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The end of iTunes music sales is inevitable

Gregg Keizer | May 16, 2016
But the transition to subscription-based streaming will take much longer than a recent report suggests, say analysts.

It's inevitable that Apple will pull the plug on digital music sales conducted through its iconic iTunes store, analysts said last Friday.

But contrary to a report by Digital Music News, which cited anonymous sources "with close and active business relationships with Apple," it's very unlikely that the Cupertino, Calif. company has a two-year countdown in the works.

Apple has denied such plans in a rare public rebuttal.

But Apple will shutter its iTunes music business at some point, analysts agreed.

"It's not a matter of whether [Apple stops offering downloaded music via iTunes], but when and how they're going to position it," said Aram Sinnreich, an associate professor at American University who researches the music industry and its transition to digital.

Revenue from music downloads has been in decline since the peak of $3.9 billion in 2012. According to Mark Mulligan, an independent analyst who focuses on the music business, download revenue will fall to just $600 million in 2019 before plummeting to insignificance the following year.

But not everyone anticipates such a fast and sharp drop-off in download revenue. "It was still bigger last year than in 2011," said Jan Dawson, principal analyst at Jackdaw Research, of music download revenue. "It's still a sizable business."

And one that Apple won't abandon suddenly.

"Transitions like this take years and years," Dawson argued. "There will come a point where Apple will turn off the lights because no one is in the store, but it will be a very slow transition."

Both Sinnreich and Dawson contend that it's inevitable that downloaded music would vanish, or nearly so, replaced by streaming services like Spotify and Apple's own Apple Music. The Apple service debuted in mid-2015 and, by Apple's tally, now has 13 million paying subscribers.

"The reality is the download market was never anything more than transitional," said Sinnreich. "Subscriptions and streaming was the only viable revenue source in an Internet media context. It took the industry much longer to move [to the service model] for institutional reasons. The industry had to line up a lot of legal ducks and appease a lot of existing commercial interests.

"But there's only one model for high-volume media transactions in a multi-channel, always-on Internet. That's the service model," added Sinnreich.

Sinnreich, who once worked with Mulligan when they were both at Jupiter Research, a since-defunct industry research firm, recalled debates the two had about the future of digital music. Sinnreich argued, he said, that streaming was in the cards. It just took much longer for Apple to get there than he expected.

"Apple originally sowed fear among both consumers and the music industry in order to dominate the download space," Sinnreich said. "iTunes contributed to the price decline in music, and the decline of its value in the early part of this century. But they've failed to transition from that."

 

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