Beats co-founder Jimmy Iovine has never been a fan of free streaming music. Now, as the longtime record exec helps Apple prepare for the relaunch of Beats Music next year, he hopes the industry will do away with the freemium model that so many competing services have come to rely on.
According to a New York Post report, sources say that even though Iovine isn't Apple's official spokesman on the topic, he's pushing to slash the price of a Beats Music subscription from $10 a month, to $5 a month. Presumably, the thinking goes, if Apple takes the lead, the rest of the streaming industry will follow suit.
Apple purchased Beats Music in January along with the company's highly lucrative headphone business. But while the latter acquisition made sense, many were baffled by what Apple, which already launched iTunes Radio, wanted to do with Beats Music.
Wasn't one Pandora killer enough?
Turns out, Apple, like many music streaming startups before it, wants to be all things to every listener, and along the lines of my earlier prediction, may be planning to make Beats Music a component of its overall digital music offering next year, according to the Wall Street Journal.
This means Apple will take on Pandora, the leading streaming jukebox, and Spotify, the not-quite master of scale with 10 million paying subscribers. Will it be easy? No, but Iovine bets that if customers want to ditch the free ad-supported services that dominate the industry, they'll be willing to shell out $5 a month or more for a family plan--and more will sign up.
"Research is showing the $10.99 all-you-can-eat price point actually exceeds the amount of money that a large number of music buyers spent on downloads or physical products before," Matt Pincus, founder and chief executive of Songs Publishing, a music publishing firm, tells Inc. So "there may be a limit to how many customers [these companies] can capture."
Apple may also see potential in what Pincus describes as "subsets of repertoire," or what musicheads like me call curation. "It's not clear that everyone wants every record in the world," he says, pointing to services like Spotify, so some customers may be willing to pay a set fee to stream the Billboard Hot 100 or to have access to songs in a certain genre.
"These companies are serving hours and hours of music and it costs a lot to convert subscribers from a free to a paid model; in fact, it's not even clear that it works," he continues, so "to the degree that Apple can eliminate that, the better off everyone's going to be."
For one thing, startups won't be so hard-pressed to add hordes of subscribers in order to achieve scale like Spotify, and artists may finally get paid a decent fee. Music publishers, meanwhile, might have an easier time handling royalties since channels for payment would be established up front.
Some experts, like one quoted in the New York Post, disagree with Iovine's stance and argue that it's better to have two pathways to revenue rather than one $5 subscription model. But if there's one company capable of influencing the music industry, it's Apple. And the man with the golden ear knows most of the big players in it. "If anybody's going to be able to affect change with labels and publishers, I think Apple has got the best shot," says Pincus.
Freemium's days may be numbered.