itunes

Declining iTunes sales highlighted by Morgan Stanley’s Katy Huberty and reported by Fortune appear to underline the need for Apple to move beyond sales of music downloads and into the subscription music business. iTunes sales are down 24 percent year-on-year.

While the slack is being picked up by app sales – a trend previously noted by Asymco’s Horace Dediu – that falling blue line reflects the wider shift in consumer behaviour from purchasing downloads to subscribing to streaming services noted last year by Billboard magazine … 

It’s widely assumed that the excellent Beats Music service is one of the reasons behind Apple’s negotiations to acquire the company. While there have been conflicting rumors about whether or not the deal is going ahead, most sources suggest that it is, though possibly for a slightly lower amount than the $3.2B initially indicated.

Spotify CEO Daniel Ek recently said that he had always assumed that Apple would launch a subscription music service.

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16 Responses to “Declining iTunes sales underline need for Apple to launch a subscription music service”

  1. honest question but is iTunes Radio a streaming service?

    Perhaps not on the Monthly subscription but a yearly one that is inclusive of iTunes Match.

    • Ben Lovejoy says:

      It’s streaming, but what most mean by the term is on-demand streaming

    • it is streaming, and it’s currently more popular that Spotify

    • gotcha. I cannot use iTunes Match (too many songs — yes, I know there is a work with splitting libraries but don’t want to do that). So, I use the free iTunes Radio on a desktop at work, at home on AppleTV or on the iPhones. When I had unlimited Data, I would stream in the car but not anymore.

      When I’ve upgraded phones or needed to install a new iOS…I tend to lose my music and then I forget to upload more tracks from iTunes so I just have been streaming. I don’t mind the commercials, they need to pay for the streaming I do since I do the free route. I have trouble paying for subscription based music. I prefer independent/college radio stations that really good. my wife like SiriusXM…and got a really good deal a while back but still the thought of paying to listen to music that can be heard OTA with regular radio gets to me.

      • Ben Lovejoy says:

        I don’t think I’d pay for streaming radio, but I happily pay Spotify for on-demand streaming. It’s about half the cost of an album per month to listen to almost everything out there.

      • Amazon has a much higher limit of the number of songs you can store in the cloud than iTunes (I would imagine enough to hold your library)

        I’m with Ben when it comes to Spotify. I have on-demand access to a sheer enormous library of music, conveniently accessible and now integrates with Algoriddim Djay which I now use for personal DJ-ing I do for family/friend get-togethers. It’s well worth the premium to me.

        You mention the music can be heard OTA. Well that’s if you’re lucky. The difference is on-demand grants you the power to dictate both the style and specifics of music that plays (again from an enormous library) rather than someone else dictating that for you. Furthermore the experience isn’t continually interrupted by advertisements. There is great value in that which justifies the premium for me.

  2. When Apple unveiled iTunes Match I started suspecting they would eventually do this and then when the iTunes Radio rumor mill got hot I just plain assumed they would at some point. It was just visual evidence they were expanding from music as a retailer to music as a service.

    Personally, at this point my iTunes library is duplicated in Google and Amazon’s cloud services, I use Pandora One more than iTunes radio because it recognizes some artists for radio station customization that iTunes Radio doesn’t and I’m quite happy with Spotify for music on-demand. As a result, my iTunes Match subscription is not set to renew because I don’t feel I need it anymore and can be frustrating to work with compared to the competition who do web services FAR better.

    I would be interested to see what kind of on-demand service Apple would offer to compete with the likes of Spotify. If it can deliver something special and be covered by the cost of iTunes Match maybe I would reconsider.

  3. Or … the declining iTunes sales could be a result of the fact that the prices for movies and TV shows are still ridiculously, over-the-top, high.

    iTunes business includes video sales. What if music is just doing fine (at the reasonable prices it sells for) and the problem is actually that people aren’t buying multi-hundred dollar TV show “season passes” and 60 year old movies priced at $30 for SD copies.

    I guess we will never know.

  4. RP says:

    Everyone i know uses Spotify and maybe Pandora.Ask people today when the last time they bought a CD or or a music download, and the answer will be “Buy music? Who does that?”

    Well the answer is older people mostly. Those who do not know about Spotify or other sources. iTunes will probably continue to sell music for quite some time. Just as AOL is still selling internet access to landline subrscibers..

  5. hmurchison says:

    I’m on a Beats music trial. I like the software and the playlists are nice but it could use a bit of Apple love in the UI dept. The apt probably isn’t up to the standards of Apple wrt design fluidity.

    I’m a fan of owning (at some level) my favorite music. I don’t think that Apple should abandon people that don’t want to spend a lot of money on subscriptions only to have their music disappear when they stop paying.

    There’s a way to keep both people happy. I also think the industry is going to start offering higher quality lossless recordings.

    There’s some times where the buffet is the ideal dinner but it’s never fine dining.

  6. I like using iTunes but I prefer Spotify because it offers on-demand streaming. I can grab a whole album and listen to it. I also like using those apps that do all sorts of specific music grabbing. I use iTunes more as a radio station type of music experience. It definitely beats the hell out of a regular over-the-air radio station. Are streaming stations capable of maintaining themselves forever? I thought they were hard to monetize. Maybe downloading music will return to its former glory if streaming services go out of business in the long-term. I think no matter what Apple goes with, they’ll make more money than most services and will probably stay around the longest because they’re not fully reliant on their content for survival. Apple should pay artists more because they can afford to and have the largest music database available. I don’t want Apple to try to undercut all the smaller streaming companies. I want Apple to play fairly and go with quality.

  7. Broken record alert: iTunes Radio in the UK might help! C’mon I am getting very bored of waiting! (I know half the problem is UK record labels and they need to get their acts together).

  8. I’ll go against the tide and say that I stopped buying music from the iTunes Store because I couldn’t bear buying any more low-resolution low-fidelity music. To be honest, I am even reluctant to buy CDs (though I do buy them again and rip them and throw them away) but I want HD music NOW!!!!! Enough of this low resolution rubbish.

  9. Avenged110 says:

    I really hope these stories are just people bs’ing hoping to get something out of it because it would be sad if Apple lost their vision. iTunes isn’t here to turn a profit and never was. It was created to drive hardware adoption and function at break-even. One of the best things about the iTunes Store, is Apple had no monetary interests there and were most likely to keep prices as low as they could possible negotiate because people like cheap media. Happy people buy more hardware on which they can get more cheap media. And the cycle continues.

    I don’t care if they make streaming services or whatever; go for it. I just hope they don’t do so purely because of “falling revenues” or “falling sales.” Because that’s not what the purpose of iTunes is. Once it becomes a business of monetary interest to Apple is when there are going to inevitably be issues with consumer experience.