Neil Hughes
Apple has reportedly pitched music labels a new lower pricing structure for its Beats Music service, arguing that subscriptions could grow considerably if the price could be lowered to just $5 per month.
In its negotiations with record labels, Apple has reportedly said that its best iTunes buyers only spend about $5 per month on downloaded music, according to Re/code. It's because of that threshold that Apple reportedly believes that dropping subscription prices to that level could generate more revenue for music labels.
Currently, a subscription Beats Music costs $9.99 per month. If users are willing to sign up for a full year, it costs $99.99 for 12 months.
News of Apple's efforts comes as Spotify announced on Monday that it will begin offering new family sharing plans. While the $9.99 per month base rate for Spotify Premium will remain the same, new family members can be added for half-price each, meaning a two-person subscription with separate playlists and recommendations would run $14.99.
Spotify Family is set to roll out globally over the coming weeks. Meanwhile, there's no sign that a reduced price for Beats Music will be arriving in the immediate future, and Peter Kafka of Re/code said that despite Apple's pitch, he doesn't believe the iPhone maker thinks it can actually get the labels to agree to $5-per-month pricing.
"A more modest goal would be to get rental music down to the price Netflix charges (some of) its users for rental video: $8 month," Kafka said. "Bear in mind that any price cuts that Apple got would have to be offered to all of its rivals, too."
Word of Apple's ongoing negotiations with labels first surfaced earlier this month, when it was revealed that Apple was asking music labels to reduce Beats Music streaming fees. Doing so would presumably allow Apple to cut the cost of subscription fees, but talks were said to be in the early stages, with no changes coming before next year.
Apple is also said to be considering a rebranding of its Beats Music service, bringing it more closely in line with its other iTunes products. In purchasing headphone maker Beats for $3 billion earlier this year, Apple emphasized the Beats Music service as a key component of the blockbuster deal.
The acquisition of Beats Music represented a key subscription market where Apple's iTunes Store downloads and iTunes Radio streaming service did not compete. The subscription Beats Music service allows on-demand streaming of tracks and albums, as opposed to the randomized nature of iTunes Radio.
Streaming has become increasingly important in the music industry as sales of digital albums have been declining. Many users who previously purchased music have been migrating to services like Spotify and Pandora.
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Wesley Hilliard
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34 Comments
There's a lot that is similar and it seems like things are approaching commodity status. Spotify has a developer community and lots of plug-ins that iTunes does or could arguably replicate. They did launch much sooner and maybe a lot of music lovers are there already who will stay for lots of reasons. I like that when you dig into an artist's catalog you can now buy merch like t-shirts and stuff. Really, that's a really cool addition.
On the other hand Beats has the relationships that iTunes has and they have Iovine and Dre. Maybe there are some artists on one and not the other. Spotify has private recordings. I don't know about Beats but iTunes does have some private stuff, of course.
I don't want to think of this as just a commodity service but most of the time it is. I hope that Apple can compete on price but also on features, music discovery and lots of other things. There should be ways to connect artists to fans more. To make music a shared experience again. To create more ways for people to discover music. Introduce personalities and DJs to music recommendations. There aren't many companies who could knock Spotify off their perch but Apply certainly is a contender.
I'm in if it cost $5
So Am I !!!
[quote name="AppleInsider" url="/t/182922/apple-wants-to-cut-the-price-of-beats-music-subscriptions-to-5-per-month-report#post_2623102"] In its negotiations with record labels, Apple has reportedly said that its best iTunes buyers only spend about $5 per month on downloaded music[/quote] Currently... $5 a month in iTunes purchases would give the record labels $3.50 I wonder how much the labels will get if Apple had a $5 [I]all-you-can-stream[/I] plan? Would it be more or less? So if I stream Beats music... will the labels eventually make the $3.50 they were getting before? If you buy a song... you can listen to it over and over. But when you stream a song... they make money on each play (albeit a much smaller amount) I wonder what the tipping point is?
Amazon tactic- how much is Apple losing on this?
None.
The thought here is that the increase in subscription volume would make up for the smaller per-user revenue. Apple would still get their 30% of gross sales.
Everyone (artist, label, Apple) gets less per subscriber, but $125 million from 25 million subscribers is better than $100 million from 10 million subscribers and zero dollars from 15 million non-subscribers.
That's the whole point of why Apple is trying to negotiate labels down.