Cool factor drives merchant interest in Apple Pay

According to eMarketer, Cool factor—not customers—drives merchant interest in Apple Pay. Merchants are interested in adding Apple Pay to their offerings at the point of sale. But according to Goldman Sachs, that interest is largely based on an elusive factor: “coolness.”

Leading Drivers of Merchant Interest in Apple Pay According to US Merchant Acquirers and ISOs, March 2015 (% of respondents)Novelty and “cool factor” were driving about 43% of merchant interest in Apple Pay, the March 2015 survey of US merchant acquirers and ISOs found. By comparison, one in five said merchants’ customers were actually asking for Apple Pay. In even fewer cases were merchants pressured to keep up with the competition. Still, most respondents said relatively few merchants were interested in offering Apple Pay—over half indicated that under 10% of merchants were interested, while 28.6% put that figure between 10% and 20%.

Goldman also asked merchant acquirers and ISOs about their own plans to enable acceptance of Bitcoin; a majority said they had no such plans.

Research shows that consumers who use Apple Pay tend to like it—but mobile payments are still a decidedly niche activity.

Apple Pay Set For UK Launch

According to “sources at multiple retailers” and Apple retail employees, Apple Pay will soon be live in the UK. The contactless payment system will likely launch on July 14th and will work with the iPhone 6 and 6 Plus, as well as the Apple Watch.

Following the US model, Apple Pay will use NFC to transmit data to payment terminals and will authenticate purchases with Touch ID. The UK is the first international market for the system. Canada will follow in the autumn.

UK users will be able to use Apple Pay at over 250,000 payment terminals across the nation. Tap-to-pay systems are already installed in many stores across the UK, and those systems are already compatible with Apple Pay. A number of banks are already on board as well, including HSBC, Santander, Natwest, Nationwide and First Direct. Apple Pay will also work around the London transport system.

Apple had previously announced a UK launch sometime in July.

 

 

 

Why Apple Music is set to take over the streaming business

From The Conversation.

After much anticipation Apple has launched its new music streaming service, Apple Music. It’s the latest addition to Apple’s burgeoning product ecosystem which includes devices, software, online digital payment systems and digital media stores. The launch of Apple Music also poses a substantial threat for existing companies that deliver on-demand music streaming services – most notably Spotify, the subscription-based music streaming provider that has achieved an impressive customer base of 75m (with 20m paying for the service) since 2008.

Competition between innovative companies is nothing new but in the hyper-connected digital world everything happens faster. The competitive advantage that a single product or service can give is much shorter-lived. The launch of a product or service on the market is immediately observed by millions of companies, globally. And the companies that have the right resources and technology to build on a good idea and possibly make more out of it are the ones that thrive. Enter Apple to the music streaming business.

Making more out of an idea

Having a good idea that creates value for customers is only the very beginning of a business’ journey – this is something colleagues and I reflected on recently in a paper published in the Academy of Management Review. Coming up with one way to make money out of it is a good start, but stopping there does not lead to success, certainly not in the longer term.

An idea is really a seed. A seed that can grow in many directions and generate other successful new ideas. Developing follow-up ideas can be the key to long-term success. Apple is an example of a company that does this extremely well.

In 2001 Apple developed the core idea of combining design, portability and connectivity. The first way it conceived to make money from this was the launch of a product for the music industry. The result was the iPod, a smoothly designed, ultra-portable device that enabled connection with other devices and access to content. The iPod was a huge success, but Apple did not stop there.

Building on the same basic concept and combining new telecommunication and computing functions it introduced the iPhone and the iPad. Today, continuing along the same trajectory the company is expanding in wearable technology with the recently-launched Apple Watch and now in music streaming with Apple Music. Electric car systems are the next objective. Each of these products is – in Apple CEO Tim Cook’s own words – “a very key branch of the tree”, originating from the same seed that led to the iPod in 2001.

Tim Cook, Apple CEO, rallies the troops at the company’s annual developers conference. EPA/John G. Mabanglo

Generating more

In our article we call this a “generative” strategy. Successful companies think about what else could be done with the same basic concept. They apply it to other contexts, develop complementary products to enhance their success and target new customer bases.

Uber is another example of this. It is building on the core idea at the basis of its car sharing service and is entering logistics with Ubercargo (a moving service) and Uberrush (a package delivery service).

Being generative makes sense for a variety of reasons. First, not all early applications of a given idea are successful. In its path to success Apple launched products that did not work, such as the tablet Newton and iTunes Ping.

