Apple has opened exploratory talks with senior label executives about the possibility of launching an on-demand streaming service that would rival Spotify and Beats Music, according to three people familiar with the talks. Apple is also thinking about adding an iTunes App for Android phones, the Google rival that has been growing faster than the iPhone, these sources said. The surprising discussions are part of a multi-pronged strategy to deal with the double-digit decline in U.S. download sales at Apple’s iTunes Music Store, the largest music retailer.
According to the report, Apple is now contemplating these options because U.S. digital album sales have started to drop. Album sales are down 13% for the week ended March 9 and track sales are down 11%.
"They are feeling out some people at labels on thoughts about transitioning its customers from iTunes proper to a streaming service," says one major label source. "So when you buy a song for $1.29, and you put it in your library, iTunes might send an e-mail pointing out that for a total of, say, $8 a month you can access that song plus all the music in the iTunes store. It's all in the 'what if' stage."
Streaming services have become increasingly popular with Spotify, Pandora and YouTube generated $1.4 billion in subscription, advertising and licensing revenues in the U.S. last year, up 39% from 2012. On the other hand, revenue from downloads was down 3.2% to $2.9 billion.
iTunes Radio, Apple's first foray into the streaming music scene has just recently surpassed Spotify to become the third most popular music streaming service in the United States. It's now just 1% behind iHeartRadio for the number two spot.
An iTunes spokesman refused to comment on the discussions.