The disruptor has become the disrupted. Apple, the company that turned the music industry upside down with the launch of the iTunes Store in 2003, saw digital download sales drop for the first time ever last year. Why? Streaming music services.
The folks out in Cupertino failed to see the rise of the Rdios and the Spotifys, and thus have been forced to play catch-up. And according to a new report from The Wall Street Journal, that’s exactly what this rumored Apple-Beats acquisition is all about…
The Journal’s Hannah Karp reports:
Record-company executives say they’ve been lobbying Apple for months to create its own subscription streaming service, using its brand power to familiarize consumers with music streaming—a concept that is still foreign to many people, especially in the U.S. Spotify launched in the U.S. three years ago after years of licensing talks, and Beats Music made its debut just over three months ago, advertising during the Super Bowl and on Ellen DeGeneres’s talk show in an effort to reach more mainstream listeners.
Among the ideas record companies have floated to Apple in recent months: iTunes could suggest to users about to purchase certain albums that they instead buy a month-long subscription to a streaming service, for the same price.
Apple, on the other hand, had pitched more download-centric ideas in recent months, according to people familiar with the matter. One such suggestion was that record companies release all new albums exclusively on iTunes in album-only format for a window of time to drive album sales, before releasing the singles separately and making them available on streaming services. But labels countered that such a strategy—employed successfully by Beyoncé last year—wouldn’t work across the board.
Karp goes on to say that record executives were surprised at Apple’s reluctance to get into subscription streaming earlier, noting that it could be compared to the record companies’ resistance to digital downloads 10 years ago before iTunes debuted.
So you can see how these acquisition talks with Beats came about. After years of ignoring streaming music, a mediocre launch of iTunes Radio last fall, and growing pressure from its record label partners, Apple obviously felt that it was time to move.
In recent months, it’s been reported that Apple was considering multiple strategies to combat declining iTunes music sales. Among them was a proposal to launch an iTunes Store on Android, and to add a standalone iTunes Radio app with the iOS 8 release.
Keep in mind that neither side has confirmed the buyout yet, though it appears that Beats co-founder Andre ‘Dr. Dre’ Young believes it’s a done deal. Earlier today, a video surfaced of rapper and producer Dr. Dre proclaiming to be Hip Hop’s “first billionaire.”
On Thursday, the Financial Times reported that Apple was in ‘serious talks’ to acquire Beats for $3.2 billion.