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Popular online music streaming service placed into Administration

In January, in a bid to raise funds, Tesco sold its music streaming service Blinkbox Music. The sales price was reported to have been £5m, significantly less than the £12m the supermarket paid to acquire the service in 2012. The streaming service had 2.8m members and more than 200,000 monthly active users.

Unfortunately, things didn’t work out for the new owners and Blinkbox Music has now been placed into administration six months into its new ownership. The new owners had attempted to sell the service prior to administration but were unsuccessful in finding a buyer after struggling to make it work financially.

If you missed the opportunity to buy the service prior to administration then don’t worry, it is still up for sale by the administrators. But is this a good buy?

What caused Blinkbox failure and Administration

I have been using a paid streaming music service for about 2 years now and I think it is great. During this time I have seen more providers move into the market and the popularity of the industry grow significantly. Numbers recently released report that in the last year streaming services grew 51%, and has grown from 9% of the digital music industry five years ago to 27% today.

Historically the main players in the industry have been Spotify and Pandora, sharing a massive 155 million users between them. To bring more competition to the market a host of music celebrities have recently released a new service called TIDAL which aims at putting more money back into the pocket of the artists. This service, being slightly more expensive than the others, did not get off to a great start but is picking up pace by concentrating on high fidelity and exclusive content.

I can’t see that TIDAL will upset Spotify too much, I anticipate that the biggest shake up to the industry will come at the end of this month when Apple launches its own steaming service to bring substantial competition to the market. Apple’s reach is potentially huge with more that than a billion iPhone and iPad users worldwide and they already have content deals with most artists and labels as a result of their iTunes service.

Exclusivity could be the key to avoid business failure

My only concern over the increased competition is that we may start to see artists follow the money and only allow their tracks on certain streaming music providers, likely to be the services that pay the most royalties. We have already seen this with Taylor Swift pulling her music from Spotify.

So, can Apple beat Spotify? Yes, in my opinion it can, it will be able to place its new music service into the hands of million’s of loyal users. Advertising will help, but when users start updating iPhone’s or iPad’s to include a free month of Apple’s new service I can see them catching up to Spotify’s paid subscriber base in less than a year. Apple also has a knack of perhaps not inventing new ideas but enhancing them and making them better than the competition.

It will take some doing to pull me away from Spotify but price and artists will be the deciding factor, I just hope that there is healthy competition between the providers rather than artists being spread between providers due to exclusivity contracts. With regards to Blinkbox Music, I would probably keep your money in your pocket (next to your mobile device, which probably uses Itunes or Spotify); the competitions battle is well underway – the question is who will win the war.....

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