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Spotify is Leading the Stream Wars. But Will the Empire (Apple) Strike Back?

Last week, music streaming service Spotify announced Spotify Family, a new feature that allows up to four other Spotify Premium users to share one account at a discounted rate. Sharing account passwords among close friends and family (à la HBO Go and Netflix) is becoming standard practice for the stream-happy generation. Spotify’s newest enhancement gives music-loving customers the experience they are accustomed to with other services, while at the same time letting Spotify monetize the practice of family and friends sharing.

This is only the latest shot fired by Spotify in the ongoing music streaming wars, which are intensifying big time this year. Even though Spotify clearly leads the pack of on-demand music streaming services — Spotify has more 40 million active users — the company faces some tough competition. Startups like Deezer and Tidal are banking on their high audio quality to lure customers, and major tech players like Google, Amazon, and Microsoft have the built-in audience, technology, and capital to make them formidable opponents.

Thus far, Spotify has managed to keep the on-demand music streaming competition at bay. Microsoft, for example, stopped offering a free ad-supported music service on Xbox Music Pass. But Spotify knows it can’t rest on its laurels, especially now that the ink has officially dried on Apple’s $3 billion deal to purchase Beats. Beats Music will launch next year as part of iTunes.

Unlike Spotify’s competitors, Apple is particularly threatening because of its 800 million iTunes users (and growing), most of whom have already linked their accounts to their credit cards. This could make for an easy, convenient way for these users to switch from Spotify to a service they’re already signed up for anyway. But what might be most dangerous of all is the perception by millions of consumers that Apple is synonymous with a delightful, elegant, and innovative user experience.

Spotify’s answer to the competition is to stay vigilant and continuously evolve the music streaming experience. The company’s new iPad app has a more elegant, darker design and lets users curate their streaming music library more easily than before. Spotify has also taken a more personal approach to engaging with their fanbase. The @SpotifyCares Twitter handle is much more than just a support center to address user-submitted questions and problems. It’s actually super fun: real Spotify employees curate witty, story-driven, hyper-personalized playlists at a user’s request. Something tells me that Apple will have to be equally as creative to get that intimate with its 800 million iTunes users.

Retaining current customers and acquiring new ones in the music streaming business will mean continuously staying on top of the stream-happy generation’s preferences, and improving the user experience through imaginative design and the addition of smart new features. Account sharing is a nice start, but there’s room for improvement. (Integrating song lyrics, for example, would be nice.) As the stream wars rage on, customers will decide who reigns supreme.

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