Apple is preparing to abandon music downloads.
Apple is now preparing to completely terminate music download offerings on the iTunes Store, with an aggressive, two-year termination timetable actively being considered and gaining favor. According to sources to Digital Music News with close and active business relationships with Apple, discussions are now focusing “not on if, but when” music downloads should be retired for good.
The sources insisted on confidentiality and required that all conversations be conducted outside of email or any written medium, given the realistic fear of reprisals for sharing details of internal corporate discussions.
Back to the story, the sources indicated that a range of shutdown timetables are being considered by Apple, though one executive noted that “keeping [iTunes music downloads] running forever isn’t really on the table anymore.” Also under discussion is a plan to “ride the [iTunes music download offering] out for the next 3-4 years,” when paid music downloads are likely to be an afterthought in a streaming-dominated industry.
Part of the debate is that paid music downloads still account for hundreds of millions of dollars, worldwide. According to an estimate revealed by music industry analyst Mark Mulligan at Canadian Music Week in Toronto, iTunes music downloads will still be worth $600 million in 2019, though that is down from peak revenues from $3.9 billion in 2012.
“If he were alive, Jobs would have killed it,” one source bluntly stated. And he’s probably right.
But this is a ship that is sinking, fast. “Last year downloads declined by 16% in nominal terms,” Mulligan noted. “This year they are tracking to decline by between 25% and 30%.”
Steve Jobs.
Lingering large is the ghost of Steve Jobs, who created a culture of aggressively phasing products out in favor of new ones, even if the older product was still earning money. That bleeding edge approach of actively cannibalizing Apple’s own products is now legendary, though the question is whether Tim Cook is guilty of riding out the profits on a dying technology. “If he were alive, Jobs would have killed it,” one source bluntly stated. And he’s probably right.
Apple Music Growth.
A critical piece of this puzzle comes from Apple Music, the subscription service launched last July that already boasts 13 million paying subscribers. According to Mulligan, that is surging towards 20 million by year end, with Apple’s streaming revenues reaching peak music download revenues by 2020. “By 2020 its download business would be tracking to be 10 times smaller than streaming revenue but, crucially, streaming revenue would nearly have reached the 2012 iTunes Store download revenue peak,” Mulligan estimates. “This is the point at which Apple would chose to turn off the iTunes Store.”
Product Confusion.
Weighing heavy on the decision-making process is a growing level of confusion amongst various Apple music properties. Already, download purchases are leading to obnoxious and confusing tie-ins with Apple Music (
Global Considerations.
Label and Content Owner Considerations.
Another wrinkle comes from recording labels themselves, especially independent labels. That group derives significant revenues from music download sales, and is expected to be express significant displeasure against any ‘premature’ shutdown. “It’s the past, not the future, but then you should know how the music business is,” one source noted.
Major labels, many of whom stand to gain handsomely from a meteoric rise streaming, may be more supportive of the termination. Streaming could enjoy even greater growth with a product clarification and streamlining from Apple.
On that front, top Apple Music executive Jimmy Iovine, a longtime fixture Universal Music Group before migrating to Apple Music, could play a key diplomatic role in the termination and transition.
Apple has not responded to an inquiry on the matter.
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