver bullet. The music market's digital future is going to be a hybrid of approaches, some of which will work better than others in particular circumstances. Timberlake's success is interesting — meaningful, even — but the way forward still isn't a simple one.

Photo via Flickr user Edward Kustoff, CC 2.0

For an industry that has such a hard time making money, digital music sure is hot right now. Everybody wants in. Amazon is now the latest tech giant rumored to be eyeing a slice of this increasingly tempting pie, according to a report on The Verge. But why? 

News that Amazon is in negotiations with music labels comes mere weeks after Google was revealed to be having similar discussions of its own. The search giant already has a huge presence in digital music thanks to YouTube, but seeks to solidify its role by launching a Spotify-style subscription service on top of its existing music products.  Like Google, Amazon already has content relationships and infrastructure in place that will simplify the process of entering what is typically a very challenging and cost-prohibitive marketplace.

It will still be an expensive endeavor, given the high cost of licensing music from the major labels, but companies like Google and Amazon are well-positioned to negotiate those dollar figures down and, if necessary, operate at a loss without discernibly denting their bottom line. 

Fine-tuning the financial details is what these negotiations are all about. And it's important to note that they are just that: negotiations. They could wind up hitting a roadblock, as has allegedly happened with Apple in its rumored quest to launch a Pandora competitor. However it pans out, it's now known that Google and Amazon are at least attempting to enter the streaming music space. If all goes according to both companies' plans, they'll soon be in direct competition for digital music subscribers.  

Google vs. Amazon: From Frenemies To Rivals

The rivalry between Google and Amazon is expected to heat up this year, and this would just be the latest source of competition between the two companies.  While they started as two very different, seemingly unrelated businesses, the companies have both evolved into new territories, occasionally bumping into each other in the process. Today, both companies sell digital content like ebooks and music, as well as the hardware required to read and view that content. Like Google's arch nemesis Apple, Amazon is now rumored to be building its own mapping service as well. 

Digital music is not an easy business to be in. Six million people are now paying for Spotify,  with 18 million more listening for free on the desktop. That's stellar growth in just under two years and an impressive conversion rate for any freemium business. Still, Spotify isn't touting massive profits, and nor are any of its competitors.

That's because they're all paying a massive chunk of their revenues to rights holders (record labels, mostly) and struggling to find ways to drive those costs down. Pandora's legislative efforts haven't met with much success on that front.

Why Streaming Music? 

A company like Amazon might be able to use its might to negotiate better licensing deals. Even if it fails to do so, running an unprofitable streaming service (or bundling music with Prime) could rope enough additional people into Amazon's ecosystem to make the effort worthwhile. 

Or, if nothing else, it could prevent Google from getting a leg up on Amazon in the broader digital music space, in which both companies are already present. In an excellent post, The Verge's Tim Carmody points out that "few of these larger tech companies embracing streaming music seem to be doing so as an affirmative strategy, because they ultimately believe streaming music will help sell their other devices or services. Instead, they're primarily worried that if they don't offer a streaming music service, they'll be seen as deficient in some way."

It's also worth keeping in mind the mobile aspect. Google's stake in mobile is obvious, and Amazon's is expected to get even more serious if, as expected, the company eventually unveils a smartphone of its own.  As Wired's Mat Honan wisely points out:

Subscription and streaming only took off once 3G made it possible for you to carry your music with you everywhere. Pandora, Spotify, and Rdio have proved there’s an attractive market. But imagine what happens when a streaming-music app ships with your phone, with every phone, and all you have to do is turn it on, using an account you’ve already set up for billing. Or even worse (if you are an existing streaming-music provider) if it’s a free, advertising-supported service.

All this action in the streaming music space leaves little doubt that this model will be a crucial component of how we consume music in the future. It's the "music like water" model that music futurists once dreamed about. Exactly how it takes shape will depend on economic questions: how the business model evolves, how artists get paid, which companies will dominate distribution.

This year was already poised to be an interesting one in digital music with the impending U.S. launch of Deezer, the arrival of Daisy and ongoing rumors about Apple's plans to build a Pandora competitor. Now Google and Amazon are also both gunning for Spotify.

Who says freemium doesn't work? For Spotify, the hybrid free/paid business model has reeled in 6 million paying subscribers out of its 24 million total listeners. Not bad. But as the music streaming space heats up, the company will face some enormous challenges, both in the short term and down the road. 

Spotify is growing fast. The company added 1 million new subscribers over just the past three months, according a report from CNET. Spotify confirmed those listener and subscriber numbers in an email to ReadWrite, but declined to comment any further on how its total revenue breaks down. Still, for just about any freemium product, a 25% conversion is pretty damn impressive. It would be even more impressive if Spotify can maintain that growth and the paid conversions well into 2013 and beyond. 

Spotify's Growing Competition: Google, Deezer and Daisy

The company really needs to keep these numbers up, because its neighborhood is about to get a whole lot more crowded — and complicated — this year. Deezer, another wildly popular European streaming service, is expected to launch in the U.S. this summer. Deezer offers roughly the same amount of music as Spotify, but has a much stronger foothold across the globe. Whereas Spotify is available in 17 countries, Deezer has launched in 182 countries as of last month. That means that connected users in 92% of the world's nations can access Deezer.  Spotify still has more paying subscribers, but that gap may start narrowing once Deezer secures the licensing deals required to go live in the U.S.

Of course, Spotify has the advantage in the U.S. Its launch here was preceded by at least a solid year of anticipation and buzz. Its growth since has been huge, fueled in part by a tight integration with Facebook. For being so young here, Spotify is practically a household name in the U.S., whereas very few people here even know what Deezer is. Meanwhile, the longer Deezer waits to enter the U.S. market, the stronger Spotify's numbers get. 

The more daunting threat is going to come from Google. The search giant has confirmed that it's looking at a subscription model for its digital music products, which include Google Music and YouTube. That makes sense. Google already plays a massive role in online music thanks to YouTube, which is now the most popular source for music among teenagers. Google also has relationships with big content providers, which it has been placating with increasingly aggressive anti-piracy measures over the last several months. 

Coming at Spotify from yet another angle will be Daisy, the music subscription service being launched this summer by Beats Electronics. The new venture will combine the popular headphone manufacturer's name recognition with some high-profile music industry personalities and some hefty funding from well-connected investors. 

Combined with digital album sales, streaming is shaping up to be something of a savior for the music industry, which is finally seeing increases (albeit minor ones) after a decade of decline. Industry-wide, revenue from streaming music was expected to grow 40% last year, according to IFPI's Digital Music Report (PDF)  Spotify's success suggests that the optimism wasn't unwarranted, although we're still waiting to see the next installment of numbers from IFPI. 

The pie is growing, as are the number of forks surrounding it. The question for Spotify is how big of a slice it can realistically hang onto. 

Is Spotify's Business Model Sustainable?

Since its launch, Spotify and services like it have faced fundamental questions about their business model. First, there's the ongoing debate over artist royalty payments. The financial deals are obviously satisfactory for record labels, but some artists have been frustrated with a trickle of funds that's decidedly slower than the revenue they see from digital or physical album sales.

There are two basic defenses to these complaints:

1. The model is different. Streaming is not the same as purchasing, and therefore it makes sense for each stream to generate a fraction of what a download brings in. Over time, frequently-streamed tracks can earn real money, sometimes even more than sales could generate.
2. Yes, it sucks, but this will get better in time as the listener base - especially the paying subscribers - grows. Hang tight.

