Apple has come up with a new avenue of business that will put it against music providers such as Spotify. Originally, Apple launched its iTunes Radio only to have its popularity not be substantial. The solution is a new service that allows for paid streaming and an additional element set up to revive internet radio. Spotify is currently number one in the world for music streaming. Pandora and other broadcast stations are close by in terms of value.
Apple is looking to charge users $10 per month for on-demand streaming on an unlimited basis. This offering is similar to what Spotify provides in its service, however the Apple service will not allow users to listen to their entire music catalog for free. It will instead have live DJs host channel programming.
Since Apple already has many credit cards on file, it is hoping to convert those users who are used to downloading songs to ones who will participate in the subscription service. According to music industry research, streaming services are on the rise across the world. Apple is recognized for being the source of between 80%-85% of all music downloads. Alternatively, Spotify leads music streaming in the on-demand fashion at 86%. Apple is looking to change that. The tech company is even willing to risk its success in downloads for the launch of the new service. In the long term, streaming offers greater revenue opportunities. Apple and music companies have the chance to bring in considerable funds from user engagement.
Licensing is a primary focus of Apple before it can release their new product. It needs to make deals with the biggest music labels in the world before getting started. The company is still seeking confirmation of licensing with companies like Sony Music Entertainment and Warner Music Group. There are still some in the industry that are hesitant to partner due to low royalty rates for music streaming. A risk even presents itself for keeping customers used to spending less than $120 per year on music.
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