JB Hi-Fi launches streaming music service but roadblocks may limit success

Electronics retailer JB Hi-Fi has launched its streaming music service, with millions of tracks available in a beta format as the company prepares to expand beyond its traditional retail model into a service-based experience.

But experts suggest the move may not be without hurdles.

Telsyte research director Foad Fadaghi told SmartCompany this morning that while the digital subscriptions market is set to increase as a proportion of all digital spending, music has some roadblocks for any new entrants.

“Certainly streaming services will increase as a proportion of subscription spending over the next three or four years, but that’s tempered by the fact there are alternative ways to stream music.”

Some music labels already manage their own offerings, and Microsoft has just launched a version of its Zune marketplace here that allows users to stream as much music as they want for a subscription fee.

Recent reports also indicate Spotify is looking at the Australian market – it recently hired a local sales manager.

But Fadaghi says the problem isn’t necessarily the professional competition.

“There’s the whole YouTube phenomenon, which drives a lot of younger people to stream the various pieces of music they want to hear, whether it’s legal or not.”

“That presents a challenging proposition for some of these streaming services, despite the convenience factor that drives people to these sorts of services.”

Spotify has certainly gained success in the United States, where its subscriber base has grown into the millions. But Fadaghi adds the Australian market is quite small, which presents a challenge to any new entrant.

“There are large record labels, and some of them may be experimenting with the new format. But there is a question of how many labels will want to be interested and what the relationship there will be.”

However, there Is one point in JB Hi-Fi’s favour – Fadaghi says the market is so small here that it could deter any foreign companies targeting a local launch.

“It’s arguable whether the local market here can support a large number of players. It’s challenging, and for that reason we’re not seeing a large amount of local players.”

“It’s a very crowded space.”

JB Hi-Fi has launched with a free one-month trial, and after that users are able to pay $25 for three months, $50 for six months and a year for $80. JB Hi-Fi says mobile apps will be released early next year.