Apple Inc. (NASDAQ:AAPL) wants to undercut competitors like Spotify and Rhapsody by significantly lowering the price of Beats Music subscription service to $5.00.
Apple wants to make Beats Music more competitive
According to Re/Code, the tech company is currently in the negotiations process with record labels. Apple reportedly told the labels buyers generally spend about $5.00 a month of iTunes. It’s that threshold which makes Apple think dropping subscription prices could generate revenue with music labels. Right now Beats music costs $9.99 a month or $99.99 a year.
The competition is strong as Spotify just announced plans to roll out a family subscription plan. The music streaming service will continue to start at $9.99 but extra users can be added at half-price. These family subscription plans could allow users to set up different playlists and get separate recommendations. A Spotify subscription for two people would cost $14.99. Spotify is set to roll out the new music service globally within weeks.
Why Apple’s talks may be fruitless
If and when Apple can lower the price of Beats Music is something that remains to be seen. Re/code’s Peter Kafka does not believe Apple will be successful in convincing music companies to get on board. He summed it up, “A more modest goal would be to get rental music down to the price Netflix charges (some of) its users for rental video: $8 month. Bear in mind that any price cuts that Apple got would have to be offered to all of its rivals, too.”
Apple’s initial talks with record labels first surfaced in early October. It was also reported Apple would rebrand Beats Music and make it more compatible with iTunes music service. When the company first acquired Beats in early 2013, Apple shared that Beats Music was a primary component of the entire deal. Beats’ on-demand music service won’t compete with iTunes Radio. Streaming may be the future as many avid music listeners purchase less music and stream more.