Developing a portfolio of variations on the same idea makes a company less dependent on the success of each one of them. For instance, maximising the profitability of its music streaming service is less crucial for Apple than it is for Spotify because Apple Music is only one of many services the company provides.

Developing a system of interconnected products and services also has the benefit of locking customers into them, which competitors that focus on one idea will struggle to replicate. So developing a customer base for its new music service is going to be much easier for Apple than it has been for Spotify because Apple benefits from the millions of users (and registered credit cards) already tied to its iTunes accounts.

Exploiting potential

Being generative does not necessarily mean pushing multiple ideas. Rather, it means exploiting the full potential of each idea. Coming up with a large number of varying inventions is more likely to be detrimental for a firm, spreading its attention too thinly. Xerox Parc in the 1970s, for example, generated an incredible number of new ideas but didn’t succeed in exploiting their full potential. Some similar ideas did find commercial success though such as the first Macintosh computer.

In our research, we emphasise that organisational choices that foster creativity but also create pressure to deliver outcomes are an important way for exploiting existing ideas in new, profitable ways. These can include things like companies having challenging goals on invention and time sensitive creative processes that create a sense of urgency and provide rhythm to the inventive process – think Apple’s annual developer conference as a key deadline for the launch of new products. Developing a knowledge base that draws on a diverse range of experiences can also contribute to this goal.

Even after a successful invention, failing to recognise a product or service’s full potential might lead someone else to do it. If a company does not consciously try to further develop its ideas in all the feasible directions, it might end up leaving a lot of money on the table. And Apple is a company that is well-endowed to swoop in and clean it up.

Author: Elena Novelli, Lecturer in Management at City University London

What Apple’s new music streaming service will mean for underpaid songwriters

From The Conversation. Earlier this month, Apple launched its long-awaited subscription-only music streaming service. Costing less than US$10 per month, Apple Music will compete head on with Pandora, Spotify, YouTube and Tidal.

Apple’s iPod revolutionized the music business. Will its streaming service do it again? Reuters

Although subscription-based music services have existed for more than a decade, many still wonder whether Apple Music will again revolutionize the music business, like iTunes. The more important question, however, is what Apple’s entry to the music streaming business will mean for underpaid songwriters.

The promise of online streaming

Online streaming offers many benefits. It allows music fans to access content anytime, anywhere. If Apple Music can include a wider variety of music than Pandora and Spotify, it will move us closer to what commentators have referred to as the “celestial jukebox” – the proverbial place where music is always at our fingertips.

On-demand services also respond well to our changing habits of entertainment consumption. Gone were the days when we sat behind the television set every week waiting patiently for the latest episode of our favorite show. Instead, we now binge watch through cable on-demand, Netflix or Amazon.

Although consumers remain reluctant to pay for online content, last year the music industry received, for the first time, more revenue through online streaming than CD sales. When one takes into account the industry’s 18% equity stake in Spotify – worth about $1.5 billion – the revenue-generating potential of online streaming cannot be overlooked.

The music industry’s (relative) well-being

Music business executives remain vocal about the challenge posed by the internet and new communications technologies. The industry, however, seems to have been doing quite well recently.

Taylor Swift’s latest album 1989, for example, sold more than 1 million copies in the first week alone. Top executives also continue to receive compensation packages worth tens of millions of dollars. The problem with online streaming therefore concerns neither Billboard Top 40 artists nor industry executives.

If anything, the arrival of Apple Music will generate more revenue. Although the industry’s total income may initially decline when some iTunes downloaders switch over to the new subscription-based service – causing reduced sales in digital downloads – that amount will return and grow as the subscriber base expands.

Unfortunately, the same cannot be said about professional songwriters.

Consider Spotify. The service claims a distribution of “nearly 70%” of its revenues to rights holders. According to The New York Times, Spotify “generally pays 0.5 to 0.7 cent a stream (or $5,000 to $7,000 per million plays) for its paid tier, and as much as 90% less for its free tier.”

For a song that has been streamed 10 million times in the paid tier, the total royalties will be between $50,000 and $70,000. This arrangement sounds attractive, until the royalties are divvied up among the record label, the performer and the songwriters (including the composers of both the song and its lyric). If the songwriters receive only 10% of the total royalties, their cut will be between $5,000 and $7,000.

That amount will be further reduced if the 10 million streams also include the free tier. For example, on Pandora – a different service that has similarly meager payouts – Pharrell Williams received only $2,700 in publisher and songwriter royalties for 43 million streams of his Grammy-nominated song “Happy”.

