And you wonder why Apple bought Beats...
Apple's $3 billion acquisition of Beats caught almost everyone off guard. Not only was the purchase price drastically higher than what Apple typically spends for acquisitions, but Apple's interest in Beats in and of itself was the source of much speculation.
With services like Spotify and Pandora still picking up steam in the market place, the influence of iTunes as a central hub for music access is not as grand as it once was. Put differently, the impetus for consumers to actually own their own music is seemingly weaker than ever before.
Highlighting this trend, Billboard reports that overall album sales hit record lows last week.
This week's 3.97-million album sales tally is the smallest weekly sum for album sales since Nielsen SoundScan began tracking data in 1991. It's also the first time weekly sales have fallen below four million in that time span.
Last week was fairly slow for the top releases. The top album, Wiz Khalifa's Blacc Hollywood, debuted with sales of 90,000 units, a figure below the first-week sales of many other top debuts of 2014. Three other albums debuted inside the top 10 but averaged only 31,000 units apiece. And the Frozen soundtrack is no longer moving in excess of 100,000 units per week.
Earlier this year, Billboard reported that 2013 marked the first year digital music sales experienced a decline since the iTunes Music Store first opened up for business in April of 2003.
With Beats now under the Apple umbrella, Apple can jump into the on-demand music streaming business in a big way. As we've noted before, if Apple can convince just 1.25% of its 800 million strong iOS userbase to sign up for a Beats subscription, it will already have as many subscribers as Spotify.
Highlighting the potential profit lurking within Beats, Morgan Stanley analyst Katy Huberty earlier this year wrote:
If Apple charges $10 per month, same as Spotify, every 1% penetration of Apple's 800M user base, equates to $960M revenue annually, adding 8 pts of growth to online services and half a point to total company growth.
It remains to be seen how Apple plans to integrate Beats into its product lineup, but with album sales on the decline -- both digital and physical -- it's easy to see why Apple getting into the on-demand music game was a shrewd, if not necessary, move.
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