First published on www.dailyfinance.com
Although the deal has not yet been formally announced, Apple is still expected to acquire Beats Electronics at some point in the near future. Much has already been written about the purchase — its potential to bring a level of fashion to Apple’s future wearables, Beats co-founder Jimmy Iovine’s music industry experience — but what I find most interesting is what it says about Apple’s iTunes business.
Apple’s total iTunes revenue is growing, and at a rapid pace, but the model on which the business was built — music downloads — could slow. Streaming services are clearly the future, and though acquiring Beats should help Apple break into that business, it still poses a major challenge.
Downloads give way to subscriptions
Industry music downloads slipped 5.7% on an annual basis last year, according to Nielsen. Consistent with those figures, Asymco estimated that Apple’s iTunes Music sales declined about 14% in 2013.