Last week, Spotify Technology (NYSE: SPOT) and Samsung announced a new partnership, in which the music-streaming leader would become the new "go-to music service provider" for Samsung devices. In no uncertain terms, the duo is looking to better challenge Apple (NASDAQ: AAPL) on the respective fronts where each company competes with the Mac maker. The announcement was music to investors' ears, as shares jumped 5% following the news.
Here's why the partnership is a perfect fit for both Spotify and Samsung.
Spotify CEO Daniel Ek speaking at the March 2018 investor day. Image source: Spotify.
Spotify is everywhere
One of Spotify's greatest strengths as a service is its ubiquity, which is facilitated by a diverse range of third-party hardware integrations as well as a platform-agnostic model. Being able to access the music-streaming service on just about any device -- from smart speakers to mobile devices to gaming consoles to cars -- a premium subscriber might own adds a whole new level of convenience and strengthens Spotify's value proposition. In contrast, Apple Music is only available on Apple hardware and Android phones.
"We know that listeners stream different kinds of music at different times, in different places, and most importantly, on different devices," Spotify CEO Daniel Ek noted in a statement. "We think music should be easy to access on ALL of your devices -- and we want it to be seamless to switch from one device to another."
The deeper the integration, the better the experience. Seeing as how Samsung is one of the most prolific consumer hardware makers in the world, the partnership will dramatically expand Spotify's reach while enjoying deep integration across devices, including Samsung's virtual assistant Bixby and its new Galaxy Home smart speaker. You'll soon even be able to access Spotify on your Samsung smart refrigerator, if you're into that sort of thing.
Samsung has never been good at music streaming
For years, Samsung has tried to break into the music-streaming space with little to no success, like with its oddly named and since-shuttered Milk Music service. The South Korean conglomerate has also tried using Alphabet's Google Play Music as the default music service, but Samsung has a long history of trying to reduce its reliance on Google, seeing as how the search giant already provides the operating system that powers its most popular devices.
It's also not as if Google has made much of a dent in music streaming, either, having rebooted its own strategy numerous times, including just a few months ago. By partnering with Spotify, Samsung is alleviating the pressure to develop its own music service, instead outsourcing music streaming to one of the dominant players.
The overall market is growing
Apple recently overtook Spotify in the U.S. music-streaming market, which could add a sense of urgency for Spotify. On the last earnings call, Apple CEO Tim Cook reframed the competition as one where a rising music-streaming tide lifts all service providers:
But really, the key thing in music is not the competition between companies that are providing music, it's the -- the real challenge is to grow the market because if you add everyone up that's providing subscription music today or streaming music, it's -- outside of China, it's less than 200 million probably around the world. And so it does seem to me, there's an extraordinary opportunity in that business to grow the market well.
The overall market for music-streaming subscribers is indeed growing, but the competition to grab those subscribers is only going to intensify.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Apple and Spotify Technology. The Motley Fool owns shares of and recommends GOOG, GOOGL, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.