Then there's the other side of equation: How much money is Spotify making? It's hard to tell, because we don't know how many of these subscribers are paying $5 to silence the service's ads and how many are shelling out $10 to get mobile access on top of that. (CNET reports that roughly 90% of subscribers are paying the higher fee.) We also don't know how much money Spotify makes per listener from advertising (they wouldn't tell us).

Inching Toward $1 Billion (Profit Is Another Story)

At Evolver.fm, Elliot Van Buskirk did some semi-educated guessing a few months back and predicted that Spotify could reach $1 billion in revenue this year.  The logic is sound, but it relies on too many unknowns for us to tell if it's realistic or not.  

Based on current subscriber rates, Spotify is bringing in somewhere between $360 million and $720 million per year from subscriptions alone. If Buskirk's theory that most users opt for the pricier premium subscription is true and the company is making a few hundred million from ads, he may well be right: Spotify is inching toward $1 billion. 

Profit is another story. The company says it pays out about 70% of its revenue to rights holders. So, if it does hit $1 billion this year, it will be paying out $700 million of that to labels, songwriters and other rights holders. That leaves $300 million for compensation, operating costs, marketing and the like. When all is said and done, there's probably not a ton of cash left over. 

On the business side, Spotify and companies like it have a dual challenge: Somehow get licensing costs under control without alienating the artists and labels whose content is desperately needed to court the listeners who will pay the bills with subscriptions and ad impressions. Do the best you can with ad sales, but do everything in your power to convert as many listeners as possible to paying subscribers. 

It's a tricky balance to strike, but Spotify is pretty well-positioned to pull it off. For their sake, this momentum had better continue for as long as possible, because a year from now, the streaming music business is going to look pretty different.  This game is not going to get any easier. 

Apple wants to roll out a streaming music service like Pandora, reports The New York Times, but can't get it done because the music companies are dragging their heels.

Funny old world, isn't it? Apple used iTunes to basically take over the music business, setting prices and dictating terms. And Apple ran roughshod over those record companies, which are still smarting from the rough treatment.

Now they're getting their revenge. The longer they drag things out, the more Apple suffers as new rivals grow stronger. The suits in Los Angeles must be loving this.

According to the Times: "Apple had once hoped to introduce the radio service around the Grammy Awards in February. But it has been delayed, chiefly by slow progress in licensing negotiations with record companies and with one key publisher, Sony/ATV, which also controls the EMI publishing catalog."

Another issue, according to the New York Post, is that Apple is low-balling the deal, trying to get streaming rights at a rate well below what others pay. Apple is offering 6 cents for every 100 songs streamed. Others pay 12-to-35 cents per 100 songs streamed.

Adding to the resentment, I'm sure, is that Apple is sitting on $140 billion in cash, some billions of which were gained by screwing record companies the last time around.

Once Bitten...

Last fall I had an interesting conversation with an influential player in the TV and movie production business, who explained the fear and loathing with which Apple is viewed in Hollywood.

Part of the problem, he told me, is that the video guys all saw what happened to the music guys after they got in bed with Apple. But also, "Steve Jobs came down here and did meetings in Hollywood, talking to people who've been in this business for 25 years, and he told these guys, `You're all a bunch of idiots. You're dinosaurs.' The response from the Hollywood guys was, `Go f@ck yourself.'" 

As far as Hollywood is concerned, "Apple is scary. Steve Jobs was scary. There's a fear of empowering Apple. No one here has a vested interest in helping to build that up. It's a scary time, and do you really want an 800-pound gorilla controlling your pricing?"

An Analog Model

The larger problem with iTunes is that it's really, essentially, an analog business model. Apple didn't really do anything revolutionary. It just "paved the cowpath," meaning it took the same business model that people had used in the analog world and created a digital knock-off. Just like you used to buy vinyl records, and then CDs, now you went online and bought an album or a song, and now you "owned" them and added them to your "collection" which you had to manage on a computer. 

You can argue that Apple did something a little bit revolutionary by letting customers buy a single song rather than an entire album. Fair enough.

But iTunes is still a model in which you buy music. The whole thing is about replicating the experience that Steve Jobs had as a kid buying vinyl records, even down to getting the album art. 

As many others have pointed out, once you start using Spotify (in my case) or any of the other new music-streaming services, you don't really want to go back to iTunes. And you don't need to.

Apple has a problem. It bullied those content guys in Los Angeles, and now those guys are getting their revenge.

Image courtesy of Reuters.

Google is reportedly working on a music subscription service to compete with the likes of Spotify, MOG and Rdio. It might seem crazy to jump into a crowded market whose basic business model is already questionable – but for Google it makes perfect sense. 

The company is already a huge, albeit unofficial, player in streaming music. YouTube is now a top destination for listening to songs and albums, not to mention the trove of remixes and parodies that get uploaded everyday. Today, when teenagers want to hear a new song, they don't turn on the radio or buy a CD. They go to YouTube. 

There's good reason for that. First off, it's free. It also has an enormous amount of music. I've had premium subscriptions to Rdio, Rhapsody and (currently) Spotify. As extensive as those services' libraries are, there's lots of music they don't have. Whenever I can't find something on Spotify, I check YouTube and SoundCloud. It's usually there. Want to stream the Beatles from your phone? Their songs are all over YouTube, not Spotify. 

YouTube: The World's Biggest Accidental Music Service

If there was any question about the critical role YouTube plays in music discovery, it was answered last week when Billboard announced it will factor YouTube listens into the formula behind its Hot 100 singles chart. In a post-"Call Me Maybe" world, it's impossible to accurately analyze the popularity of a song without taking YouTube plays into consideration.     

Of course, the music-streaming use case is not quite what YouTube was designed for. It's a video site. It may work as a one-song-at-a-time music search engine to fill Spotify's gaps, but it's pretty poorly organized compared to existing music services. That's why Google Music is a more logical and likely home for this rumored streaming service, presumably with some cross-promotion via YouTube.

The fact that people turn to YouTube for music is something that evolved organically thanks to its user-generated nature and Google's willingness to pay licensing fees to keep the music playing. There's still plenty of copyright infringement going on, but Google is getting more aggressive about dealing with that. The RIAA may still complain, but more and more, Google is catering to copyright owners. Initiatives like this are exactly why the Plex is so eager to please the content industry.

Thanks to YouTube and the Google Music MP3 store, the company already has relationships in place with labels, songwriters and other copyright owners. But those existing partnerships aren't enough. The subscription-based streaming model is fundamentally different and requires unique, rather costly licensing deals.

Music Streaming Is About To Get Even More Crowded

If you think the music streaming space is crowded now, just wait. Deezer, a hugely popular streaming service now available in 182 countries, is in talks to launch in the U.S. sometime this year.  This summer, another much-hyped streaming service will go live, this time from Beats Audio, which acquired MOG last year.  Then there's the ongoing rumor about Apple taking aim at Pandora with an iTunes-based Internet radio product of its own.  

Exactly what Google's streaming service will look like is anybody's guess. That will depend in large part on what kind of content deals it can manage to negotiate. But the company is in a very good position to enter this space. After all, Google already has millions of streaming music users. It just needs to polish (and almost certainly rebrand) the experience and make it official with the major labels. 

Lead photo by Alexandre Normand

Music streaming service Slacker has been around for quite a while - six years and counting - but has never been able to gain the traction enjoyed by its competitors Pandora and Spotify. That may begin to change with Slacker's full mobile and browser facelift, which rolled out to users Tuesday and comes equipped with a handful of new channel additions.

