Apple wants to cut the price of Beats Music subscriptions to $5 per month - report

Posted:
in iPod + iTunes + AppleTV edited October 2014
Apple has reportedly pitched music labels a new lower pricing structure for its Beats Music service, arguing that subscriptions could grow considerably if the price could be lowered to just $5 per month.




In its negotiations with record labels, Apple has reportedly said that its best iTunes buyers only spend about $5 per month on downloaded music, according to Re/code. It's because of that threshold that Apple reportedly believes that dropping subscription prices to that level could generate more revenue for music labels.

Currently, a subscription Beats Music costs $9.99 per month. If users are willing to sign up for a full year, it costs $99.99 for 12 months.

News of Apple's efforts comes as Spotify announced on Monday that it will begin offering new family sharing plans. While the $9.99 per month base rate for Spotify Premium will remain the same, new family members can be added for half-price each, meaning a two-person subscription with separate playlists and recommendations would run $14.99.

Spotify Family is set to roll out globally over the coming weeks. Meanwhile, there's no sign that a reduced price for Beats Music will be arriving in the immediate future, and Peter Kafka of Re/code said that despite Apple's pitch, he doesn't believe the iPhone maker thinks it can actually get the labels to agree to $5-per-month pricing.

"A more modest goal would be to get rental music down to the price Netflix charges (some of) its users for rental video: $8 month," Kafka said. "Bear in mind that any price cuts that Apple got would have to be offered to all of its rivals, too."

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Word of Apple's ongoing negotiations with labels first surfaced earlier this month, when it was revealed that Apple was asking music labels to reduce Beats Music streaming fees. Doing so would presumably allow Apple to cut the cost of subscription fees, but talks were said to be in the early stages, with no changes coming before next year.

Apple is also said to be considering a rebranding of its Beats Music service, bringing it more closely in line with its other iTunes products. In purchasing headphone maker Beats for $3 billion earlier this year, Apple emphasized the Beats Music service as a key component of the blockbuster deal.

The acquisition of Beats Music represented a key subscription market where Apple's iTunes Store downloads and iTunes Radio streaming service did not compete. The subscription Beats Music service allows on-demand streaming of tracks and albums, as opposed to the randomized nature of iTunes Radio.

Streaming has become increasingly important in the music industry as sales of digital albums have been declining. Many users who previously purchased music have been migrating to services like Spotify and Pandora.
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Comments

  • Reply 1 of 34

    There's a lot that is similar and it seems like things are approaching commodity status. Spotify has a developer community and lots of plug-ins that iTunes does or could arguably replicate. They did launch much sooner and maybe a lot of music lovers are there already who will stay for lots of reasons. I like that when you dig into an artist's catalog you can now buy merch like t-shirts and stuff. Really, that's a really cool addition. 

     

    On the other hand Beats has the relationships that iTunes has and they have Iovine and Dre. Maybe there are some artists on one and not the other. Spotify has private recordings. I don't know about Beats but iTunes does have some private stuff, of course. 

     

    I don't want to think of this as just a commodity service but most of the time it is. I hope that Apple can compete on price but also on features, music discovery and lots of other things. There should be ways to connect artists to fans more. To make music a shared experience again. To create more ways for people to discover music. Introduce personalities and DJs to music recommendations. There aren't many companies who could knock Spotify off their perch but Apply certainly is a contender.

  • Reply 2 of 34
    prokipprokip Posts: 150member
    Quote:

    Originally Posted by sog35 View Post

     

    I'm in  if it cost $5


     

    So Am I !!!

  • Reply 3 of 34
    In its negotiations with record labels, Apple has reportedly said that its best iTunes buyers only spend about $5 per month on downloaded music

    Currently... $5 a month in iTunes purchases would give the record labels $3.50

    I wonder how much the labels will get if Apple had a $5 all-you-can-stream plan?

    Would it be more or less?

    So if I stream Beats music... will the labels eventually make the $3.50 they were getting before?

    If you buy a song... you can listen to it over and over. But when you stream a song... they make money on each play (albeit a much smaller amount)

    I wonder what the tipping point is?
  • Reply 4 of 34
    pazuzupazuzu Posts: 1,728member
    Amazon tactic- how much is Apple losing on this?
  • Reply 5 of 34
    mpantonempantone Posts: 1,432member

    None.

