Apple Inc. (NASDAQ:AAPL) acquired Beats Music and Electronics for $3 billion earlier this year. Apple Inc. (NASDAQ:AAPL)’s Beat Music like other music streaming services lets people listen to all the songs they want with a monthly subscription of $10. But Apple has come out with the thought that $10 per month is higher and is currently planning to cut the cost. Re/Code Co-Executive Editor, Kara Swisher talked to Jon Fortt on CNBC about the music streaming industry and the cost structure.
Swisher mentioned about the Apple Inc. (NASDAQ:AAPL)’s feeling that there are a group of people who might not pay the $10 monthly subscription fee. She added that the group of people unwilling to pay $10 per month also forms the majority. She thinks that the streaming business pool is limited and there are a lot of competitors like Pandora and Spotify to deal with. Swisher said that Apple is talking to the big music companies regarding the rights and features to make the cost reduction possible.
Fortt mentioned that Apple Inc. (NASDAQ:AAPL) has strategically positioned themselves as a profitable friend for the recording companies, with idea of album downloads through iTunes. He doubted if Apple’s is pushing the consumers to move away from cheaper streaming option and into the costlier download option.
“No, Downloads are going down by the way. That has dropped by 12% or whatever, that’s not how people want their music. They don’t want to buy the music anymore. They want to have the streaming service and so Apple sees the writing on the wall, they see the client sales and downloads and by the way the physical music is just going to collapse, but so is the download business. They have got to provide these streaming services at price that consumers find attractive,” Swisher said.
Fortt pointed at the Amazon.com, Inc (NASDAQ:AMZN)’s issue with publishers over the demands of price reduction. He thinks that Apple Inc. (NASDAQ:AAPL) is trying to do the same with recording industry, which might not be welcomed by recording companies.
Swisher said that that it is obvious that recording companies might not like the talks of price reduction, but she added that recording companies have gained a lot for many years and due to their resistance for price reduction companies like Pandora are under a lot of pressure to make profits. She said that for streaming business to grow, recording companies has to go with the price reduction idea which Apple is proposing.
Among the shareholders of Apple Inc. (NASDAQ:AAPL) is Icahn Capital Lp, led by Carl Icahn. As of 30 June, 2014, they hold around 52.8 million company shares.