Sources Insist: iTunes Music Downloads Dead In 2-3 Years…

Apple Headquarters, Cupertino, CA.

Apple Headquarters, Cupertino, CA.

Last month, sources to Digital Music News pointed to internal Apple discussions and a proposal to eliminate music downloads from iTunes, in as quickly as 2-3 years.  That was flatly denied by Apple’s media representatives, though sources with close knowledge of the company’s plans continue to share credible details that music downloads may be phased out in just a few years.   A great deal depends on how sharply music downloads decline, how quickly streaming accelerates, and how an unstable internal political atmosphere within the company shakes out, the same sources have shared.

Importantly, paid music downloads appear to be entering a free fall this year, according to preliminary stats revealed to DMN (more on that later).  Suddenly, the question is less about Apple nixing downloads, simply because consumers may be doing the job for them.

That said, the ability to cleanly remove downloads at a future point could get easier.  One source indicated that Apple may be architecting iTunes differently, with the ability to more easily drop iTunes music downloads in future years if the format becomes seriously marginalized.  That would allow the company to simplify the application towards streaming and radio in the event that music downloads experience a ‘CD-like collapse’ in the coming years, or if downloads are viewed as heavily dragging Apple Music’s progress against competitors like Spotify.  “It’s a ‘keeping their options open’ thing,” one source noted, while underscoring that a few years is “an eternity” in this market.

Enter Apple’s annual Worldwide Developers Conference, or WWDC, which kicks off June 13th in San Francisco.  That event is a smorgasbord of announcements and product rollouts, and is expected to include the unveiling of a major iTunes overhaul. Addressing widespread complaints of ‘bloatware’ and a nightmarishly complicated interface, Apple is hoping to vastly simplify a sprawling iTunes, including an iTunes Store stuffed with apps, movies, TV shows, music downloads, podcasts, and now, streaming service Apple Music.

Importantly, the company is not planning any phase-outs to music downloads at this stage, but is rather trying to make harmony out of two conflicting (and cannibalizing) formats.  There was no information about downloads of other forms of media, including TV shows or movies.

Appropriately, WWDC roughly coincides with the one-year launch anniversary of Apple Music.  At last count, the streaming application counted 13 million paying subscribers, with another flashy milestone potentially on tap.  But that further highlights the issue: streaming is clearly the future of music consumption, while downloads represent the past.  So why is Apple straddling the fence, cannibalizing itself within its own application, and refusing to harness the bull-charge legacy once embodied by Steve Jobs?

The answer to that question is complicated, and plunges into a rather chaotic internal political situation within iTunes, Apple Music, and Beats.  That features Apple Music chief Jimmy Iovine, whose diplomatic and dealmaking role with marquee artists has been critical, but appears less involved in nitty-gritty application details according to a recent report by Bloomberg.  A large number of acqui-hired Beats executives, including Ian Rogers, are long gone, potentially leaving a vacuum of conflicting product ideologies and music initiatives.

Sources couldn’t share screenshots or any sensitive information about the upcoming iTunes launch, though a key aspect of the overhaul includes ‘making more sense’ of iTunes music downloads and Apple Music streams.  That has been a huge source of confusion for fans, even those that clearly understand the difference between downloading and streaming.  But one source noted that Apple is “definitely not getting rid of [music] downloads” at the WWDC event next week, or any time in the short-term future, while another mentioned that possibility that top executives may “double down” their expressed commitment to the format during WWDC presentations to cool rumors.

The reason for that expressed commitment, and possibly the denials, is that canceling downloads could create serious licensing problems with major and independent labels as well as marquee artists.  For labels, downloads still drive a significant amount of (upfront) revenue, with far simplified accounting, even though audiences are heavily migrating towards streaming.  For superstar artists like Adele and Beyonce, downloads offer an important format for windowed exclusives, not to mention better revenue.

In the face of all of that, Apple is unwilling at this stage to even consider ripping the rug out from downloads, even though download revenues are “basically immaterial” to Apple’s revenues, according to one source.  Indeed, the clear party line is that downloads are here to stay, and a core part of the next version of iTunes.  Ironically, downloads themselves are creating the exact type of product overload and confusion that Apple is trying to fix.

 

 

8 Responses

  1. Casey

    Maybe it is time to throw some weight behind other platforms. I imagine Google Play and Microsoft will eventually abandon downloads but Amazon seems pretty dedicated. As does 7Digital. I personally buy all my music downloads from 7Digital.

    Reply
  2. It's just math...

    YTY Transactional downloads are down 25-35%.. that’s since January to May. That’s one hell of steep drop off. The transition to streaming in 2016 has been EXPONENTIAL. MAYBE Windowing will help slow the transition, but it may be too little too late.

    Once again the music industry brain trust is has been shooting holes in the bottom of the lifeboat to get rid of the ants.

    It is truly and completely stunning the absolute and total lack of leadership at every major label. So long, and thanks for all the fish…

    Reply
  3. Remi Swierczek

    Jimmy got his cash, got married and doesn’t give a fuck about the music!

    It was Jimmy and his previous employer UMG who poisoned Apple with all inclusive SUPER NAPSTER dope and we are witnessing conversion of $200B of annual music goodwill to $15B smelly COMPOST of ads and subs.
    DO NOT COUNT FOR iTunes TO EXIST in 3 YEARS. It will die by itself without any decision on Apple side.

    Thank you Jimmy and UMG for acceleration of music industry suicide!

    Reply
  4. Rick Shaw

    Where’s MusicMatch and Jimmy/Doug’s Farm Club when you need them?

    Reply
  5. SingleAnonymous Commenter

    always love explosive DNM stories based on a single, anonymous and uncorroborated source. yay journalism!

    Reply
  6. Steph Curry

    Owning is better then renting remember that. Its like when downloads came ppl were saying Hard Copies will die…But they’re still around. in Fact all 3 forms of listing to music exists in today’s time. SO no, I don’t see them getting rid of downloads on iTunes anytime soon.

    Reply
  7. Terry

    Yeah right, there’s not a chance any of this information is accurate other then the latest denial from Apple Rep, who you guys didn’t even mention other then to say a SOURCE. Seriously you guys need to stop spreading so many crazy rumors!

    Reply
  8. Troglite

    With a sharp, observable decline… it would be irresponsible to not discuss all possible causes and long term, strategic responses. Talking is not doing.

    It does seem likely that streaming will be prioritized over downloads when funding marketing and product enhancement initiatives. That could still have a meaningful impact on artists and labels who haven’t managed to diversify their revenue sources.

    There are only two possible justifications for shutting down iTunes.

    1) Apple thinks they can drive most of those users to more profitable subscriptions, retain those customers over time, and maintain predictable or reduced content costs over time. I really hope Apple allows the marketplace decide how people interact with music recordings.
    2) iTunes volumes drop to a level that the business cannot be profitable, even after cutting operating costs. I would suspect volumes would really have to crash because digital downloads should have very little overhead.

    Reply

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