Tech giant, Apple, has recently been rumored to be acquiring American audio company Beats Electronics in a deal worth $3.2 billion in the very near future. Beats Electronics revenues have relied heavily on its sales of Dre Beats audio equipment, though Apple’s acquisition is speculated to be focused more-so on Beats Electronics’ catalog music streaming service Beats Music, launched in January 2014.
Apple have failed to make as big of a mark as they would wish to on the digital streaming market thus far, even though iTunes Radio is said to hold 8% of the streaming market share. Apple paid a reported $80 million in December 2009 to acquire catalog music streaming site, Lala, which seemingly flopped and whose service was shut down four months later. Spotify, the most popular catalog music streaming service has grown immensely since its launch in 2008 and offers a limited free service but also has a payable service, of which six out of the 25 million users make us of, according to figures from 2013. Spotify currently holds just six 6% of the market share, though its somewhat small market share is expected to continue rising as it attracts even more subscribers with a growing music catalog and frequent updates and features, including the latest standardization of its applications across all supported platforms.
A recently leaked report has claimed that the Beats Music service has approximately 111,000 subscribers in total, a far cry away from Spotify’s paying six million paying customers. Out of these reported 111,000 subscribers, it is unclear how many of these have taken advantage of Beats Electronics’ partnership with A&A which is currently running a promotion that allows customers to obtain a 90 day free trial of the service. These figures could prove to be rather worrying for Apple with an acquisition of the company on the horizon.
Even more worryingly for Apple, its iTunes digital music sales declined in 2013 from the previous year for the first time since the company started selling digital music in 2003. Single track sales fell by 5.7%, and even digital album sales declined by 0.1%. These figures, together with other reports of Spotify subscribers increasing by one million since the start of 2014, imply that the digital music industry is seemingly relying on music streaming services with a large proportion of consumers preferring to rent their music. The main issue is whether Apple’s acquisition of Beats Electronics will place it in a market-leading position to take full advantage of these trends.
For more insights read our The music industry: The rise of digital music – Case Study and the Apple SWOT Company Profile.