In an effort to make things cleaner, simpler and a bit brighter (a good move considering it differentiates the design from that of Spotify's darker hue), both the mobile and Web versions Slacker is now awash in a pleasant blue-and-white scheme. The browser version has an elegant single-page interface that prompts you to jump right into streaming with a search bar. One look at the old site, which can still be accessed through a link at the bottom of the homepage, illustrates just how much Slacker's design sensibilities have improved. It also went ahead and axed its old motorcycle-company-look logo, opting to simplify the design to better fit with the new color scheme and cleaner interface. 

But better design means nothing without stronger functionality to go with it. Slacker has always had competitive features, but the redesign makes them more accessible - and make now a good time to check out the oft-overlooked service. One strength is that Slacker is everywhere - on Blackberry, iOS, Android, Windows Mobile, Nokia and Palm as well as through your browser.

Slacker has also cut deals with a handful of car companies and entertainment-hardware manufacturues, from Ford and Tesla to Sonos and Logitech. So while it may lack the cultural pervasiveness of Pandora and Spotify, it certainly has the physical ubiquity to be a major player.

The new update adds a radio section with plugins for big players in the sports radio and news marketplace - ESPN and ABC News - with more to arrive in coming months. You can also find a few comedy channels in the section, opening the door for a slew of podcast and other unique Web chat platforms to find their way to Slacker. 

But Slacker's big strength has always been its more than 200 hand-curated sections, an output of creative human manpower that puts even the best algorithmic music-selection tools to shame. The ability to pinpoint the work of an artist during a certain timespan - a period that may not be tied to a specific set of albums - and then create a "station" built off that by other human listeners is invaluable.

Slacker's service, much like its competitors', is free if you can tolerate advertising. For $3.99 a month, you can get Slacker Plus, which kills the commercials, and $9.99 a month gets you the Premium version, which adds offline listening. To promote the new and improved Slacker the company is offering a free 1-month Premium subscription on February 14 and 15.

After more than a decade of hand-wringing over the music industry's tumultuous decline, there's a glimmer of hope. Last week, more people paid for digital music than during any week-long period in history, according to Nielsen SoundScan. 

In the week ending December 30, 55.74 million digital songs were purchased. The week following Christmas is typically a prosperous time for digital media and mobile platforms, as gadgets and gift cards are exchanged during the holidays. This year's spike was the biggest since the same week in 2008, when consumers bought 47.73 million songs.

These new numbers show that, when given a way to easily and conveniently do so, many, many people will pay for digital music. In this case, the growth appears to have been fueled by the exchange of holiday gift cards to services like iTunes and Amazon.

Digital Music Challenges Remain

Things started looking up in 2011. That's when IFPI reported that the industry saw its first year-over-year growth in music sales since it started tracking the business in 2004. That growth was only a measly 1.4%, but it sure beat the 13% decline seen in 2010. As 2012 unfolded, the outlook for digital music sales continued to brighten. 

But although the bleeding appears to have stopped, the music industry remains a long way from recapturing its former prosperity. From 1999 to 2009, music industry revenues imploded by 56%. Even with the more recent promising trends, nobody expects the music business to return to its heyday any time soon. 

Contrary to popular perception, though, compared to other traditional media industries disrupted by the Internet, music has fared relatively well in the digital age. According to the IFPI (which, somewhat ironically, stands for the International Federation of the Phonographic Industry) 32% of music industry revenue came from digital in 2011 (a number most expect to have increased in 2012). For newspapers, that number is closer to 5%. The digital transition for book publishers is similarly slow and precarious. 

Why Digital Music Is Growing

So why is music growing? Services like iTunes have been aggressive about expanding globally. The biggest digital music services more than doubled their global reach in 2011, with iTunes alone launching in 16 Latin American countries.

The proliferation of connected music devices have also helped drive music revenues. As consumers snatch up millions of smartphones and tablets, many are heading straight for the digital storefronts of Google, Apple and Amazon to load them up with their favorite songs. Meanwhile, streaming music services like Spotify, Rdio and Deezer (which is aiming for a U.S. launch in 2013) are also exploding, with mobile access being the key selling point for their premium subscriptions. While it's perfectly feasible to pirate the latest albums and load them onto your tablet or phone, it's finally becoming easier to just type in a credit card number. 

The global fight against piracy also appears to have had an effect. Draconian anti-piracy laws like SOPA and PIPA may have failed in the U.S. Congress, but other initiatives have succeeded in driving down piracy. For one, Google has grown more accommodating to copyright owners, nixing piracy-related terms from auto-suggested search terms and making DMCA takedown requests easier (some would say too easy). 

There's also early evidence that the availability of legitimate music services can help reduce the rate of piracy. Sweden saw a 25% drop in illegal filesharing after the public launch of Spotify, according to one study. There are now 500 legitimate music services available worldwide, according to the IFPI. As streaming services and MP3 marketplaces expand across the globe, it shouldn't be surprising that people feel less inclined to download music without paying for it.

A Smaller Industry, But A More Level Playing Field

The music industry may never return to what it looked like 15 years ago. But maybe that's okay. Today's playing field is far more level and the tools to create and distribute music are cheaper and easier to use than ever before. Artists still face major challenges, but the Internet has loosened the grip of the record labels and opened up new possibilities in terms of financing the creation of music projects - including crowdfunding and selling music directly to fans via platforms like Bandcamp or via digital distribution platforms like TuneCore and CDBaby.

Maybe the Internet isn't killing the music industry after all. Sure, the Net upended the old business model and irreversibly changed how music gets distributed to consumers. But clearly all is not lost. 

Lead image courtesy of Don O'Brien.

When it comes to the mobile industry, we talk a lot about new devices and the virtues or detriments of each one. Is the iPhone 5 the best thing ever or does the Samsung Galaxy S 3 blow it out of the water? These questions, while pertinent and fun to talk about, really are ancillary to what makes the mobile industry run.

Why do people buy smartphones and tablets? It is not because they have quad-core processors or super fast LTE connections. People buy mobile devices for what can be done on them. Apps, and the services that run them, are truly the backbone of the mobile industry.

So, we present our top 10 mobile products of the year. To make this list, a product needed to be mobile-Web or -platform enabled. So, no devices (which we ranked earlier this month) or the platforms themselves. 

What made our top 10 in 2012? See the list below.

10. Instagram

No company or service has had a bigger roller coaster year than Instagram. The social photo sharing app released an Android version, had a very public backlash against its Terms of Service and, oh yeah, was acquired by Facebook for nearly a billion dollars. 

Instagram also saw the type of exponential growth that startups can only dream about. It grew by tens of millions of users when it announced its Android app and then added tens of millions more when it was acquired by Facebook. Instagram in 2012 went from a popular iOS photo-sharing app with around 20-25 million registered users to a 100-million-user behemoth that has become synonymous with social photos. 

The elm trees of Central Park, New York City by Dan Rowinski

9. LevelUp

When it comes to mobile payments, we gave Square the No. 1 honor for mobile products in 2011. The dongle-based mobile payments system was truly deserving and we could very easily include it on this list this year. But we are taking this opportunity to highlight another mobile payments startup that is beginning to make waves in the industry and has a ceiling that could lead it to be a major player (or acquisition bait) in 2013 and beyond.

