iTunes and Streaming Music

Is iTunes Still Relevant?

When was the last time you purchased a song from iTunes? For me personally it has probably be since the 7th or 8th grade since I’ve purchased a $1.29 song from the iTunes store to be downloaded to my iPod or iPhone. When iTunes came out, it crushed and revolutionized the music industry. The transition from vinyl disks to cassettes to CDs was a relatively linear one when compared to the transition from CDs to iTunes. When iTunes launched in 2003, there was rapid increase in sales of iTunes songs accompanied by the rapid decrease of all other physical forms of music purchasing ways.
Within the last few years the competition has emerged in many ways. Companies that have services that are similar to iTunes and compete in that respect, along with innovative companies that give availability to stream music instead of purchasing songs individually. In this Tech Briefing I will go over both types of competition, how they differ, and how they affect one another.

In terms of music streaming

• Pandora – Pandora is a streaming application that is set up similar to how a radio station is. First, you would choose an artist or a song, and from there it will attempt to play similar songs based on the songs that you listen to. Within the Pandora application, it has an algorithm that has the ability to select songs that are similar (or dissimilar) to the one you are listening to. It does this by giving you, the user, the option to give a thumbs up or a thumbs down. It bases those decisions of up or down to calculate whether or not it will play that song again or take it off the list. It takes these favorable or unfavorable decisions that you made to tweak that station to songs that are only similar to the ones you like.
• Spotify – Spotify is a music streaming application that falls under a freemium business model. What this means is that there are two versions of Spotify you can choose from, Free or Premium. Within the free version you have basic services, which may include listening to the music, and ability to skip a few songs. But with the free version you have ads that pop up every few songs. With the premium version, ads are removed, skips become unlimited, and additional features are included. But of course, with premium there is a monthly charge.
• SoundCloud – SoundCloud is another music streaming application. Similar to Spotify, you have the ability to have the free version with basic features, or you can purchase the premium version for a monthly charge. One of the largest differences that separates SoundCloud from other music streaming applications is the ability to upload your own music to the library that the application has in order for the public to be able to hear it. This is why SoundCloud has the largest music streaming library at the moment.

In terms of music stores:

•  iTunes – iTunes has the largest selection of music and videos, and will continue to do so into the future. Since its inception in 2003, it has always been a leader in regards to the content that it has and offerings that are available.
• Amazon – Amazon is relatively popular when compared to other sites largely because of the other (non-music) services that they offer. This includes watching movies and online shopping, with many families that involve themselves with the Amazon Prime subscription. Prices for Amazon are in line pretty well with iTunes. Having new releases being identical, but slight variation in older types of movies. The main difference for Amazon that stands out is the wide availability across multiple types of devices. Amazon members can stream music and videos to computers, their Kindle, gaming device, and mobile phone all free of charge.

Over the last few years, starting in 2013, iTunes has had a decrease in iTunes sales. From 2013 to 2014 alone they saw a decrease in music sales by 13%. Apple greatly attributes these decreases in iTunes sales to shift in the way of music is being offered. Seeing a shift from the music purchasing libraries to the music streaming services. When looking at the financial statements of Apple, their sales are semi-broken down into categories. 

One subcategory is “Services”, this services category attributes to approximately 8% to 11% over the last 3 years. Noted in the foot notes of the document, “Services” includes revenues from the iTunes store, App Store, Mac App Store, TV App Store iBooks Store, Apple Music, AppleCare, Apple Pay, licensing, and other services. As you can see, I am not able to find the specific percentage that is allocated to the iTunes store only, but will all others taken into consideration, it is a very low percentage of total sales of the company. In order to stay competitive they acquired Beats music, which is similar to a Pandora kind of application, to rebrand and expand their reach. The rebranding began in 2014, and was launched as part of Apple in 2016. The thing to be excited for in 2017 will be the 10K financial statements that will have the acquisition incorporated. We will be able to see the impact it made on iTunes and if they will be able to keep up in the future.

Google Play vs. Amazon vs. iTunes Store
Apple 10-K
iTunes Killing the Music Industry
iTunes Music Sales Plummeting