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iTunes Losing Market Share to Streaming Services

Pay-per-song business model may be fading away as service celebrates 10 years

Sunday marked the 10-year anniversary of iTunes, with some news outlets noting that business has declined as streaming services like Spotify and Pandora gain popularity. Later this year, Apple plans to debut its own streaming service, Bloomberg reported.

While iTunes still dominates the digital music market with a 63 percent share, selling 35 million songs in 119 countries and 850,000 iOS apps in 155 countries, it has fallen from 69 percent in 2010. In fact, the music store's share of the $2.9 billion music market is the lowest it has been since 2006. Amazon.com's cheaper music store has grabbed 22 percent of digital music sales in the past several years.

iTunes faces competition from services like Spotify, Rdio, Rhapsody and now Twitter, indicating that listeners would prefer to pay a monthly rate for streaming access rather than put up 99 cents per track. Market researchers anticipate a slow decline in the market for downloads in the next five years.

The pay-per-song business model might be becoming obsolete, and some complain that the iTunes website itself is also somewhat archaic—"a spreadsheet with music," as New York-based nightclub artist relations manager Ben Easton described it to Bloomberg Businessweek.

Apple plans to overhaul iTunes later this year with a Pandora-like streaming service. The company hopes that the radio service will inspire users to purchase more tracks, keeping them entrenched in the Apple ecosystem.

As for its movies, TV and podcast offerings, iTunes now competes with streaming services from Amazon, Google and Netflix. The retail behemoth's media sales remains enormously profitable—iTunes revenue for all of its media topped $2.4 billion in the first quarter—however, growth may be slowing.

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