In Music, Apple's Strength Becomes a Vulnerability

Image courtesy of Spotify

One of Apple’s (s aapl) great successes this decade has been its ability to unite the cell phone, the portable MP3 player and the music store in one ingenious handheld device, the iPhone. As new applications arise that allow on-demand streaming music on non-Apple phones such as those powered by Google’s (s goog) Android operating system, however, Apple’s great strength and longstanding investment in music may become a crucial vulnerability that will force the company to make difficult choices in years to come.

This week, European streaming music service Spotify demonstrated its Android app, which features on-demand streams of songs the user doesn’t own, as well as an offline synchronization and caching function that allows a listener to enjoy a song on the go, regardless of whether the phone is connected to a data network at that moment. That’s dangerously close to owning a song, and speculation is already rife that Apple won’t accept Spotify’s planned iPhone app because it’s too much of a threat to Apple’s iTunes music store.

Spotify, whose free desktop service is popular in Europe, doesn’t offer anything in the U.S. yet, and the Stockholm-based company has hinted that it may charge users in all geographies for premium accounts in order to use the mobile service. But it seems inevitable that consumers everywhere will eventually demand ubiquitous on-demand mobile streams, whether from Spotify or someone else, making ownership of music less popular and iTunes therefore less important. And in that respect, Apple’s decade of investment in music and current domination of the online music world may become an Achilles’ heel, as Android’s openness and neutrality give it greater flexibility than Apple’s closed system to offer consumers what they want as alternatives arise.

Thus far, Apple has shown considerable flexibility in working with streaming music providers. Companies such as Imeem have challenged Apple’s boundaries on the iPhone, but have always played nice, offering helpful links to buy songs through iTunes. On the PC, Apple has always endeavored to offer a superior experience compared to free services: no ads, a clean and organized interface, and interactivity between the store and the software (and by extension, the portable hardware). But those advantages could erode as increasingly simple and powerful apps are introduced on mobile devices — applications Apple may have to reject while other phones accept them. And that could give avid music consumers a reason to own Android-based phones instead of iPhones.

On-demand streaming isn’t a perfect science, and Apple’s user experience is still stronger than any application can provide. Nor is multitasking an option with most apps, never mind how much the ones that do can drain a device’s battery life. But as the trend toward streaming music rather than owning it, once confined to the desktop, shifts to the mobile sphere, Apple will have to make new choices to fend off its competition. Perhaps it will counter with a long-rumored subscription service of its own, although it has largely held off “music rental” services Rhapsody and Napster on the PC without doing so. Growth in full-track mobile downloads is still expected to outpace subscription-based mobile streaming over the next few years, according to a recent report. But music is the one content area to which Apple is committed while Android is not, and while that commitment has yielded benefits throughout the current decade, openness and neutrality will pose a real threat to it in the next one.

Image courtesy of Spotify.