Apple Inc. has asked Florence and the Machine and more than a dozen other artists for exclusive deals to promote a revamped Beats Music, and persuade people to ante up for what they’re accustomed to getting pretty much for free.
The company’s in talks with the British group, which is set to release an album in June, about giving Apple limited streaming rights to a track, and has approached Taylor Swift and others about partnerships, according to people familiar with the matter. The idea is that exclusives will be bait for music lovers loathe to pay for subscriptions.
Tidal, a Beats rival owned by Jay Z and 16 other musicians, is using a similar tactic as the industry tries to steal the march from platforms like Spotify and YouTube that let people listen gratis, so long as they sit through ads. The offering from Apple — whose iTunes is the world’s largest seller of music — will be the most-watched subscription-only effort yet.
It’ll come to the game with the advantages of “a whole ecosystem of devices with a loyal and rabid fan base,” said Russ Crupnick, managing partner of the research firm MusicWatch. “A lot of the infrastructure is already in place.”
Beats Music will be retooled and re-launched this summer, possibly with a new name. There will be a $9.99-a-month subscription for individuals and a family plan for $14.99, according to the people, who asked not to be identified because they’re not authorized to speak publicly about the matter.
Tidal, which charges $9.99 for a standard monthly service and $19.99 for high-fidelity, is hyping exclusives from two of its owners, Beyonce and Rihanna.
Leveraging iTunes
“Given how easy it is to obtain free streaming music on the Web, any subscription payment gateway needs to involve a differentiator to warrant a pay model like that,” said Tom Webster, vice president of strategy and marketing at Edison Research. For Apple it could be “the power of the Beats brand. That’s the x-factor.”
Apple bought Beats Electronics, a headphone maker and streaming service, for $3 billion in May 2014, its biggest acquisition ever. Co-founders Jimmy Iovine, former chairman of the record label Interscope Geffen A&M, and the rapper and producer Dr. Dre joined Apple to work on its music platforms: iTunes, which has dominated the market since it opened in 2001, and two-year-old ad-supported iTunes Radio, which competes with radio sites from Pandora Media Inc. and IHeartMedia Inc. Pandora also sells an ad-free tier, for $4.99 a month.
Tom Neumayr, an Apple spokesman declined to comment. Luv Luv Luv records, which manages Florence and the Machine, and Big Machine, Swift’s label, didn’t respond to requests for comment.
Majority Unconvinced
“We are all interested in seeing how much Apple will leverage iTunes and iTunes Radio,” said Beth Murphy, chief marketing officer of Deezer, a streaming platform that began in France in 2007.
The giants to topple are Google Inc.’s YouTube, the top online destination for music, and the four-year-old service from Spotify Ltd. Spotify has more than 60 million users — with a quarter of them buying its $9.99-a-month ad-free subscription. YouTube has a new ad-free service called Music Key that also costs $9.99.
Swift pulled her entire catalog from Spotify after it refused to restrict her new album “1989” to its pay tier. Alicia Keys, one of Tidal’s owners, said in a promotional video that it “puts the power back in the artists’ hands.”
That’ll happen only if enough customers are willing to pony up and so far “the majority of people who stream haven’t been convinced why they have to pay,” said MusicWatch’s Crupnick.
‘Innate Advantage’
He said he doubted can’t-get-it-anywhere-else specials would do the trick for the new Beats, which will cost $120 a year, triple what the average person spend on iTunes.
But with its worldwide army of iPhones and iPads — and soon watches — Apple has ready-made customers for a new Beats app. “While Apple can’t convince all its iTunes customers to pay for a subscription service, or even a majority, that base gives it an innate advantage,” Crupnick said.
The industry has embraced streaming as other formats have faded, and as its income has shriveled. Recorded music sales were $40 billion in 1999 and $15 billion in 2013, according to the International Federation of the Phonographic Industry.
Streaming revenue surpassed CD sales in the U.S. this year. If trends continue, streaming in 2016 could exceed downloads, which have been declining, according to MusicWatch.
Last year, revenue from streaming subscriptions, Web radio and music-platform ads grew 29 percent to $1.88 billion, according to the Recording Industry Association of America. Subscription streaming brought in $799 million.
Universal Music Group Inc., Warner Music Group Corp. and Sony Music Entertainment declined to comment for this story.
“The history of subscriptions says they start cheap and go up, always,” said Marc Geiger, head of the music division at talent agency William Morris Endeavor Entertainment LLC, said during a speech last year about the future of the music business. He said it would grow, thanks to streaming. “Once people have the ‘subscription needle in the arm, it’s very hard to come out — and prices go up.” [Bloomberg]
