The debut of iTunes Radio last summer signaled a fundamental shift in Apple's music strategy. First and foremost, iTunes Radio was Apple's not-so-subtle acknowledgment that the musical landscape that framed Steve Jobs' oft-repeated line about consumers wanting to own their music had changed.
Pandora. Spotify. Songza. Hell, even YouTube. Today there is no shortage of ways for consumers to listen to and discover nearly the entirety of the world's music for free. iTunes Radio was Apple's attempt to keep music lovers inside the Apple ecosystem. If consumers were busy streaming music via sites like Pandora, Apple figured it might as well offer its own streaming service in an attempt to funnel users towards the ever-tantalizing "Buy" button.
Only problem is, iTunes Radio doesn't exactly offer anything new to music lovers. As a result, it's not terribly surprising that the service hasn't exactly taken the world by storm.
A recent Billboard report relays that iTunes Radio has not stemmed the tide of declining digital music sales. During the first quarter of 2014 alone, digital album downloads declined by a whopping 14.2% while digital track sales declined by 12.5%. What's more, the report claims that Apple's iTunes Match service has, to date, only attracted about 1 million subscribers. But again, the looming problem remains that consumers just aren't buying music online the way they used to.
iTunes Radio, which launched in September with much fanfare, so far only sees about 1%-2% of listeners clicking the buy button, while overall music downloads have been declining upwards of 15%, according to several label executives.
At the same time, Apple is finding that its influence over labels is slipping as YouTube, Spotify, Pandora and other streaming services gather momentum. One independent label said that iTunes's share of the label's revenue has eroded from more than 70% in 2012 to about 50% today.
While iTunes undeniably ushered in a digital music revolution, it'd hard to argue that the baton has now been handed off to a slew of newcomers who cater to audience no longer interested in purchasing the music they listen to.
As Jason Notte recently wrote, "We're not listening to streaming music services so we can find the next song to buy. We're listening and subscribing to them so we don't have to buy songs anymore."
From a streaming perspective, it's hard to categorize iTunes Radio as a bust given that its share of the streaming market is at 8%. Not too bad for a new kid on the block. But again, Apple wants folks to buy music, not stream it.
The Billboard report adds:
"The a-la-carte consumption model is 11 years old and at this point the decline in the U.S. download sales seems unstoppable; it doesn't seem like the store is refreshable," says one label executive, who went on to suggest Apple has no choice but to embrace the subscription model.
So might Apple transition iTunes Radio into a subscription type service? Don't count on it. If anything, Apple will reportedly be taking steps to double down on iTunes Radio. Recently, rumors have indicated that iTunes Radio may be featured as a standalone app in iOS 8 to position the service more prominently amidst homescreens that likely already feature competing apps such as Pandora and Spotify. After all, more visibility means more users which translates into more digital purchases, which is ultimately what Apple really cares about.
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