Apple reportedly planning to integrate Beats Music completely with iTunes

27 Oct 2014 | Author: | No comments yet »

Apple iTunes Sees Big Drop in Music Sales.

Taylor Swift fans who pre-ordered her latest album 1989 are waking up today to a notification from Apple that it’s available to download from iTunes – the latest high-profile album to shun streaming services like Spotify in favour of Apple’s music downloads store. THE growing availability of cheap music — from free videos and streams to $US10-a-month ($11) unlimited subscription plans — is sapping demand for digital downloads at the world’s biggest seller of music, Apple.DIGITAL music sales at Apple’s iTunes store have fallen 13 per cent to 14 per cent worldwide since the start of the year, according to people familiar with the matter, underscoring the fragility of the music industry’s nascent recovery. That puts Swift in the company of big artists including Beyoncé, Coldplay and U2 in 2014 so far, showing iTunes’ continued clout within the music industry.

To turn this around, Apple is planning to integrate Beats Music into iTunes, according to the newspaper’s anonymous sources, following its $3bn acqusition of the company last year. “Apple is rebuilding Beats Music and plans to relaunch it next year as part of iTunes,” the WSJ claimed, adding that it is not yet clear whether a free streaming option will be offered when it relaunches. The report notes that – in stark comparison to digital music downloads – revenues from music streaming services, such as Beats Music, soared 28 percent in the first half of 2014, with the total number of streams seen by Spotify and Pandora up by 46 percent for the year to date. Apple has yet to comment on the report, but earlier this year debunked speculation that it was planning to shut down Beats Music, hinting that it might fold the service into iTunes instead.

Meanwhile, music industry analyst Mark Mulligan of Midia Research published a report in August claiming that 30% of consumers are now streaming music; that 23% of those people used to buy more than one album a month but no longer do so; and that 45% of all music downloaders are also now music streamers. Some record company executives worry their industry could lurch back into decline after several years of relative stability, should download sales decline faster than streaming growth accelerates. Such a move would make sense too, as Beats recently launched an Apple TV channel in the US, and revealed integration with Shazam, which comes baked into Apple’s iOS 8 operating system. Spotify and its rivals are expanding rapidly globally and signing up new users – Spotify went from 24 million active users in March 2013 to 40 million by May 2014, and 50m now according to multiple sources within labels – with many of their early adopters being exactly the kind of people who used to spend money within iTunes. A key part of that equation, executives say, is persuading enough users of online music services to pay a monthly subscription fee, usually $US10 a month, rather than stick with free versions that carry advertising and generate much less revenue for record labels.

Apple is already looking beyond downloads, having bought Beats Electronics – including its Beats Music streaming service – for $3bn earlier in 2014. Simply preloading Beats Music on every iOS device with a lengthy free trial would present a major challenge to rival services, but Apple may also use price as a weapon, if recent reports that the company is negotiating with labels and publishers to halve Beats Music’s monthly subscription cost to $5. At a time when some musicians are complaining about the royalties they receive from streams of their work, cutting the price of a streaming subscription sounds like a controversial move.

If it can convert even 10% of iPhone buyers in 2015 to a $5 monthly music subscription, that could be tens of millions of new paying subscribers – or more if you take a more optimistic approach and start from the figure of 800 million iTunes accounts reported by Apple chief executive Tim Cook in April 2014. On Thursday, Pandora reported a 25 per cent lift in the number of hours listeners tuned in during the third quarter, though part of the jump stemmed from the fact Pandora had a 40-hour monthly cap on free-listening for much of the third quarter last year.

Spotify has already made its move into half-price subscriptions however, introducing a family plan through which subscribers can add up to four additional accounts for $4.99 each for family members. Another factor potentially weighing down digital sales could be this year’s album release schedule, which features bigger end-of-the-year releases than last year’s, many of them by artists with young, digitally savvy fans, said Nielsen’s Mr Bakula. Some of the most notable releases in recent weeks, by contrast, have been albums by country heavyweights Florida Georgia Line, Blake Shelton and Jason Aldean, which tend to sell more physical copies and fewer downloads than other genres, said Mr Bakula.

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