UPDATE: Facebook tells Billboard that they have “no plans to go into music streaming.”
It’s been an insane year for music-streaming services — including not only the garish launches of Apple Music and Tidal, but the expanded monetization of Soundcloud and YouTube. Considering all the surrounding noise, you might almost forget that Spotify and Pandora are still the dominant players in this space. But maybe not for long? Today, Music Ally reports that none other than Facebook is getting in on the action, saying in their report: “The social network is planning to [launch] an audio music-streaming service to compete with Spotify, Apple Music, and others.”
It seems like any such launch won’t occur before 2016. Per Music Ally, “the launch date and specifics of the business model and payout formula have yet to be nailed down” — and nothing will get started until after Facebook rolls out its native music-video platform, which is reportedly “expected to happen in the next few months.”
It’s hard to imagine exactly what a Facebook streaming service would look like — or what function it would serve — especially if it were built into Facebook’s existing platform. Of course, Facebook could build a standalone service (although … why?) or it could obtain an existing service. Music Ally posed that possibility:
Will Facebook build or buy its streaming music service? With the company having paid $19bn for messaging app WhatsApp, $2bn for virtual reality startup Oculus VR and $1bn for photo-sharing app Instagram, it has proven willing to splash out at multiple levels for companies to expand its offering.
Spotify’s current valuation is less than half the WhatsApp price, while a smaller, socially-savvy rival like Rdio could surely be picked up for a fraction of that price.
Despite this, Music Ally’s sources expect Facebook to build rather than buy, although they do not see that strategy as set in stone.
As far as I know, Spotify is currently valued at $8 billion, which seems like it would be a steal for Facebook. Even if they paid a 50% premium on that valuation, it would be a good buy: Not only would they be getting an existing platform with high visibility and an enormous user base, they’d also be eliminating their primary competition. However, that assumes (among other things) that Spotify’s owners would sell at that price, or that Facebook would want to adopt Spotify’s “freemium” model. Still, that seems like Facebook’s best option by far, IMO. Yes, Rdio would be a much cheaper alternative, but as of May 2014, Rdio had less than 500,000 subscribers, which is infinitesimal by Facebook standards. Cheaper still would be Tidal, which Facebook could probably acquire for a fraction of the $56 million Jay Z paid for the service back in March.
Although Music Ally’s sources expect otherwise, I find it extremely odd and unlikely that Facebook would prefer to build rather than buy. It’s not like this is an uncrowded field, and it’s hard to imagine a brand-new Facebook streaming service gaining any real traction. But who knows? In any case, it’ll be fascinating to see what happens.