iTunes Music Sales Crater As Apple Considers Integration Of Beats Music

Apple took the world by surprise when the company bought the Beats brand for $3 billion earlier this year, which remains the Cupertino outfit's largest acquisition to date. Now the big question is, what will Apple do with the Beats Music portion of that acquisition? We've heard a few different rumors, the most recent of which is that Apple will relaunch Beats Music as part of iTunes next year to bolster the latter's declining music sales.

That's the word from The Wall Street Journal, which spoke with a person who is supposedly familiar with Apple's streaming music strategy. While nothing is yet official, integrating the two brands is at least plausible, considering that music sales at the iTunes Store have dropped 13-14 percent globally since the beginning of last year. Compare that to a 2.1 percent dip in 2013, and you can see why Apple is concerned.


In the U.S., revenue from downloads of singles and albums fell by as much as 14 percent as well. A big part of the reason is because consumers are being groomed to streaming models, hence a 28 percent increase in revenue from streaming music services like Beats Music. It's telling that the total number of streams on services such as Spotify, Pandora, and others were up 46 percent so far this year, with streaming services now accounting for a third of the revenue from recorded music in the U.S.

What it all boils down to is a shift in how people get their music. Paid downloads are being replaced by what are essentially rental services -- when it comes to Beats Music and the rest of the streaming gang, so long as your subscription is current and paid for, you can continue to listen all the music you want.

This marked shift is precisely why Apple is reportedly lobbying music labels for royalty terms that would allow the company to slash its Beats Music subscription service to $5 per month (it currently costs $10 per month). Apple's argument is that music labels wouldn't lose any money because the best iTunes buyers spend about $60 per year, which works out to $5 per month. By offering a $5 subscription model, those same users would be enticed to switch over to a streaming account, plus it would attract a whole bunch of new subscribers.