Apple to ‘cannibalise’ iTunes with new streaming service

2 Jun 2015

Apple is set to announce its new streaming service, priced at US$10 a month, at the upcoming Worldwide Developer Conference (WWDC), targeting non-iOS users and “cannibalising” its iTunes service.

According to a report in the Wall Street Journal, the tech giant is looking to revolutionise the music industry for the second time in a dozen years.

iTunes’ introduction back in 2003 saw Apple change how consumers bought music, moving away from tangible hard copies to online, easy purchasing.

Now, with streaming the only true growth area of music at the moment, but as yet not the most profitable way to do business, Apple is looking to move the goalposts once again.

The company is ready to “cannibalise its download business in favour of streaming” according to the WSJ, with a potential prompt appearing when iTunes consumers purchase albums that will suggest the new, streaming option.

The monthly subscription of US$10, however, is markedly higher than the average spend of an iTunes consumer, which averages out at around US$30 a year – convincing people to spend four times that won’t be easy.

But Apple is clearly committed, following its acquisition of Beats Electronics from Dr Dre and Jonny Iovine last May for US$3bn. It has since been sprucing up its musical assets, hiring renowned BBC DJ and tastemaker Zane Lowe, as well as acquiring a London-based music software company Camel Audio.

Indeed Lowe’s tenure is noted by WSJ, with the report suggesting a celebrity DJ radio service will be provided too. That means that Apple won’t just be competing with streaming giant Spotify – which as yet can’t turn a profit – but also mainstream online radio.

That’s quite the ask, but Apple has form for this. When iTunes was created, Apple orchestrated an industry that had, in a way, become an in-app purchasing machine.

That created a revenue stream that tech companies had not yet worked out, diverting money from stores just as online purchasing was set to explode.

If the company gets its timings right again, then Apple could finally make streaming the new way to make money in music.

Of course, it’s not a foregone conclusion. Agreements with Sony Music Entertainment, Universal Music Group, and Warner Music Group – the three largest music companies on the planet – remain unsigned and, until they are completed, Apple will no doubt hold off on its announcement.

However, it’s a very interesting angle on this burgeoning business, with a suggested Android app, too, a change from the norm for Apple. Watch this space.

Woman listening to music image, via Shutterstock

Gordon Hunt was a journalist with Silicon Republic