Last month I reported that Apple would shut down Beats Music and likely add streaming music to iTunes. Apple denied, specifically, that Beats Music would be shut down.
Shortly thereafter, ‘unnamed sources familiar with the matter’ conveniently surfaced to engage in a battle of semantics about whether Apple might modify Beats Music over time, including its brand.
As we noted at the time, that was another way of saying Beats Music would get rolled into iTunes. And that’s just what the Wall Street Journal, (I’m sure they just forgot to cite us) is reporting today. “Apple is rebuilding Beats Music and plans to relaunch it next year as part of iTunes, according to a person familiar with the matter.”
Yep.
As I reported before the Beats acquisition became official, iTunes executives wanted to acquire Beats Music because they knew that music download sales were plummeting, and it needed a way to gracefully transition into streaming. And lo and behold, the WSJ writes “Digital music sales at Apple Inc. ’s iTunes store have fallen 13% to 14% world-wide since the start of the year, according to people familiar with the matter, underscoring the fragility of the music industry’s nascent recovery.”
With download sales cratering and streaming coming up quick, Apple needed to get serious about streaming before Spotify, Google Music, and Deezer got a bigger lead. So rather than pour investment into Beats Music, which only had 250,000 people signed up for paid subscriptions as of May, it will roll streaming into iTunes, which has 800 million users and 400 million credit cards on file.
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Apple doesn’t have to make money on music. It’s just a loss leader for or way to entice sales of its high-margin iPhones, iPads, MacBooks, and iMacs. That, combined with its industry clout, means when it relaunches iTunes with streaming, it may be able to negotiate a much cheaper subscription rate, such as $5 a month rather than the $10 Spotify charges.
A cheap price, a massive built-in user base, and Apple hardware as a vector for distribution could make an iTunes streaming service tough to compete with.
