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Apple will bundle the subscription music service it acquired from Beats into its iOS operating system early next year, instantly making it available on hundreds of millions of iPhones and iPads – and ramping up pressure on Spotify, the market leader in music streaming.
The inclusion of the paid for Beats service in an iOS software update could happen as early as March, according to people familiar with the situation. The move represents Apple’s first attempt to capitalise on Beats since it bought the headphone maker and streaming service from Dr Dre and Jimmy Iovine for $3bn this year.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. It will also be Apple’s first big push into subscription music at a time when iTunes downloads are in decline and some high-profile artists such as Taylor Swift remain sceptical about the economics of streaming.
Apple declined to comment.
Pre-installing apps on devices is seen as a fast track to reaching new customers. Apple could also take advantage of its new mobile payments service to enable customers to subscribe with just one touch of the iPhone’s fingerprint reader.
Apple’s installed base of active music buyers dwarfs other services, according to Midia Research, a music analysis firm, which estimates it has 200m active iTunes customers. Apple’s push to capitalise on the Beats service will start from a low base, however, as Midia estimates Beats Music has only 110,000 subscribers.
Apple paid $3bn for Beats’ headphones and music app business in May to try to re-establish its leadership in digital music, which has waned as iPod sales and iTunes downloads have flagged.
Spotify has pioneered music streaming but has come under fire from Ms Swift, who pulled her catalogue from its ad-supported music service in a dispute over the value of her work.
“I think that people should feel that there is a value to what musicians have created, and that’s that,” she told Time magazine. Daniel Ek, Spotify’s founder, retorted that Spotify had paid $2bn to artists and music companies, half of that in the past year.
Estimated active iTunes customers
Apple’s revamped Beats service will operate on a paid subscription model. The service, which is likely to be rebranded under the iTunes label, will form part of a three-pronged music strategy for Apple, alongside downloads and iTunes Radio, which it launched in 2013. The trio will challenge not only Spotify, whose paid streaming service has more than 10m subscribers, but also Pandora and Soundcloud.
Apple is preparing to put its new Watch on sale in early 2015, to which the new music push could be linked.
Amount Spotify has paid artists and music companies since its launch
Earlier this year, Apple used its ability to push content to its vast customer base to bundle its iBooks app with iOS 8, rather than requiring users to download it from the App Store. It also caused a stir among musicians and customers when it installed U2’s new album on hundreds of millions of devices, whether they wanted it or not.
Spotify has also struck deals to bundle its app with handset makers such as HTC and telecoms operators including Vodafone and Sprint. But none can match the scale of Apple’s customer base. The California-based company said in June it had sold more than 800m iPhones, iPads and iPod Touches to date.
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Nonetheless, bundling does not guarantee success. iTunes Radio, which came pre-installed with iOS 7, has not been widely seen as successful in challenging Pandora’s dominance of internet radio in the US.
YouTube will also present a competitive threat, as Google also looks to shake up the digital music market with a paid subscription tier and series of enhancements to the world’s biggest video site.