The professional songwriters’ oft-overlooked pain

Thus far, musicians have been highly dissatisfied with the royalty payout from online music services.

For professional songwriters who do not perform, few can earn enough money through these services to put food on the table, pay for electricity and equipment and forgo part-time work. Even for those who manage to bring in additional revenue through concerts and tours, the frequent need to perform and travel takes away valuable writing and recording time.

In a recent interview, Björn Ulvaeus of ABBA said he “doubted spending all that time on writing songs would be possible in a world where Spotify is the main source of income … as [his group] would have had to spend much more time touring in order to make a living.”

If professional songwriters are to succeed in the brave new world of online streaming, a new compensation model will have to be developed.

That model could feature a minimum royalty payout or a higher rate for online streaming. It could also include a small cut of profit from the record labels’ equity in streaming services – some of which was reportedly obtained with very limited up-front investment.

Also worth reviewing is the “blackbox” from which royalties for songs from back catalogs have disappeared. Even though the record label may have received only a fixed sum for licensing its whole catalog, a songwriter whose song has yielded 10 million streams deserves some royalty.

Apple could have revolutionized the music business by charting a new course for compensating professional songwriters. Yet nothing reported thus far – other than the lack of a free service – suggests a more generous royalty payout than Pandora or Spotify.

Potential competition concerns

Apple Music will raise additional questions about competition, affecting musicians and consumers alike.

From Pandora to Spotify to Tidal, virtually all existing streaming services are technology start-ups. Apple, by contrast, is the world’s most profitable company with an enormous war chest and reportedly 800 million credit cards on file.

Once Apple enters the market, it is unclear how effectively the existing services will be able to compete or how many new players can still enter the market. It is no coincidence that iTunes remains the most dominant format for digital music. While Google can certainly stay competitive, it is doubtful that the next Pandora or Spotify could emerge.

It is therefore no surprise that the attorneys general in New York and Connecticut have already launched an antitrust investigation into the music streaming business. Although they have yet to target Apple, the timing of the launch is suggestive – not to mention the company’s recent $450 million settlement of its e-book price-fixing lawsuit.

In sum, despite the considerable attention Apple Music has recently caught, it remains to be seen how this new service will improve the lives of underpaid songwriters. If anything, the service has raised more questions than answers.

Author: Peter K Yu – Professor of Law and Co-Director of the Center for Law and Intellectual Property at Texas A&M University

Apple Pay Plots New Territory—Including Las Vegas and China

The Payment War continues. Interesting commentary from Brand Channel.

After many decades, it’s still interesting to watch Apple continue to push the envelope around its primary business model.

Apple Watch is a prime example, as it plunges the brand deeply into the fashion world as well as the personal tech sphere that it already dominates. Intriguing new wrinkles include the just-uncovered fact that a loophole in security would hypothetically allow a thief to use someone else’s Apple Watch to make Apple Pay payments with the owner’s credit card data, according to PhoneArena.com.

While the Apple Watch launch may have somewhat overshadowed the company’s Apple Pay platform, the latter’s list of participating vendors keeps expanding—including its newest addition, Cole Haan.

“The Cole Haan enthusiast is on the go and online at all times,” said David Maddocks, chief marketing officer at Cole Haan, in a press release. “The mobile wallet in our popular mobile application made perfect sense for the Cole Haan customer who wants to stay stylish at the touch of a button.”

Las Vegas is getting in on the Apple action as well. Apple Pay is now making its way to The Cosmopolitan hotel and casino there, where consumers will be able to use it at the front desk, restaurants and bars. According to Digital Trends, however, it can’t be used to buy chips for gambling—yet.

All of that may be table stakes, though, compared with Apple’s biggest target for Apple Pay: China.

China is Apple’s second-biggest market by revenues and snaps up more iPhones now than the US, according to CNBC. “We very much want to get Apple Pay in China,” CEO Tim Cook told a Chinese news agency.

The company reportedly is in talks with Alibaba about bringing Apple Pay to China using Alibaba’s Alipay to process transactions. Apple has been eying the China market for some time, according to Zack’s.com, but regulatory hurdles have made it difficult for the company to enter the market.

As with smartphones, Samsung looms as a formidable competitor in mobile-pay systems after its acquisition earlier this year of Massachusetts-based startup LoopPay, according to Recode.net. The price, it was reported, was $250 million.

Will that be enough for Samsung to arm wrestle with Apple Pay as its smartphones have done with iPhones? The answer likely will come quickly.