When Apple launched iTunes in 2003, Apple addressed the consumer’s wants by giving them the choice of buying a whole digital album or they had the ability to buy a single track from the album. Apple did not start iTunes to sell music, however to sell the hardware that Apple sells, the iPod. Apple has tried to control music sales since day one to raise the demand for Apple products. In the beginning Apple’s iTunes used DRM technology to block out other competitors that sold MP3 players. This would leave consumers dependent on their iPods. In 2005 Thomas Slattery, filed a lawsuit against Apple. This lawsuit stated that Apple broke antitrust laws by using FairPlay. Any music purchased from iTunes would work only with Apple’s iPod, which froze out competitors. Apple has been a dominant force from its music sales since it’s starting point. Apple has flexed its muscles to control music distribution and deals that worked to their benefit.
In 2010 Apple’s iTunes store started see a decline in sales for the first time. It was at this time that music streaming service started to come in full swing, at this point Spotify was not even introduced to the US Market. Now the tables have turned and Apple is trying to recreate itself once again to address the consumer’s wants by giving them on demand streaming through their revamped Beats music service.
In 2014 iTunes music downloads declined by 14%, while Spotify’s subscriptions increased. Since 2011, Spotify has grown from 10 million subscribers to over 50 million subscribers. I find it funny that the iTunes split of 30/70 will come back to haunt Apple. Basically, the competitor who is stealing streams for downloads is using the same slit. Apple was once making dollar to dollar and now they’re making pennies to the dollar.
Apple, along with Beats music, has to show consumers the value of spending money on a subscription service each month. While other competitors give away freemium tiers and lower subscription fees, this is going to be a hard sell, however, not an impossible one. If anyone can introduce a creative, innovative way for consumers to stream music, it’s definitely the folks at Apple.