Berkowitz: iTunes becomes obsolete as YouTube announces paid subscription music plan
As if the industry was not packed already, YouTube announced this past month its plan to release yet another paid subscription music service. Like Mp3 players made CDs obsolete, paid subscription music services are on the verge of ending the need for song-purchasing digital music platforms such as iTunes.
Similar to Spotify, Google Play and Rhapsody, YouTube, the world’s largest music search and discovery engine, will let customers watch videos and listen to music without advertising interruption for $10 a month.
While subscription services are on the rise, Steve Jobs once believed that people wanted to own their music as opposed to renting it.
Although Jobs’ model does not seem sustainable, his theory does have some truth to it: Currently in 2013, 10 years after its launch, iTunes has 26 million songs available in its store, is available in 119 countries and has revenue of $2.4 billion.
But while the classic iTunes library service will not immediately disappear, evidence of its decline is certainly noticeable. According to a BusinessWeek article from April 2013, iTunes’ share of the $2.9 billion digital music market has decreased to 63 percent, its lowest since 2006.
Also, its competitors are gaining on iTunes, causing even more of a problem for the once all-powerful-song-purchasing platform. Amazon now holds 22 percent of all U.S. music sales in the last several years. Millions of subscribers have signed up for Spotify, Rhapsody and Rdio, further taking away customers from iTunes.
When you look at the business models of song-purchasing platforms versus music subscription services, it really is fairly simple to see why programs like iTunes are on their way out.
iTunes now charges up to $1.29 per song, whereas music subscription services charge between $8-$10 a month for unlimited streaming.
Economically, is it worth it to purchase 10 songs on iTunes for $12.90 when you can pay $10 for a month’s endless supply of music?
Furthermore, digital integration has allowed people to do more throughout the day, changing people’s expectations and the way they live. With smartphones, people expect to be entertained all the time.
YouTube makes access to any song possible and with the way the radio operates, no song stays popular for long. I once heard a joke that the “Top 40 Radio Hits” ranking is where good songs go to die.
However, this joke is not too far from the truth.
Popular songs on popular radio stations are overplayed so much that most of them only last a few months. If people’s song perceptions are fluctuating this much, then a song-purchasing business model really does not make sense.
And because it looks certain that subscription services will overtake music purchasing programs, many musicians and record labels are concerned that this transition will result in even less royalties than before.
In a 99-cent download from iTunes, artists earn a percentage of the sale, typically between seven and 10 cents. In a subscription model, artists earn money based off the number of times a song is played.
Right now, Spotify generally pays less than a penny per stream, meaning that for every million streams, an artist or record label is only collecting less than $10,000, making it very hard for professional musicians to survive.
According to The New York Times, Sean Parker, a board member of Spotify and the creator of Napster, believes Spotify will eventually draw enough subscribers, returning sustainability to the music industry.
Parker is hopeful for the industry’s future.
However, looking at an extremely successful product like iTunes that appears to be in regression after only 10 years, Parker has obviously overlooked the perpetually changing nature of the music industry.
More likely than not, in 10 years, music subscription services will probably end up in the same predicament that iTunes is in now.
Bram Berkowitz is a senior advertising and entrepreneurship and emerging enterprises major. His column appears weekly. He can be reached at email@example.com.
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