Apple still involved in last minute negotiations with music labels
Apple (AAPL) is widely expected to unveil its music streaming service at the Worldwide Developers Conference today. This was confirmed by Sony (SNE) Music CEO Doug Morris in a report from Venturebeat.
According to an earlier report from Bloomberg, Apple is still negotiating with music labels over terms and conditions. The report also says that the music labels are seeking a 60% cut from the revenues that Apple will earn from this service. This would be somewhat higher than the reported 55% that labels take from Spotify.
Apple will have ample opportunity to grow its music streaming service
Until last year, Apple focused its efforts on persuading users to purchase songs through its iTunes Store. However, consumer interest has shifted toward low-cost subscription services. In response to this trend, Apple bought Beats Music and Beats Electronics for $3 billion in August 2014—its largest acquisition to date.
According to a report from Statista that cites Nielsen data, on-demand audio music and on-demand video music have seen tremendous growth in the last year. As the chart above shows, digital album, digital track, and CD album sales have all declined. This is the primary reason for Apple’s entry into the music streaming market.
Apple will have ample opportunity to grow its music streaming service. The company will quickly expand its service to a number of countries where competition is less intense.
Pandora (P) is present only in the United States, Australia (EWA), and New Zealand. Spotify, which is present in 59 countries, is continually expanding. It recently entered Canada and has plans to enter Japan (EWJ). Apple could use its market heft to affect Spotify’s business.