Boston-based LevelUp is an app that uses QR codes to make payments at local merchants using the company’s system. LevelUp will provide retailers with Android smartphones to act as QR code scanners (or Near Field Communications later, if needed) and provides loyalty discounts to consumers. For instance, if you are at Four Burgers in Cambridge, Massachusetts and you pay for the first time with your smartphone on LevelUp, you get a $3 discount on your order. Come enough times and you can “level up” to greater discounts. 

LevelUp has two important factors working in its favor. First is what the company calls “interchange zero.” Interchange zero is the concept that merchants do not have to pay a fee for every transaction made on the system, such as the 2.75% or so that they have to pay through financial processors like Visa or American Express. LevelUp makes its money through the loyalty/advertising sector as opposed to interchange. The other prong in LevelUp’s attack is that it is making significant progress in getting its system into actual retail locations, something that larger companies are having trouble with (right now). As of the beginning of December, LevelUp had 500,000 registered users and had processed two million transactions. That is a drop in sea of the large payments industry, but the model LevelUp is using has significant disruptive potential.

8. Waze

Social… driving. When we first heard of Waze, this seemed like a bad idea. A very bad idea. The last thing we want is for people to be on their phones while in the car. Yet, upon further inspection, Waze is much smarter than just an app that helps you tweet traffic alerts. 

Waze is a background location and turn-by-turn navigation app that works with your friends and the people around you to know where traffic is, where cops might be hiding or where the cheapest gas on your route is. Waze taps the collective consciousness to get you where you are going faster and smarter. 

Waze also saw huge growth in 2012. The Israeli-born, San Francisco-bred company scored a big win when it partnered with Apple as part of its iOS Maps system and has added many users through its expansion to various mobile operating systems.

7. Nuance – Dragon/Swype

Nuance is a repeat offender on this list, mostly because it is very difficult to keep it off. Swype, the typing feature that allows users to input text by swiping letters across the keyboard without taking their fingers off the keyboard, is one of the most addictive features included in many Android devices. Nuance licenses Swype to many mobile manufacturers, such as Samsung.

Nuance has built a neat little business licensing its technology (whether it was built by Nuance or acquired, like Swype was) to mobile manufacturers. Nuance also licenses its speech recognition service to smartphone makers and it is believed to be one of the technology suppliers for Apple’s Siri personal assistant app on the iPhone. 

2013 will bring good things for Nuance as it works on its own voice-controlled personal assistant mobile systems and makes additions to its Swype and Dragon line of products. 

6. Geoloqi

We normally do not like to add products on this list that have been acquired and are now a cog in a larger organization, but Geoloqi deserves its spot as one of the bright startups working to solve many of the problems associated with location services on smartphones and tablets. 

Portland, Ore.-based Geoloqi, which joined Esri this year, provides accurate and granular location services to app developers and manufacturers while still trying to preserve the battery life of a device. Essentially, Geoloqi provides developers with a software developer kit (SDK) that runs its location services in the background of any app in which it is included. The ability to run a data-gathering, persistent background location service without killing battery life cannot be understated. The use cases are vast, from government agencies using apps to track employee locations in the field to helping manage power consumption in your home through your location. 

Geoloqi is one of those companies that most mobile users will never really hear about. But, the old cliché applies, “good technology should be almost indistinguishable from magic.” Well, if you are ever using your phone and it performs and action that say to yourself, “how’d it do that?” There is a good chance a company like Geoloqi is behind it.

5. Lookout

If we saw anything in 2012, it was that the proliferation of mobile devices is changing the nature of computing on a vast, accelerating scale. Well, with any industry-changing event, the good comes with the bad. In this case, the bad is the pace and volume of mobile malware in the smartphone ecosystem looking to steal your data and cost you money. This is especially true for Android, but if you have an Internet connection with your cellphone, you are not immune from spam, scams and viruses. 

A variety of companies are working to tackle the mobile malware problem. Kaspersky Labs, Sophos, Bitdefender, Symantec and others are all on the forefront of research and defense against malicious hackers. But, for the second year in a row, we think that Lookout is one of the best companies working on preventing and detecting mobile malware. 

Lookout updated its Android app in September and added several new features. The app will scan all of your apps looking for vulnerabilities in your system. In and of itself, that is not really profound. Add Lookout’s ability to find your phone (even your iPhone) anywhere you may lose it, scan all your apps to determine what permissions they can use to share your personal information, institute Safe Browsing in Chrome for Android and backup just about every piece of data on your device, and you have one of the most comprehensive and powerful mobile security services available.

4. Chrome for Android/iOS

If we have to pick just one mobile browser, it has to be Chrome. Dolphin, Opera and Firefox for Android are all worthy candidates, but the Chrome browser for iOS and Android from Google is the best of the best. 

Chrome for iOS and Android brings all the great features that you expect from Chrome on your PC. It is fast, remembers your history and has a robust bookmarking capability. The best feature is the ability to sign in to your Google account and sync your Chrome browser across all of your devices, remembering pages that you may have visited on your Android smartphone, iPad or PC. This cross-platform sync is not unique to Chrome, but now that you can tie your browser to your Google account across any type of computing platform you might use, the ease and benefit of using Chrome is apparent. 

3. Evernote

When Evernote landed $50 million in funding in July 2011, the startup’s CEO Phil Libin said that he thinks his company can last for 100 years. 

We’re inclined to believe him. 

Evernote Toolbar Widget for Android

If you are an Android user, there is a pretty good likelihood that you have downloaded and installed the Evernote Toolbar Widget… and cannot live without it. If you are a copious note taker on your mobile device, Evernote is one of the best apps you can find to take photos, audio files, save articles or just jot down thoughts and sync it to the cloud. If we think of the factors driving new era of computing – mobile and cloud – Evernote is the undisputed thought leader in the personalized cloud productivity space. 

2. Spotify

Whenever I ask people about apps they cannot live without, I get a fairly short list: Maps (usually Google’s variety), email, Twitter, Facebook, Zite/Flipboard, Instagram (or some type of photo app) and maybe something specialized to a person’s specific interest, like RunKeeper or Strava Cycling. Those who have been indoctrinated also add one app that may slip off a casual user’s list.

Spotify.

The cloud-based music streaming service engenders such loyalty among its users that many of them have trouble remembering a life before the ability to look up just about any song they want and stream it immediately, from anywhere. It also allows users to save files locally, has a Pandora-like radio streaming service, can be social or anti-social per the user’s preference and generally has any song you are looking for (yet, for some reason, a surprising paucity of Hootie And The Blowfish).

  Spotify Widget

Spotify and streaming services like Pandora, TuneIn, Rdio and the rest of its ilk are also causing a subtle shift in how people buy and manage their mobile phones. For instance, the Apple iPhone has long come in three storage sizes: 16 GB, 32 GB and 64 GB. Apple has built a very robust business on this tiered-pricing model. But, as more people move to streaming services for audio and video, the need for extra storage for media purposes is lessened. The priority then falls on the amount of data and speed you can get from your carrier. These services are changing user spending behavior and Spotify is leading the charge. 

1. Google Now

You have heard of artificial intelligence. Chances are, you probably do not quite know what that means in its entirety. True artificial intelligence (robots that are as smart as humans and can think and behave on their own) may never become a reality, but Google is trying its darndest to give us the smartest kinds of computer intelligence, straight into our pockets. 

Google Now has the ability to know where you are, what you are doing and then give you help along the way. Leaving on your morning commute? Now will detect traffic and give you an alternate route, if desired. Its Card-based system can hold your boarding pass, local weather, reservations, events, appointments and meetings or the score of your favorite sports team. What makes Now special is that it has the machine learning Google is known for, the cloud to sync its information anytime, anywhere and the information intelligence that is unique to Google’s approach to the world. 

