TLDR.
FWIW, I think it’s good to look at the market direction of tech/content to understand what likely happens to music services (like Amazon) and companies like Roon given these trends.
Here’s a few of points to consider:
-
The entire tech/media industry is consolidating into large media companies that get to must-have status (i.e. Disney/Hulu, maybe Netflix, but in the long term, Netflix’s future is murky) and companies that provide an integrated offering of tech/media/commerce (Google, Amazon, Apple, ATT, etc). As cable audiences bail, consumers will fragment to become customers of a small subset of those that offer the best critical mass whether it be content alone (like Disney/Hulu), hardware ecosystem + content (apple), commerce+hardware+content (Amazon), etc. The latter at least will have to have very strong TV/Movie/Music offerings over the long haul.
-
If this is the only way to win, then it is almost a fait accompli that any independent content companies (Tidal, Qobuz, and even Spotify/Netflix) will likely be acquired as they will be crushed long term by offerings by major media companies that have critical mass and tech/media conglomerates that don’t have to pay the bills on content alone and will undercut on price like Amazon. (btw Spotify still isn’t profitable and Netflix went almost $2.5B cash-negative this year to try to build up it’s content mass – a level it can’t sustain over the long term) Who are likely buyers? Just look at any major tech company that doesn’t have any media. First up on my list would be Sprint/Tmobile after their merger is completed. They need something big to compete with ATT. If ATT and Sprint/Tmobile have content, Verizon will likely have to jump. Next would be all the obvious major players who want to beef up their media offering (Apple, Google, Amazon). The chance that any current independent content companies morph into long term major independent of the strength level of Disney/Hulo is slim to none IMHO.
-
Given the fact that disk space is becoming almost free and network speed is increasing massively with 5G, HD for everything will become defacto. It’s already become almost defacto for tv/movies and one of the big side effects of Amazon’s HD offering is it likely will push the others (Apple, Spotify, Google) to offer their own HD services as while none of them (except for maybe Spotify) are scared of Tidal or Qobuz, no one wants to give Amazon an advantage. This will further (unfortunately) devalue Qobuz and Tidal and hasten their need to be acquired or die.
-
As someone who had arguably the #2 exec at Amazon on my board of my last company, I have some insight into the way they think. They don’t care at all about the short term, they play to win long term. Selling books led to them to sell everything. An incomplete set of web services (that they used first internally) when launched has led to their massive cloud business. I would be very surprised if the shipping/distribution network (that they have developed to use internally) will one day be a direct and brutal competitor to ups/fedex shipping for anyone. With this background, they absolutely want to win the home from apple and google. This is why they launched Alexa. It’s why they bought twitch – yes they like increasing their footprint in gaming – but twitch gave them a very large footprint of video consumers in the home that they could expand. It’s why they acquired Ring. It why they are launching their own speakers. HD music is clearly another step in this strategy. While their initial HD music offering has many issues, they will address them over time and don’t need to get everything right at once.
-
Multi-room capability and ease of setup are becoming commodities. It used to be only Sonos but many players will offer this and of course this devalues Sonos and drives them to extreme measures like suing Google (which they are now doing), but the chance of them winning is slim in the long term. They will also likely be acquired by one of the big boys.
-
This brings me to Roon. As previous stated, I believe Tidal and Qobuz will be acquired (or die). When this happens, more than likely, the larger acquirer who has a different agenda will pull back on the metadata access that Roon needs to provide their service as they will working to provide more of what Roon does themselves (HD, Multiroom, etc). Amazon HD in my mind is still a wild card. They could choose never to offer the kind of access Roon needs to integrate properly or choose to offer an expansive APIs (like they do with Alexa) to get everyone attached to their offering given their late entry. The jury is out here and their decision could have a major effect on Roon. All of this probably means over time that Roon gets driven to have much less choice (or no choice) in its deeply integrated music offerings and users start migrating to inferior solutions that cost less but are good enough. When this happens Roon will probably have to solely align with one partner or choose to be acquired even though that is not the direction they want to go as they have publicly stated many times.
-
While I am pretty confident the above plays out very close to they way I’ve laid it out, what I’m not confident is how long it takes for all to play out. Timing in the tech/media market is extremely difficult to predict. When the mp3 was invented by my friend Karl-Heinz Brandenberg (and others) at the Fraunhaufer Institute in 1978, many industry pundits predicted the end of physical music sales within 5 years. It took almost 14 years for this to happen but then digital downloads sales were surpassed by streaming in 4 years. No one predicted how fast that would occur. No one really predicted how fast cable subscriber would decline (and it is accelerating). So this could play out in 2 years or a decade or more. That is the big question mark in my mind.
-
Does any of this make me less of a Roon fan or afraid to invest in using their service? NO. You have to make decisions on today’s facts and what they do today is unmatched in the industry. I’ve paid for 2 roon installations and subscribe to both Qobuz and Tidal. It’s critical we support Roon and the music industry (and those that best support artists). And the continued support of Roon today will help give them the financial underpinnings to find the right way to navigate the rapidly changing market in the best way possible. I do hope they can find a way to integrate with Amazon in the right way and I hope it’s a while before the independent content companies get gobbled up. That would be the best for Ron. It would be great to see a third offering like Amazon in the Roon content mix IMHO.
-
And the last and most important thing about all of this is that I could be wrong on everything.
