Citing sources familiar with the talks, Billboard reports Apple is testing the waters of a possible subscription-based music streaming service as well as an Android iTunes app.
The discussions are purportedly part of a larger strategy to fend off a steep decline in U.S. iTunes downloads. Research from Nielsen SoundScan shows digital album sales were down 13 percent for the week of Mar.9, while per-track sales are tracking down 11 percent from the same time last year. A report from early March claimed Apple is also in talks with labels to release more exclusive content on a windowed basis, which would limit album sales to iTunes for a certain period of time.
"They are feeling out some people at labels on thoughts about transitioning its customers from iTunes proper to a streaming service," said an unnamed source from a major label. "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."
While talks are just now getting underway, some believe Apple will make iTunes Radio a standalone app, breaking it out of the iOS Music app where it currently resides.
It was reported earlier in March that iTunes Radio managed to carve out a larger portion of the streaming music market than Spotify, a major force in the sector. Of course, Apple's solution boats a free-to-use feature and comes with a massive installed user base.
Despite the initial influx of users, some of whom are granted on-demand listening access via iTunes Match, Pandora still dominates with nearly one third of the market. The service took a marginal hit when iTunes Radio first launched, but has since recovered and is back to a positive growth model. In addition, some 40 percent of Pandora listeners also listen to iTunes Radio.
In light of an erosion of downloads by all-you-can-eat streaming services like Spotify and Beats Music, iTunes still holds considerable sway in the industry, generating more than 40 percent of U.S. recorded music sales revenue. That represents a huge bargaining chip for Apple in pushing for an expansion of its own streaming service.