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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.

Until Apple Music's launch last year, anyway. Now armed with a subscription-based streaming service, the Cupertino, Calif. has a replacement for the falling single track or album sales through iTunes.

The problem is that while Apple Music may be an option for those who once paid for and downloaded tracks, its 13 million subscribers are just a fraction of the consumer pool that could download, said Dawson, bolstering his point that iTunes won't be going anywhere soon.

Although neither Sinnreich or Dawson envision a sudden death of iTunes, Mulligan warned that it could come sooner than many anticipat, assuming the trend of accelerating declines continues. "By 2020, [Apple's] 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. This is the point at which Apple would choose to turn off the iTunes Store," he wrote in an analysis posted on his website last week.

For his part, Sinnreich predicted that the end of iTunes music sales would occur in the five-years-plus range.

Before that happens, however, he hopes that Apple will have put the right pieces in place. And Apple Music on its own won't cut it.

"The smart thing would be to create a sustainable momentum on the service side before they pull the [iTunes] plug," said Sinnreich.

He imagined a multi-component service, one that encompassed everything from music and video to home automation and automobiles, with the latter two adjuncts to Apple's current HomeKit and CarPlay initiatives. Apple Music would, Sinnreich said, be the "crown jewel" in that expanded service offering, but not the only piece. "All of these are new frontiers for consumer attention and revenue," said Sinnreich. "Apple must start thinking about how to sell services to Millennials as they begin to set up their households."

Just as downloads were transitional, so will be Apple Music as the company rolls it into something more expansive, more expensive.

"That's the sweet spot right there," Sinnreich continued. "Millennials know the brand, there's a level of trust and technical proficiency there that makes selling services to them a must."

Lately, Apple's executives, particularly CEO Tim Cook, have stressed the revenue opportunities in services when talking to Wall Street, citing the enormous pool of customers who own its devices.

The pivot from downloads to streaming has been, in fact, part and parcel of the shift to a service narrative, Mulligan maintained. "This has much to do with why Apple chose to enter the streaming market now as did any other factor," he said. "While the download business generated solid headline revenue, it did not have the benefit of being predictable, on-going spend in the way that subscriptions are."

 

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