Apple Considers Creating Spotify Competitor and iTunes App for Android
Apple (NASDAQ:AAPL) is contemplating several game-changing moves to counter the overall decline in digital music download sales, reports Billboard. According to unnamed people familiar with the talks cited by Billboard, Apple is currently in talks with various record label executives about the possibility of starting an on-demand streaming service modeled after Spotify or the recently launched Beats Music.
“They are feeling out some people at labels on thoughts about transitioning its customers from iTunes proper to a streaming service,” one record label source told Billboard. “So when you buy a song for $1.29, and you put it in your library, iTunes might send an e-mail pointing out that for a total of, say, $8 a month you can access that song plus all the music in the iTunes store. It’s all in the ‘what if’ stage.”
The sources also noted that Apple is mulling the possibility of creating an iTunes app for Android. Google’s (GOOG) open source mobile operating system is found on the majority of the world’s smartphones, and an official iTunes app for Android could greatly expand Apple’s iTunes customer base. Although the Google Play app store already features several iTunes apps, they are only offered by unofficial third-party developers.
As previously reported by Billboard, Apple is also still pressuring the music industry for more exclusive content deals that would allow Apple to sell a digital version of an album for a set period of time before it is released on CD. The so-called “windowed” release of albums would be similar to the exclusive weeklong distribution deal that Apple struck with Beyoncé for her latest album last December. The deal secured 1 million album sales for Beyoncé through Apple’s iTunes before the CD version and individual digital tracks were released.
Apple’s rumored plans appear to be the company’s response to the overall decline in digital download sales that have historically been the bread and butter of its iTunes business. According to the latest Nielsen SoundScan data cited by Billboard, digital track sales have slipped 11 percent and U.S. digital album sales are down 13 percent compared to the same time last year.
The decline in digital download sales has corresponded with an increase in the popularity of subscription music streaming services. According to an International Federation of the Phonographic Industry report cited by Billboard, worldwide streaming music revenue increased by 51 percent last year, while digital downloads decreased by 2.1 percent. A similar report from the Recording Industry Association of America showed that revenues from music streaming services in the U.S. increased 39 percent in 2013 over the previous year. Meanwhile, U.S. digital download revenues fell by 3.2 percent.
Although Apple launched a music streaming service with iTunes Radio last September, the iPhone maker’s service is more similar to ad-supported services like Pandora (NYSE:P) than it is to subscription services like Spotify. In a recently filed court ruling that settled a royalty rate dispute between Pandora and the American Society of Composers, Authors and Publishers (ASCAP) the presiding judge noted that “Pandora has continued to grow despite the presence of iTunes Radio.”
More From Wall St. Cheat Sheet:
- Apple Is Not in the Market for Game-Changing Acquisitions
- Macquarie Kicks Off Apple Coverage With ‘Outperform’ Rating
- Can Apple Move Higher?
Follow Nathanael on Twitter (@ArnoldEtan_WSCS)