     

    The thought here is that the increase in subscription volume would make up for the smaller per-user revenue. Apple would still get their 30% of gross sales.

     

    Everyone (artist, label, Apple) gets less per subscriber, but $125 million from 25 million subscribers is better than $100 million from 10 million subscribers and zero dollars from 15 million non-subscribers.

     

    That's the whole point of why Apple is trying to negotiate labels down.

  • Reply 6 of 34
    pazuzupazuzu Posts: 1,728member
    mpantone wrote: »
    None.

    The thought here is that the increase in subscription volume would make up for the smaller per-user revenue. Apple would still get their 30% of gross sales.

    Everyone (artist, label, Apple) gets less per subscriber, but $125 million from 25 million subscribers is better than $100 million from 10 million subscribers and zero dollars from 15 million non-subscribers.

    That's the whole point of why Apple is trying to negotiate labels down.

    But now has to sell to twice as many heads while reporting that they have a larger subscription base. Fuzzy statistics.
  • Reply 7 of 34
    schlackschlack Posts: 705member
    I bought the $99/yr Beats plan using a $100 iTunes gift card that I bought on eBay for $75.

    That brings my monthly cost down to $6.25/month. Pretty awesome.

    So it looks like Apple can already handle $6.25/month. Not too much further to get to $5/month
  • Reply 8 of 34
    Now that's a great argument by Apple, backed with their own sales data.
  • Reply 9 of 34
    boredumbboredumb Posts: 1,417member

    Personally, I just can't wait to find out

    what price I'll be ignoring this at...

  • Reply 10 of 34
    hmurchisonhmurchison Posts: 12,306member
    $60 annually sounds right. In my home music streaming plays second fiddle to Netflix. No way are we paying more for Music
  • Reply 11 of 34

    Not even for $1 a month.

  • Reply 12 of 34

    I would prefer free to iPhone users. $5.00 month to Android / Windows 

  • Reply 13 of 34
    dasanman69dasanman69 Posts: 12,985member
    richlo wrote: »
    I would prefer free to iPhone users. $5.00 month to Android / Windows 

    Should be the other way around since all I've ever heard is that iPhone owners are well to do, and Android users are poor.
  • Reply 14 of 34
    calicali Posts: 3,495member
    sog35 wrote: »
    exactly.  Music studio's need to get with the times or be left in the dust like the Newspaper industry

    Excuse me?

    Get with the times and do what now? Give their art away and maybe work for free also?

    $5 a month? this sh** is getting ridiculous. What's next? Download as much music as possible in an hour for $3?

    This is insane and Apple is low balling way too much here.
  • Reply 15 of 34
    Originally Posted by richlo View Post

    I would prefer free to iPhone users. $5.00 month to Android / Windows 



    I'd prefer they not get it anymore at all.

  • Reply 16 of 34
    hmurchisonhmurchison Posts: 12,306member
    Quote:

    Originally Posted by cali View Post





    Excuse me?



    Get with the times and do what now? Give their art away and maybe work for free also?



    $5 a month? this sh** is getting ridiculous. What's next? Download as much music as possible in an hour for $3?



    This is insane and Apple is low balling way too much here.

     

    Put it into perspective. 

     

    How much does it cost to product a 74 minute or less album versus producing a 74 minute film?    Why would the industry think that

    Music can command $10 a month when a majority of music is produced at a budget that’s probably less than 5% than the average film.  

     

    Artists make their money on tours.  Only the largest artists make anything from album sales.   Music is essential an advertisement to come

    See the artist perform live. 

     

    No contrast that with producing a film or documentary.   Even a “talking heads” documentary is going to run you over 100k to produce and distribute. 

    If you think music gear is expensive you should try pricing out a Red, Arri, Sony/Panasonic etc camera and the software and hardware to edit and finish.

     

    Consumers have spoken.  They buy large flatscreens and have made Netflix a very rich company.  Music is simply not on the same level as far as value.  I’d

    Pay $15 for HBO Go access but no way in hell am I paying that for a family music plan (Spotify Family)

     

    The music industry can attempt to feel relevant but it was illegal filesharing that sunk them it was a declining product that was losing to other forms of media. 

  • Reply 17 of 34
    Quote:

    Originally Posted by mpantone View Post

     

    None.

