March 24, 2014 - 13:41 AMT
PanARMENIAN.Net - Apple has opened exploratory talks with senior label executives about the possibility of launching an on-demand streaming service that would rival Spotify and Beats Music, according to three people familiar with the talks. Apple is also thinking about adding an iTunes App for Android phones, the Google rival that has been growing faster than the iPhone, these sources said. The surprising discussions are part of a multi-pronged strategy to deal with the double-digit decline in U.S. download sales at Apple’s iTunes Music Store, the largest music retailer, Billboard reported.
Apple is considering a range of efforts to support the iTunes Store. iTunes executives like Robert Kondrk, for example, have suggested creating exclusive album-release windows in which digital versions of the albums would go on sale ahead of the CD release. Individual tracks would not be available for sale until the CD versions hit shelves.
But it's the talks around on-demand subscription and the iTunes App for Android that will most intrigue label heads and the wider market. Apple founder Steve Jobs was widely known to have argued that fans would never subscribe for music. Moreover, up until now, iTunes has been committed to keeping the iTunes ecosystem closed off.
But now, nearly three years after Job's death, iTunes has to consider the option because so far this year, U.S. digital album sales are down 13 percent for the week ended March 9, and digital track sales are down 11 percent from last year, according to Nielsen SoundScan.
Even as download sales have deteriorated, revenue from streaming services have grown, according to two reports released on March 18. The first, from the Recording Industry Association of America (RIAA), showed that streaming services such as Spotify, Pandora and YouTube generated $1.4 billion in subscription, advertising and licensing revenues in the U.S. last year, up 39 percent from 2012, while downloads revenue were down 3.2 percent to $2.9 billion. The second report, from the International Federation of the Phonographic Industry (IFPI), painted a similar picture, albeit on a global scale. Streaming music revenue grew 51 percent worldwide, while downloads slipped 2.1 percent.
These figures provide fresh ammunition to those in the music industry who believe streaming services’ all-you-can-listen model has drawn consumers away from download sales, where Apple dominates. But industry executives also believe that the growth of Android is also impacting iTunes sales. While the Google Play App store offers iTunes apps, they are all from third-party developers. Meanwhile, the iTunes App stores has official Google apps for Google Play Music, Google Books, and Google Play Movies & TV.
With iTunes accounting for more than 40% of U.S. recorded music revenue any decision it makes about its business model will have a significant impact on the labels' business models.
Apple already has a streaming service with iTunes Radio, which launched last September. But the free ad-supported service, similar to Pandora, has limited control over the songs they can hear.
According to several reports, Apple is looking at the possibility of spinning out the service from the iTunes suite as a standalone app. While initially excited by the iTunes Radio, label executives say the service needs more work. Indeed, it appears that the launch of the Apple service "had a measurable (albeit relatively small) impact on Pandora, after a short period of time that impact appeared to decline," according to court documents from the Pandora/ASCAP rate court hearing. "Pandora has continued to grow despite the presence of iTunes Radio."
Meanwhile, iTunes began an initiative to make its store easier to shop and is trying to promote catalog titles more, in hopes of stimulating download sales.