Now should just be getting started. Google ramped up its team in 2011 to work on Now, making it a priority within the company. In successive versions of Android, Now should become smarter, more intuitive and more able to serve your needs no matter what you are doing. 

Lead image courtesy of Shutterstock.

2012 was a big year for music. No, I'm not talking about Adele, Call Me Maybe or the Tupac hologram. The big news this year were the shifts at the intersection of music and technology that occurred as the industry continued to figure out its digital future. 

Indeed, the biggest moments in music tech this year all had to do with piracy or the tricky evolution of a business model to replace the one that started dying a decade ago. 

1. The Death Of SOPA / Megaupload Raid 

These two events were not officially related, but they happened within 24 hours of each other and they both helped frame the debate about content piracy. In late January, the uber-controversial anti-piracy bills called SOPA and PIPA were tabled by the U.S. Congress after massive online protests. The death of SOPA meant the fabric of the Internet would be spared from the wrath of the Recording Industry Association of America (RIAA) and Motion Picture Association of America (MPAA) and set the stage for new legislative battles.  

Just as that attempt at fighting piracy ended, an even more dramatic one began when New Zealand police - by request of the U.S. Justice Department - arrested Megaupload founder Kim Dotcom and several of his colleagues in a military-style raid. The hacker group Anonymous responded with large-scale Distributed Denial of Service (DDoS) attacks that took out the Department of Justice's website. For the first time, the so-called "piracy wars" started to look like an actual war. 

The Megaupload raid marked the beginning of a lengthy legal procedure, but it also raised major questions about the rights of non-infringing cyberlocker users and caused similar services to get more serious about fighting piracy, if they didn't shut themselves down all together. 

2. Lars Ulrich Hugs Sean Parker, Embraces Spotify 

There could hardly have been a more symbolic official end to the Napster era and more importantly, the beginning of one in which all-you-stream music subscription services are seen as a legitimate way forward for the industry. Metallica drummer Lars Ulrich not only shared a stage with Napster cofounder Sean Parker to announce the band's arrival on Spotify, he hugged him. 

Major questions remain about the viability of Spotify's business model and whether it can fairly compensate artists, but it's still early in the game and the fact that Metallica has embraced the model is a positive sign. Don't hold your breath for The Beatles, though. 

3. BitTorrent Goes Legit

2012 was the year the strict association between the word BitTorrent and piracy started to erode. It still has a long way to go, but BitTorrent, Inc. has been aggressively marketing itself as a legitimate content distribution platform and teaming up with established artists and authors to prove it. 

Author Tim Ferriss may be the most high-profile content producer to partner with Bit Torrent, but musicians have been experimenting with the platform as well. After Pretty Lights published a bundle of free music and videos on BitTorrent, it soared to the top of Pirate Bay's download chart, the DJ saw a 700% increase in traffic to his website, collected 100,000 email addresses and, probably not coincidentally, sold out two concerts at the Red Rocks amphitheater in Colorado. For musicians, BitTorrent may provide an unexpected path to revenue.

4. Internet Radio Fairness Act Introduced

Internet radio providers like Pandora and iHeartRadio are expensive to operate. That's largely because these companies operate under a different royalty rate regime than terrestrial and satellite radio stations, both of which pay far less than Pandora to copyright holders. 

In September, a bill called the Internet Radio Fairness Act (IRFA) was introduced in the U.S. House of Representatives that aimed to level the playing field. Record labels, royalty collection organizations and some artists were less than thrilled with the IRFA. Congressional testimony and debate got underway in November and the issue is expected to continue to be a contentious one in 2013. 

Whatever happens with the IRFA as it was originally drafted (many predict its demise), something needs to give, and that something will have to balance the need for innovation with the rights of those who create music for a living. The end result of the debate that kicked off in 2012 will have a huge impact on radio's future. 

5. Amanda Palmer's Blockbuster Crowdfunding Experiment

2012 was the year that independent musicians, desperate for a new business model, started taking the crowdfunding craze seriously. In an age when revenue is harder and harder to come by for musicians, many turned to fans to help fund the recording of their album, production of music videos and other projects.

There were plenty of successful campaigns, but none got more attention than that of Amanda Palmer. The singer took to Kickstarter to fund the release of her album and ended up blowing past the $100,000 goal to rake in more than $1.1 million. Suddenly, crowdfunding looked like a viable model for musicians. 

The Amanda Palmer example is not without its caveats, though. For one, not all independent artists will have a fan base as rabid as the famously social media-savvy Palmer. About half of all music-related Kickstarter projects fail to reach their goal. For the right projects and artists, though, crowdfunding can work quite well, as Palmer demonstrated. 

Any artists that do luck out on Kickstarter might want to do their best to avoid the public relations headache incurred by Palmer after she invited unpaid musicians to play with her onstage - and was subsequently lambasted across the Web. 

Image courtesy of Shutterstock.

Radio will never be the same. Like books, magazines, music and just about every other mass medium you can think of, the age-old format is being transformed by the Internet, mobile technology and a few very smart organizations.

We don't know exactly what radio will look like in 20 years (or if we'll even still call it that), but it's safe bet that it would it be utterly unrecognizable by the likes of Edwin H. Armstrong, who was awarded the patent for FM radio in 1933. We'll always have audio, but transmission via radio waves will be augmented by wireless Internet standards like 4G mobile broadband and Wi-Fi. Those networks will carry much more interactive and smarter audio content, which will likely push traditional broadcasters toward a more personalized experience. 

So who's forging this future? It's still early - and this space will undoubtedly be occupied by a few now-unfamiliar names by 2030 - but there are a handful of organizations already busy chiseling out that future. Keep an an ear on these 5:

Stitcher Radio 

Stitcher Radio is amazing. The four-year-old company blends terrestrial broadcasts with popular podcasts to let users build a highly personalized, lean-back radio experience. Since I started using Stitcher, I've spent a little less time in the NPR iPhone app (though I haven't abandoned it completely) and Instacast, which I had used to subscribe to podcasts. Stitcher also streams other local, non-commercial radio stations in your locale, which you might miss if you don't have an FM radio in every room in the house. 

Like Pandora does with music, Stitcher builds smart radio stations based on your preferences, which are based on your listening history and the familiar thumbs up/down tapping. It's great. If I want to listen to audio hands-free, Stitcher will play back new episodes of my favorite podcasts and public radio shows without me having to fidget with a radio dial or smartphone app interface. Stitcher features content from CNN, NPR, BBC, Fox News and a host of providers large and small. 

How It's Looking Forward: Earlier this year, Stitcher Radio announced a partnership with Ford, who will build the service (along with Pandora) directly into its new cars. Smart. 

Pandora

This one might seem obvious, but Pandora has stayed on top of the personalized Internet radio market for years, despite challenges by everyone from Last.fm to Spotify. The company faces some significant hurdles. As a public company, Pandora now must deal with pressure from investors - and the ongoing battle over artist royalty payments will likely come to a head in the U.S. Congress next year. But Pandora isn't going away.  

For my money, Pandora's Music Genome Project still provides some of the smartest semi-automated music recommendations out there. It doesn't yet rival the brain of a real live tastemaker, but it's getting there, thanks in large part to the human intelligence that heavily fuels Pandora's algorithm.  

