Morgan Stanley analyst Katy Huberty released an interesting chart highlighting the need for an Apple-branded on-demand music streaming product. Currently, the company only sells individual songs or whole albums on iTunes.
The analyst worryingly writes in a note to clients issued Wednesday that iTunes sales are down 24 percent year-on-year. Moreover, Apple’s 800 million iTunes users are spending an average of $3.29 on iTunes.
For the sake of clarity, the figure represents combined per-user purchases of music, movies, iOS and Mac apps and more. That being said, Apple is clearly taking a heat due to its refusal to introduce a subscription music service because iTunes users seem to spending more on apps and less on music nowadays…
According to Fortune which obtained a copy of Huberty’s note to clients, the analyst is adamant that Apple would be foolish to ignore where the market is headed for much longer.
Online services is an under-appreciated growth and margin lever for Apple. At a high level, this raises concerns about Apple’s ability to monetize the new base of emerging market customers.
Yesterday, The New York Post reported that Apple was able to trim about $200 million off the reported $3.2 billion Beats price tag after realizing that co-founder Dr. Dre leaked a report saying the startup added just 111,000 paying subscribers to its Beats Music streaming service in March.
Beats Music for iPhone.
A January Nielsen SoundScan survey has revealed that music downloads are waning for the first time since iTunes Store’s inception in 2003. That’s bad for both the music industry and iTunes.
Apple brings record labels a cool $1 billion in annual revenue from song downloads, based on its 70 percent share of the U.S. music download market.
I know what you’re thinking, but Apple’s free iTunes Radio is more of an Internet radio product like Pandora and Rdio rather than a full-blown on-demand streaming music service such as Spotify.
See, iTunes Radio does not allow users to create playlists comprised of hand-picked songs and it keeps your skips per station to just six an hour, which is extremely limiting.
iTunes Radio is available in iTunes and on iOS devices, free with ads.
Compare this to true music subscription services that offer unlimited streaming, fully customized playlists, offline listening and other cool features – for a monthly subscription price of a typical album sold on iTunes!
Why would anyone in their right mind buy and not rent their music?
At any rate, just as music sales exploded after Apple had brought the iTunes Music Store to Windows, Cupertino could again revitalize flagging music downloads by releasing iTunes for Android, as rumored.