Both Apple and Spotify are currently racing to the bottom with their music streaming fees. Apple’s Beats Music service, which they acquired for 3 million dollars in August, is now looking at 50% cuts for its monthly membership cost. This would be a significant discount for Beats, reducing the subscriptions from $10 to $5 each month. But as outrageous as it may seem, Spotify is actually playing with the same numbers. Today, the streaming giant announced a forthcoming family plan that offers 50% off on up to four additional accounts. As a result, Spotify will take the same $10 to $5 plunge on those particular memberships.
Spotify’s family plan will begin rolling out globally in the coming weeks. The company hopes the new pricing will see an increase in the 10 million plus users who are already forking over 10 a month for uninterrupted listening. With 40 million active users and counting, Spotify seems to be the ringmaster of the streaming show. Beats Music, on the other hand, is walking the tightrope.
Apple’s 3 million dollar splurge was met with an onslaught of speculation about their plans for Beats Music. Just a month ago, five reputable sources (including prominent employees at both Apple and Beats) led many publications to report that Apple would be scrapping the service altogether. Many theorized that they had only been in it for the headphones in the first place. Beats Music has streamed on, though its mere 111,000 registered users leaked back in March was made a laughingstock around the web.
Still in the pitching stages, Apple’s new price cut is currently being proposed to music labels as a necessary shift in the industry. Sources who have heard Apple’s scheme in one form or another have reported their logic in short. Basically, Apple’s most avid iTunes buyers spend around $60 on downloaded music each year, which comes to around $5 a month. The company feels that if subscription service prices were to drop that low, they would generate the same amount of revenue from streaming. They also hope to increase their subscribers in the process.
Although $10 a month is the going rate for subscription services, some analysts have pointed out that that is much more than people spent on music during the music industry’s peak in 1999. At that time, according to the International Federation for the Phonographic Industry, the average consumer shelled out only $28 a year on music. This figure is a little warped, because it includes consumers who did not purchase any music in 1999. But even if you remove the outliers and just look at music consumers, the statistic sits at around $48 per person that year.
Though you would be hard pressed to find a consumer who wouldn’t appreciate a massive discount, many are already noting that Beats Music might be biting off more than they can chew. It could prove challenging for Apple to persuade labels to reduce their prices by 50%, especially since record companies they have just barely warmed up to the idea of streaming in the first place. Since any slices for Apple (pun intended) would theoretically have to be offered to all rival services, the proposed sale may be a long time coming for Beats.