How It's Looking Ahead: Like Stitcher Radio, Pandora is finding its way into new cars. It's also begging Congress to rethink the unbalanced artist royalty payments that Internet radio providers pay. Not everybody loves Pandora's proposal, but something has to give for this model to remain viable. 

Spotify 

Not so long ago, you wouldn't have associated Spotify with Internet radio. That's because the on-demand streaming service never attempted to offer the type of functionality that Pandora, Last.fm and Slacker have long been known for. That all changed last December, when the Swedish startup launched Spotify Radio, which emulates Pandora's functionality using the Echo Nest, a competing music recommendation engine. Any doubts that Spotify was serious about this push were cast aside in July, when Spotify Radio was made available for free in the service's mobile apps. 

How It's Looking Forward: Spotify's most promising feature is its third-party app platform. The year-old store now boasts more than 60 apps focusing on discovery, social music, promoting individual artists and whatever else developers can cook up. The platform is still desktop-only, but once it starts to go mobile, it will fundamentally change the way listeners consume music on the go. 

National Public Radio

If old media are supposed to be crusty and slow-to-innovate, you couldn't tell it by looking at NPR. The public radio nonprofit first went on the air in 1971, but unlike some of its counterparts in print media, it hasn't been sitting out the digital revolution. NPR's Digital Services team has been busy creating application interfaces, Wordpress plugins and experimental Web radio products. Its social media presence is impressive and its podcasts are some of the most popular on iTunes. 

Most importantly, NPR has invested heavily in its mobile strategy. It's got some immersive and content-rich apps for iOS, Android and Blackberry and has been proactive about using HTML5 to build a cross-platform, modern radio experience that works on just about any device.

How It's Looking Forward: NPR knows that it needs to be present on every platform its listeners might be using, and its done an impressive job of achieving that. By maintaining this spirit - especially when it comes to mobile devices - it pretty much guarantees itself a prominent role in radio's future. And NPR also knows the importance of partnering with car makers. 

Clear Channel 

NPR isn't the only industry incumbent that's thinking ahead. Terrestrial radio conglomerate Clear Channel sees the threat posed by innovative startups and has responded accordingly. Its iHeartRadio service combines 1,5000 live broadcast stations with personalized channels fueled by the Echo Nest's music recommendation application programming interface. 

The company's digital efforts are merely breaking even, but it hopes to change the equation by joining Pandora in its quest to get Internet radio royalties reduced. Digital may make up only about 5% of Clear Channel's total listenership, but the company knows where radio is headed. 

How It's Looking Forward: By putting its massive weight behind Pandora's quest to reduce Internet royalty rates, Clear Channel helps make change more likely. It also provides its own API that developers can use to bake iHeartRadio into other products, including cars. 

Other Players Forging Radio's Future

Narrowing this list down to five organizations was tough. So many technology and media companies are working on things that will make up the future of what we today call radio. Satellite radio will play a key role alongside FM and Internet radio, presumably led by Sirius XM for the foreseeable future, at least in North America. 

When I prop up my iPad and stream content from NPR, Stitcher or Spotify, it's a bit like using a futuristic radio. On my iPhone, smaller versions of those same apps let me bring the content with me in the car or when I'm walking down the street. Along with Samsung, Nokia and others, Apple is already building much of the hardware from which we stream audio content. Cupertino recently solidified this role by partnering with car makers to tighten iOS integration in vehicles. The company is even rumored to be launching its own Pandora competitor in 2013. 

It's not just giants that are jockeying for a spot in radio's future. Under-the-radar upstarts like Shuffler.fm and the Hype Machine turn music blogs into lean-back, mobile-friendly listening experiences. Even SoundCloud is growing more radio-like. Meanwhile, The Echo Nest's complex music recommendation algorithm is woven throughout a long list of Internet radio products, each of them aiming squarely at Pandora.

Lead photo by Rafael Kage. 

Lars Ulrich wants you know that he's cool with Sean Parker. To show it, the Metallica drummer and anti-filesharing crusader didn't just share a stage with the Napster cofounder this morning - he hugged him. The occasion? Metallica's catalog is newly available on Spotify, the music service in which Parker is now an investor.

The company also announced a significant update to its service, which will aid in music discovery and make it more social overall. Like Twitter, Tumblr and now SoundCloud, the new version of Spotify will let you follow friends, artists and other influencers whose music tastes you trust. This should be a lot more useful than just seeing what everybody you know is listening to in real-time, all balled up into one stream. 

Spotify is also adding a "Discover" tab, which sounds like it will borrow a page from some of the service's third party add-ons, displaying music recommendations based on listening history and social data. Digital music discovery is a notoriously tough nut to crack, so we'll have to wait and see how effective these recommendations are. Other promised features include mobile push notifications for new releases and - at long last - the option to add music to your collection without starring it or adding it to a playlist. 

The new features will roll out in a desktop app update within weeks, while cross-platform availability is due next year.

Metallica's Stamp Of Approval Is A PR Win For Spotify

The Metallica deal is a significant win for Spotify, not just because the popular heavy metal band has long been a stubborn hold-out from subscription streaming services, but because of the PR coup it represents for the company. Since launching in the U.S. last summer, Spotify and similar services have faced criticism from some artists who bemoan its low royalty payments and fear that making their music available there could further cannibalize album sales. 

In response, Spotify has argued that its payouts aren't as paltry as some of the early checks make them seem and that, at any rate, the service is still new and needs to build up its subscriber base to bring in more revenue. Today, the company announced that it has paid out $500 million to rights holders (mostly record labels). It now hase 20 million total users around the world, about 5 million of whom pay for the service. 

In some ways, Spotify isn't all that different from Napster, at least from the consumer's perspective. It's a place you can go, search for music you want to hear, click a button and get access to it. One difference is that on Spotify, you can't download the tracks and keep them. More importantly, the Swedish startup has crafted a business model that allows it to pay music labels and other rights holders, a detail Napster never bothered to worry about and which ultimately led to the service's demise. 

Crafting that model - and getting buy-in from artists and labels - hasn't been easy for Spotify. That's why it took the service so long to secure deals and finally launch in the U.S. Even now, as it grows in leaps and bounds, the company struggles with artists threatening to jump ship over the royalties issue. 

That's why the endorsement of Lars Ulrich is a huge deal. Here's one of the most prominent, most vocal critics of Napster and unauthorized file-sharing giving a very public nod to streaming services. Ulrich is essentially acknowledging that this might in fact be the future of the music industry, or at least a central part of it. 

There's no word on how much Spotify had to fork over to get the rights to stream Metallica's music (nor should listeners hold their breath for The Beatles or Led Zeppelin to show up soon). But whatever the price tag, it's a big deal for Spotify to simultaneously assuage artist concerns and nab a few more listeners in the process. 

For some musicians, social media is a pain. They'd much rather focus on writing and performing songs than tweeting, pinning and Instagramming from the tour bus. Does all that time spent on digital promotion even pay off? New research suggests that yes, it does. 

There's actually a correlation between an artist's social media presence and their album sales, according to data from Next Big Sound. For 38% of musicians, Facebook views had a significant effect on album sales, a stronger impact than traditional radio plays had. Vevo, YouTube and SoundCloud all ranked highly as well. 

It's not just social media that's driving paid downloads. The artist's own website still has substantial impact on boosting sales, more than any other channel examined. For 52% of artists, more website page views meant more digital album sales. A few more (54%) saw the same cause-and-effect relationship when it came to selling digital singles. 

