Apple has bought Beats Electronics for a hefty $3.2 billion and now it's clear why. The fruit giant wants to join the streaming music revolution but doesn't want to risk damaging iTunes sales, say sources of Tech Crunch.
At the moment record labels and recording artists rely on a $1 billion iTunes turnover that's based on sales of downloads. That's over 800 million accounts registered and paying to buy and own the music. Streaming is cutting into those sales as they were down 13.3 per cent in 2013. But since they’re still there Apple won't want to abandon them altogether. By comparison Spotify has 10 million paying subscribers with 40 million total listeners.
Buying Beats means Apple is able to offer a streaming service which it can make money from while also maintaining the iTunes sales. Many people still like to own their music and have built up an iTunes library which they can't face changing.
The source of Tech Crunch, who was privy to Apple's board decisions, said the company didn't want to kill the music industry by jumping to streaming, even though it's been looking into it for about two years. Live Nation Labs and former Warner Music Group SVP of technology agrees by saying that if iTunes shifts to streaming, it "effectively kills the recorded music business by slaughtering mechanical revenue from retail…[the] impact on the market will be catastrophic."
Once Apple has established a strong enough streaming service with subscribers paying enough it will be able to make the jump to streaming. Just don't expect anything sudden to happen anytime soon.
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