     

    The thought here is that the increase in subscription volume would make up for the smaller per-user revenue. Apple would still get their 30% of gross sales.

     

    Everyone (artist, label, Apple) gets less per subscriber, but $125 million from 25 million subscribers is better than $100 million from 10 million subscribers and zero dollars from 15 million non-subscribers.

     

    That's the whole point of why Apple is trying to negotiate labels down.


     

    The hard-sell here is that Labels figure they get those 25 million via one group or another. So slacker if not Apple. But that's not how it works. There are a lot of people who would stream but do not due to not feeling like $8 a month is a value. -- at least according to Apple.

     

    My wife streams music with a service, but I find it hard to justify paying the same amount as we would for Netflix.

  • Reply 18 of 34
    Quote:

    Originally Posted by hmurchison View Post

     

     

    Put it into perspective. 

     

    How much does it cost to product a 74 minute or less album versus producing a 74 minute film?    Why would the industry think that

    Music can command $10 a month when a majority of music is produced at a budget that’s probably less than 5% than the average film.  

     

    Artists make their money on tours.  Only the largest artists make anything from album sales.   Music is essential an advertisement to come

    See the artist perform live. 

     

    No contrast that with producing a film or documentary.   Even a “talking heads” documentary is going to run you over 100k to produce and distribute. 

    If you think music gear is expensive you should try pricing out a Red, Arri, Sony/Panasonic etc camera and the software and hardware to edit and finish.

     

    Consumers have spoken.  They buy large flatscreens and have made Netflix a very rich company.  Music is simply not on the same level as far as value.  I’d

    Pay $15 for HBO Go access but no way in hell am I paying that for a family music plan (Spotify Family)

     

    The music industry can attempt to feel relevant but it was illegal filesharing that sunk them it was a declining product that was losing to other forms of media. 


     

    I agree with your points.

    I'd like to add; a recent study showed that TOR users are the BIGGEST CUSTOMERS of purchasing movies and music -- and that's probably skewed because there are likely a lot of TOR users who just don't have money. They wouldn't buy ANYTHING. So they've got big purchasers that are potential targets of their harassment.

     

    The people not stealing are much less likely to buy -- so it means their entire business model and view of the world is bankrupt.

  • Reply 19 of 34
    zoetmbzoetmb Posts: 2,491member
    Quote:

    Originally Posted by schlack View Post



    I bought the $99/yr Beats plan using a $100 iTunes gift card that I bought on eBay for $75.



    That brings my monthly cost down to $6.25/month. Pretty awesome.



    So it looks like Apple can already handle $6.25/month. Not too much further to get to $5/month



    It's not what Apple can handle, it's what the record labels are willing to take.

     

    The fact remains that the music industry is a disaster.   In the U.S., based on the first half of 2014 and including digital downloads, paid and ad-supported streaming services and even including Sound Exchange and synchronization royalties, the U.S. industry is at 43.8% of its former peak if you don't count inflation.   If you adjust for equal dollars, it's at 30% of its former peak.   (And the former peak doesn't include sync royalties).

     

    If Apple is willing to guarantee the industry substantial money in the $100 million to $300 million annual range, I'm sure the industry would do the deal.   But at $6 per month (assuming Apple won't get the industry down to $5), a $72 annual cost per subscriber and assuming Apple keeps 30%, the labels would get $50.40 per.   IMO, Apple's going to have to guarantee 3 million subscribers in the U.S. to get the labels interested.    Without any changes, the total U.S. streaming market (at consumer prices) is expected to come in this year at about $1.1 billion, about half the size of the download market, which is in decline. 

     

    However, with pretty decent free services from Spotify, Pandora and others, I think it's going to be tough for Apple to get a lot of subscribers at any cost.   Until the number of advertising spots on the free services exceed 10 minutes per hour, consumers will put up with it (even though you haven't).  

  • Reply 20 of 34
    pazuzupazuzu Posts: 1,728member
    cali wrote: »
    Excuse me?

    Get with the times and do what now? Give their art away and maybe work for free also?

    $5 a month? this sh** is getting ridiculous. What's next? Download as much music as possible in an hour for $3?

    This is insane and Apple is low balling way too much here.

    Exactly- how much is Apple losing on all of this?
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