On Facebook, it's not just about building up a large fan base. Artists, like other brands, have to actively engage fans there, as evidenced by the fact that Facebook page views had a much higher correlation with album sales than did Facebook Likes. In other words, it's not enough to just be there. Bands have to continually post updates and interact with their fans. 

The Future Of Music Is... Wikipedia??

Perhaps the most interesting data point is the relationship between music sales and Wikipedia. Apparently, the more well-trafficked an artist's Wikipedia entry is, the more likely they are to sell digital music. That might seem pretty weird, but maybe what's happening is that fans want to know more about an artist before buying their music. Or perhaps the intent to purchase was already there; People are just looking for historical information about their favorite artists, whose music they're already likely to purchase. 

The charts illustrate, among other things, MySpace's dwindling relevance. MySpace plays drove album sales for only 17% of bands. When it came to driving digital single sales, MySpace was at the bottom of the list. This is obviously something the company desperately hopes to change with its latest relaunch.

Noticeably absent from this analysis was Spotify. With all the hullabaloo over artist royalties and streaming services, many in the industry are anxious to see what, if any, relationship there is between Spotify exposure and sales. Its chief competitor, Rdio helped drive digital single sales for 17% of artists studied.

Lessons For The Music Industry 

Finally, it's worth noting that terrestrial radio is far from dead. Even in the face of competition from the likes of Pandora, Last.fm and Spotify, radio plays are still a significant driver of paid music sales, just like in the old days. 

If there's a key takeaway for the music industry, it's that maintaining an active Web presence and utilizing social media are every bit as valuable to the business of music as everybody thought. That's not breaking news, but it's always nice to have some hard data to back up assumptions. For independent artists, it suggests that Twitter and Facebook aren't a waste of time after all. Oh, and you might want to double-check that your Wikipedia entry is up-to-date. 

Lead photo by Alexandre Normand.

Spotify wasn't built for discovery. The Swedish music streaming company realizes this and instead of trying to natively bake a zillion features into its service, it launched a platform for third party developers about a year ago. 

Spotify's app directory now features almost 60 HTML5-based add-ons for the service's desktop client. These apps perform a lot of different functions - some are social, while others sonically augment album reviews from big name publishers. The thing for which they're probably most useful is discovering music you might like but may never have heard otherwise.

1. Moodagent

Since launching on Spotify last year, Moodagent has been one of the most interesting apps on the platform. That's because it takes standard algorithmic music recommendations and beefs them up with emotional intelligence. 

There are at least a dozen apps that let you build a playlist based on related artists, but Moodagent factors in the mood of each song to build out something that feels more consistent. The options look broad, but are surprisingly powerful. A playlist can be sensual, angry, happy, tender or some combination of all four. You can even base them on tempo, playing back a series of similarly paced songs. Tie these characteristics to the same kind of artist-to-artist matching algorithm that fuels so many other music-discovery apps, and you have a uniquely intelligent system for finding new music. 

2. Last.fm

Last.fm has been around for a decade now, but the Internet radio and music recommendation service is still a reliable tool for discovering new artists. It works by keeping track of everything you listen to and using a Pandora-style algorithm to recommend related artists and albums. It's a simple concept, but one that apparently holds up quite well over time. 

Existing users of Last.fm will feel right at home in its Spotify app, which more or less frames a slightly modified version of the service's usual interface into Spotify's desktop client. The results occasionally need to be tweaked, but on the whole the recommendations are pretty solid. A few albums in my own physical record collection landed there thanks to Last.fm's ability to turn up hidden gems.  

3. Swarm.fm

Oh great, another social music-discovery app. Ho-hum.

Actually, Swarm.fm is pretty useful. It uses data from Facebook to show you what music your friends are listening to, even if they're not signed up for Swarm.fm. If they are, that data becomes much more detailed and easily explored. Swarm.fm will also let you know if any artists in your own collection have new releases, which is far more relevant than the new releases coughed up by Spotify itself. 

That tag cloud on the home tab might look like just another collection of metadata, but it's actually informed by your social music data. I listen to a number of artists who don the tag "space rock" - and when I click that tag, it shows me dozens of similar bands. I can then sort those artists by popularity and what's trending on Swarm.fm, which is a good way to pinpoint worthwhile listens.

4. ShareMyPlaylists

When I first opened ShareMyPlaylists, I thought "Oh, this is looks fairly generic." Alternative, Classical, Blues, Dance. One-size-fits-all playlists.

I was wrong. 

When you scroll down, you see a wide variety of very specific playlists: Beatles covers, the songs sampled by Nas and music from Quentin Tarantino films, songs featuring Moog synthesizers. It's a random conglomeration of curated listening experiences, but one that is well worth browsing. 

ShareMyPlaylists has something for absolutely everyone. Devotees of popular music from the charts can browse the "Top 50" tab while those with more under-the-radar tastes will find plenty of new stuff under the "Recommended" tab, which finds playlists based on the artists you listen to the most. If nothing in either section suits your mood, you can always run a search or use the app's built-in playlist generator. 

5. The Hype Machine

It's been a wildly popular MP3 aggregator on the Web for years, so it only makes sense that The Hype Machine would find its way into Spotify's app store. It's right at home on top of the streaming service's massive library of music. 

The Hype Machine eschews the complex algorithm in favor of human-curated playlists. Specifically, it aggregates tracks from popular music blogs across a wide range of genres, each of them very heavily populated. Dream Pop, for example, isn't exactly a top 40 genre of music, but the Hype Machine pulls together no fewer than 100 different blogs classified as such. It's loaded with music, all hand-selected by Internet tastemakers and guaranteed to introduce you to something you haven't heard before. 

A Growing Universe Of Music Discovery Apps

Narrowing this list to just five selections wasn't easy. There are plenty of discovery apps on Spotify worth checking out - top charts from We Are Hunted and Billboard and social music from TweetVine, Soundrop and Sifter. Depending on your tastes, the critic-curated recommendations from Pitchfork, Rolling Stone, NME or KCRW can be invaluable. 

It's also worth mentioning that the new, supposedly Pandora-killing Spotify Radio feature is worth playing with. Its Echo Nest-powered recommendations are not quite as granular and effective as Pandora's, but they're quite good. Not only can you create a station based on any album or artist, but you can build one off of an entire playlist. This is pretty powerful. For instance, if you've starred a lot of music on Spotify, you can build a radio station based solely on those favorites. 

Here's another Spotify Radio trick: The Last.fm app will let you generate a Spotify a playlist based on your dozen or so most-played  albums of all time. You can then start a Spotify radio station based on that playlist, which is sure to contain a few tracks you'll love, but have never heard before. And isn't that the point of music discovery?

MySpace is planning to get into the music subscription business - because let's face it, it's got to do something.

The move into music subscriptions has been rumored for quite some time, but Monday Business Insider published a leaked slide deck that appears to confirm it. In the second quarter of next year, Interactive (formerly Specific) Media, MySpace's parent company, plans to launch what it describes a "mobile subscription model" intended to compete with Pandora and Spotify, companies MySpace identifies by name as future competitors. 

MySpace has fallen a long way since its peak as a social network in 2008. That was the year that its traffic was first eclipsed by Facebook's and things have gotten much worse since. MySpace's trend lines have all slid downward as Facebook has exploded and new social networks have risen to prominence. 

