Claire Atkinson NYPost.com 10/27/14
Cheap is better than free.
At least that’s the message from music mogul Jimmy Iovine as he helps Tim Cook-led Apple ready the crucial relaunch of Beats Music next year.
Iovine, who earlier this year sold the popular Beats headphones brand along with its sister music service to Apple for $3 billion, is attempting to steer the industry away from free streaming services in favor of lower-priced paid subscriptions, sources said.
Iovine is getting plenty of pushback, however.
As part of its vision for a revamped Beats, Apple is seeking to slash the $10-per-month price to $5 in hopes of spurring widespread adoption. It’s also pitching the idea of a $12 a-month “family plan,” tech site Re/code reported.
Iovine — like other long-time recording execs — is no fan of Spotify, Pandora and other free ad-supported services that dominate the industry. While they are fast-growing, the money they generate for the labels is still a trickle.
Although he’s not Apple’s official pointman on the talks with labels, Iovine believes the industry should push cheaper monthly subscriptions and move away from the ad-supported model.
“Now that Jimmy is at Apple he’s lobbying the industry not to allow too much more free music,” said a source familiar with Iovine’s impressive track record of success in the music business. “He believes it’s bad for the industry.”
Most streaming services let users pick from millions of songs over the Internet free or by a paid subscription. They typically offer a free ad-supported service and another $10-a-month premium service without ads. So far, the majority of users choose to be freeloaders.
Although Pandora and Spotify pay just fractions of pennies to the labels each time a song is streamed, they represent the only area of growth in an industry plagued by piracy and slumping sales. What’s more, they share a cut of the ad revenue with the labels.
“Everyone feels like you can have two lines of growth (advertising and subscription),” said one source. “It’s a better idea than one [business] at $5.”
Apple’s Beats, which has had a tough time attracting subscribers, is trying to sway an industry that is entering another period of upheaval.
Songwriters and artists are unhappy with their paltry streaming royalties and are looking for a bigger cut from fast-growing streaming services.
The royalty battle is ramping up just as Apple sees a big drop in digital downloads. Music sales at Apple’s iTunes Store are down as much as 14 percent this year, the Wall Street Journal reported. Apple declined to comment.
Pandora also has challenges. It reported slower user growth in the third quarter, disappointing investors and sending the shares down 13.5 percent on Friday. Pandora is looking at ways to make more money from its existing audience, execs said during the earnings call.
All the chaos is making it tough for Beats to sell the labels on a cheaper subscription model.
“Ten years ago people would spend $15 for one CD,” said one music exec, adding that “$10 a month is a reasonable ask for a universal library of music.”