Report: Apple considering subscription-based music model
Since Apple first entered the online music business nearly five years ago, the company has stuck to its guns on à la carte pricing. But a report in Wednesday’s Financial Times suggests the company could be reversing course on its long-time stance against subscription-based music services.
The Times reports that Apple is in talks with music labels on a program that would let users access the entire music library at its online iTunes Store in exchange for paying a premium on iPod or iPhone purchases. Such a deal would mirror the “Comes With Music” program launched by Nokia last December, in which Nokia customers received a year of unlimited access to music tracks when they bought a handset.
If it comes to pass, such a deal between Apple and record companies would be a radical departure from the company’s previous stance on subscription-style offerings. Since the April 2003 launch of the iTunes Store, Apple has insisted on selling music on an à la carte basis—customers either paid to download a single track or an entire album for a set price. In contrast, other services, such as Real Networks’ Rhapsody charge users a monthly membership fee for access to an unlimited library of music.
Apple CEO Steve Jobs has previously dismissed subscription-based models, saying that customers like to own their own music. “Never say never, but customers don’t seem to be interested in it,” Jobs told Reuters last April. “The subscription model has failed so far.”
However, Apple has taken a different stance when it comes to other forms of digital media. In January, the company introduced movie rentals to its iTunes Store, after its attempts to only sell digital downloads of feature-length movies failed to match the success of its music retail efforts. In his Macworld Expo keynote, Jobs cited the lack of movie rentals as one of the reasons the company’s Apple TV set-top box failed to take off after its 2007 debut.
Apple has other motivations to rethink its position toward subscription-based music offerings. While the company sold a record number of iPods in its fiscal first quarter, the growth rate of iPod sales has flattened, fueling speculation that the market for the handheld music player may be oversaturated. Apple has taken steps to push iPod sales, by cutting the price on its low-end shuffle by $30 and introducing higher-end offerings such as the iPod touch. (The introduction of the latter product has boosted the iPod’s average revenue per unit for Apple.) Adding a subscription component like the one described in the Times article could be seen by Apple as a way to spark sales.
Apple declined to comment on the Financial Times report.
Updated at 2:05 p.m. PT to add a respsone from Apple.