Refocusing On Music Has Slowed The Bleeding... So Far

After being sold to Specific Media by News Corporation (for a wince-inducing fraction of its original price tag), MySpace more or less gave up on the social networking game and instead refocused its efforts on the thing that gave it traction in the first place: music. After doing so, the site saw its first membership bump in quite some time and its overall traffic stopped falling off a cliff, at least according to the publicly available guestimates from sources like Compete. By no means is MySpace headed back to the lofty metrics of its heyday, but its music-focused relaunch appears to have slowed the hemorrhaging. 

For its next act, MySpace is poised to join Spotify, Rdio and, to a lesser extent, Pandora in the music-subscription space. The move makes sense in a few respects. MySpace has long been associated with music and refocusing its efforts there has already begun to pay off in terms of traffic. 

It's also sitting on a catalog of 42 million songs, compared to about 17 million in Spotify's music library. That massive collection of music is due in large part to the millions of unsigned artists who have uploaded tracks to MySpace over the years. It's a ton of music, but it's provenance  means the quality varies pretty widely. To beef up its musical arsenal even further, MySpace plans on investing at least $15 million in music licensing deals, provided it can win over new investors. 

While MySpace has some built-in musical advantages, entering this space is still a risky move. Spotify and Pandora, streaming music's dominant players, might have some impressive metrics to tout, but profit is not one of them. Even as subscriptions and ad revenue grow, these companies continue to struggle under the weight of enormous music licensing costs. MySpace is already floundering in the social networking market, even with its renewed focus on music. Is pivoting to another money-losing business really the wisest move? 

Maybe, maybe not. At this point, this is probably the last, best shot MySpace has at returning to something resembling relevance. It's worth a try.   

Soon, Spotify will be joining us all where we hang out the most: the World Wide Web. The wildly popular streaming music service is breaking free of its app-only confines and launching a browser-based version, the company confirmed. This is great news. 

An Awkward Relationship?

To date, Spotify's relationship with the Web has been a little awkward. Since the service has long existed only in the form of a desktop app and mobile counterparts, embedding music from Spotify within Web pages hasn't exactly been the completely elegant thing. Various widgets exist to do it, but they require the desktop app to be running in order to function.  

The most well-known example of this is probably Facebook's Spotify integration, which shows you what music your friends are listening and lets you hear it for yourself. It's a pretty tight integration, but clicking the Listen button either launches the desktop app or prompts you to install it. It's not quite as seamless, to say the least. The same goes for blogs and other sites that embed Spotify tracks or playlists. It can be done, but there's a little bit of extra friction in the process. 

Spotify's integration with the Web will soon get a lot smoother and the user experience will undoubtedly be much better as a result. Details about how the Web app and its embeds will work are sparse, but it's reasonable to assume that it will be analogous Spotify's iPad app (to which it bears a striking resemblance). Playing back a song back will almost certainly require a Spotify user account, so it won't be quite as seamless as a YouTube or SoundCloud embed, but it's still a big improvement. It also makes the service a little more portable, since you can access it in the browser, which is sometimes easier than download a desktop application. 

Catching Up With The Competition

It's worth noting that Spotify's biggest competitors have long had this feature. Since its launch, Rdio has offered a Web version alongside its mobile apps. MOG has been in the browser for awhile as well. What makes this significant is Spotify's leading position in the all-you-can-stream music space, a role that will likely be more emboldened once users can more easily play Spotify songs from within their browsers. 

This morning, for the first time ever, I jogged in silence. Other than my own rhythmic panting, my sneakers hitting the pavement and the urban soundtrack that my brain has long filtered out, I heard nothing as I ran across my neighborhood. For once, there wasn't music playing. 

Normally, I stream music from Spotify on my iPhone, but today the app -- or my data connection; I wasn't sure which -- was not cooperating. After waiting for "Connecting…" to disappear from the top of the application and for the track names to turn from grey to black, I force-quit Spotify. Then I fired it up again. And again. Same thing. I started my run without music, figuring I'd check back with Spotify in a minute or two to see if anything had changed. It hadn't. 

Running in silence was actually kind of nice, but it got me thinking. Do I really want to keep my music in the cloud? Suddenly, I was cut off from most of the music I listen to day to day. Sure, I could start searching for songs on SoundCloud or YouTube, but stringing together more than one track would be too tedious to do while trying to run. I do have several songs favorited on SoundCloud, but they're a random assortment of things and streaming them back to back probably wouldn't suit my situation or mood. On Spotify, I had entire albums starred and a playlist I made specifically for running. And now, if only for 45 minutes, I was locked out of it all. 

It was my own fault, mostly. For the past 15 months, Spotify's mobile app has been my chief source of music while I'm on the go. It's been a pretty good experience, on the whole. I actually let Spotify replace my iPod and haven't used iTunes to manage or sync my music since last summer. Other than predictable scenarios like flying in an airplane and riding the subway in New York, that experience had never been truly interrupted until today. Maybe I shouldn't be relying so heavily on the cloud for music. 

When I got back to my house, my phone connected to my home WiFi network and my music loaded instantly. The issue, it turned out, was with my phone's connection, not the Spotify app. In fact, my excessive music streaming is almost certainly leading AT&T to throttle my (grandfathered) unlimited data connection, which uses 33 GB per month. The biggest plan they offer new smartphone owners is 5GB. Yikes.

The Net Has Altered Music, But Let's Not Store It There

My phone wouldn't use so much data if I was storing all that music locally, which is actually something Spotify allows subscribers to do. Premium subscribers can sync tracks from its massive library to their devices (much like you can with Rdio), as well as transfer their own local audio files, iPod-style. The latter feature is one thing that sets Spotify apart from its competition. Unfortunately, every time I've tried to sync my playlists and transfer my own MP3s from the Spotify desktop client to its mobile app, I've run into problems. I'm not the only one. After I went back and forth with their support team, reinstalled the app and re-synced everything twice, the issue persisted and I gave up. 

Did AT&T throttle my connection? Did Spotify screw up its mobile app? Are my phone's OS and apps up to date? Did I try force-quitting the app and reconnecting? The mere fact that these variables exist suggests that the Internet isn't the best place to store our music. Not now. Probably not ever. 

The future of music is not, dare I say it, in the cloud. Instead, our music collections will be both Web-hosted and locally-stored and, like our books, both digital and analog. As long as a data connection can be interrupted -- by a subway tunnel, a natural disaster or a dictator -- keeping our most cherished things on some company's servers seems like a bad idea. 

We might, for example, stream from Rdio or Spotify to our phones, sync whatever will fit on those devices, keep a bigger-capacity iPod (or perhaps a Pono player) as a backup and hang onto some favorites in a physical, often analog format. Even if most of what we listen to is piped to our speakers over the Internet, we're still going to want to own some meaningful segment of our music collections. I don't care how fast and ubiquitous the networks get. They'll never be failproof. 

See Also: Screw The New iPods: We Need Better Music Players

If digital music's future indeed isn't primarily cloud-based, Apple doesn't appear to see it that way. The company that revolutionized music consumption with the iPod is in the process of phasing out its high-capacity classic iPods in favor of iOS-based devices that max out at 64 gigabytes of storage. When the new iPod Touch was announced last month, our own Jon Mitchell eloquently bemoaned this state of affairs, decrying these smaller and inherently cloud-dependent devices. 

By no means am I contemplating the end of my Spotify subscription. Aside from the annoying syncing issues, the service is excellent. Its third-party app platform offers some of the most promising glimpses at how we'll discover and interact with music in the future. But while I'll continue to stream music to several devices every day, I'm looking to the cloud as a supplement to -- not a repository for -- my music collection.   

Photo by Niki Odolphi