Apple won't end music downloads in 2 years, but it will someday

Apple, which recently launched a music streaming service, will continue to offer music downloads — an industry it helped legitimize — for a long time. The question now is how long is long?

A report surfaced on Wednesday saying plans to terminate iTunes music downloads in two years is "actively being considered and gaining favor" within the company. However, Apple representative Tom Neumayr denied the report to Mashable and other publications.

While the two-year timeline is very unlikely, music industry analyst Mark Mulligan predicts it will happen. 

Apple is unlikely to turn off the store while revenue is still meaningful.

"Right now there are many, many more people paying to download music than there are paying to stream music," says Mulligan, who is the author of Awakening: The Music Industry In the Digital Age. Apple will likely wait until that group becomes an "absolute minority" to prevent alienating a large portion of its user base. 

"Apple is unlikely to turn off the store while revenue is still meaningful," he said. 

But how much longer will that be the case? Mulligan predicts five years. 

Different Kinds of Listeners 

Mulligan has been researching the number and types of people who still download albums and says it's unlikely that Apple will pull the plug on music downloads until consumers have a streaming option other than the standard $9.99/month subscription. 

That's because those who stream and those who download are very different music consumers. Those who download are often far more casual listeners — people who don't see it worth their $9.99 a month and would rather spend money only on the music they want. 

"With downloads people can choose how much to spend, when to spend it, a single here or there an album here or there," Mullgian says. "It's flexible, and it matches how most mainstream music consumers are."

But while there are a lot of people still in this group, the most valuable customers have switched to streaming services. The most avid listeners have stopped downloading, and those who are still downloading are rarely spending an average of $9.99 per month. 

That's why, for the first time ever, streaming revenue surpassed download revenue in 2015. Streaming brought in 34.3% of revenue compared with digital downloads' 34%, according to the RIAA. Revenues from digital downloads dropped 10% from 2015 to 2016 to $2.3 billion. 

Fixing Apple Music 

Another factor is when Apple Music will be at a level where it can truly compete with Spotify. Apple Music already passed 11 million subscribers in February, which far outnumbers Tidal's 3 million. But Spotify is still far ahead, having surpassed 30 million users last month. 

While Apple Music has a lot of bugs to fix in order for it to be on par with Spotify, Mulligan predicts it will reach 20 million subscribers by the end of the year, and "could easily close in on Spotify" by the end of 2017.

That's because Apple has the freedom to overspend, and there's not a huge amount of pressure for Apple Music to make money, unlike Spotify.

"It's got a war chest at its disposal," he said. 

Artists 

While many avid music consumers have stopped downloading, they'll make an exception for certain artists. Adele proved that when she released her third studio album, 25, only via digital download or a physical copy. The album broke records when it sold 3.38 million copies in its first week in the U.S. alone. 

“I believe music should be an event,” Adele said in an interview with Time around 25's release. “For me, all albums that come out, I’m excited about leading up to release day. I don’t use streaming. I buy my music. I download it, and I buy a physical [copy] just to make up for the fact that someone else somewhere isn’t. It’s a bit disposable, streaming.”

Adele is hardly the only one. Prince was notoriously anti-streaming, with his music only available on Tidal. 

For Neil Young, it's a matter of quality. "Streaming has ended for me," he announced last summer. "I don't need my music to be devalued by the worst quality in the history of broadcasting or any other form of distribution. I don't feel right allowing this to be sold to my fans. It's bad for my music." (Young's music is now available on Tidal, where there is a higher-quality streaming option available for $19.99/month.) 

Mulligan says that in order to maintain a relationship with these artists, Apple will be sure to wait until the artists won't feel too much of an impact. 

"They rely heavily on download sales so will clearly work closely with Apple to keep the store open for as long as possible," Mulligan said. If the end of downloads comes to pass, however, "their digital revenue will have long since transitioned to streaming." 

'The Death Sentence' for Indie Labels

For those of us who have already made the switch to streaming services, Apple terminating music downloads may not sound like a big deal. But for smaller record labels and artists who still make a good amount of revenue from digital music downloads, it could be tragic. 

"It will be the death sentence for a lot of smaller labels," Mulligan says. "It's that simple." 

"We've seen time and time again that pushing back against a changing landscape leaves us in the dust."

The average income for labels from streaming, Mulligan says, is 20 cents per album. When you download an album on iTunes, however, the label gets 65% of the revenue, he said. To earn the same amount from streaming, an album needs to be streamed "about 130 times." 

"If you're small indie with an album and you maybe just want to sell 20,000 to 30,000 copies, that would have bought you in the best part of quarter a million dollars at the very least. Now, you might [get] yourself a few tens of thousands of dollars," he said. "The counter argument is that after a year you'll carry on earning money, and if you're a big label you've got the cash flow to do that. If you're a small indie label you live hand in mouth from one release to the next."

Adam Lekach, vice president of media and partnerships at the Brooklyn-based label Mexican Summer, said in a statement to Mashable that the potential move should be "embraced, not feared." He said his label focuses on vinyl, which has seen a massive increase in sales over the past few years.  

"All signs have pointed to shifting consumption patterns in music," Lekach said. "They are simply being proactive by focusing their energy on what consumers want. The music industry should take note and follow suit — we've seen time and time again that pushing back against a changing landscape leaves us in the dust. The key takeaway here is that we need to adapt and give the customer a better experience in music." 

But Matthew Johnson, president of Mississippi-based blues label Fat Possum Records, doesn't see it that way.

"Yeah it fuckin suxs [sic]," he wrote in an email to Mashable.

Source: mashable.com