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How iTunes reinvented the music industry… and how it lost ground to streaming

iTunes VS Online Streaming

iTunes once struck fear into the digital hearts of Amazon Music and record stores such as HMV alike, but how did it all change within a decade?

Written by Kaye Neylon

Once upon a time… there was a music library called iTunes

Launched in April 2003 and selling an astonishing 100 million songs within its first year, the 100 millionth track was bought by a man called Kevin Britten who received a personal call from Steve Jobs himself who congratulated him on being part of music history.

Apple had created something bigger than anyone could have ever anticipated, they had started a music revolution in the shape of what is essentially a spreadsheet of music. The interface back then was nothing special, the user experience was what sold the product, Apple never forget the user.

Apple marketed iTunes as a “legitimate, industry-supported alternative” to online music piracy from sites which are mostly banned in the UK. iTunes offered music to its customers for 79p and it was this uncostly feature which made it the first to make digital music purchases mainstream, something which others had failed to do. Steve Jobs, Apple’s co-founder cemented iTunes with these very words:

“Consumers don’t want to be treated like criminals, and artists don’t want their valuable work stolen. The iTunes Music Store offers a groundbreaking solution for both.”

Jobs hit the nail on the head when he paired iTunes with Apple’s iPod and later with it came the immortalised iPhone. iTunes quickly became the Internet’s record store of choice, accounting for 69 percent of all digital music sales at its peak in 2010 (According to estimates from market researcher NPD Group).

The Digital Model

The demise of iTunes can be pinpointed to streaming services, Spotify in particular. Prior to streaming services, iTunes appeared to offer a solution to a worldwide epidemic of pirated and torrented music being loaded on its iPod devices.

iTunes offered music at a relatively cheap price and the music industry rejoiced as a digital model made it as easy for customers to buy music legitimately as it was for them to obtain it through less legal methods with more than 25 billion tracks being sold as of February this year.

iTunes made it a simple and a seamless process for its users to connect their Apple devices and listen to their music on the go, so where did it all go so wrong?

Spotify – Social Streaming

Spotify launched itself onto the digital market in the summer of 2008 and took the music industry to another level in terms of user experiences and making users listening a more social experience with social network integration. Users were in a position where they could share their playlists via Facebook and Twitter for the first time, Spotify had advanced beyond Apple’s empire, a feat not many has succeeded in doing.

Some people would argue it was Apple’s emotionless design of iTunes, there was no impetus for users to purchase music. This being the whole basis for iTunes existing in the first place caused huge problems and was quickly overtook by Spotify.

With the dawn of social media, users wanted to share with their friends whatever it is they were listening to and after months of spamming friends walls with YouTube videos, Spotify integrated social into both their desktop and mobile apps for an altogether entirely different experience for users, which was most appreciated.

Ten years in, and Apple’s music library can boast of more than 26 million songs, yet it no longer has a captive audience. This is a sure sign that users expect more from iTunes and if they’re not being given more options, they will look elsewhere. And they did!

Spotify offers users three types of accounts: a free one which will play ads at intervals and two paid for accounts which you can either play on your desktop of multiple devices (we prefer this last option). Instead of iTunes telling its customers what they want, Spotify listens and offers wide selection of music to cater for all tastes as well as an integrated account which is accessible on any device based on your membership type.

As Apple venture into its movie and ebook offerings, its music service has been diluted and this has not gone unnoticed by its users. Simmilar with Apple’s latest venture into its iCloud which just about brought them up to speed with Amazon, Apple have fallen victim to their own success.

Algorithmic Transitions

The digital music world is going through an interesting transition, there is no doubt that download-to-own will continue to increase yet streaming music shows no sign of lagging, if anything, its strength continues to grow through other similar services such as Pandora and Rhapsody. When Apple launched iTunes, they knew what consumers wanted, before they wanted it – but perhaps it’s the consumers who will dictate what comes next in the digital evolution.

Spotify has proven that consumers are willing to pay to “rent” music if they feel they are getting a valuable service and this is a completely different model to Apple’s traditional distribution business which iTunes is more closely aligned with. Consumers are waiting and wanting something new, a new experience, and it would seem iTunes has a lot of catching up ahead of them.

Spotify’s business model works on the basis that users technically rent out the tracks they listen to and download to their device, this cannot be shared onto any other nor can it be copyrighted. Spotify remain in control throughout the whole process, users control the playlist and what they listen to next but do not own the music, this ensures a continued revenue stream.

Where to Next?

Are we correct when we try to correlate the availability of algorithmic internet radio, or streaming as it’s commonly called, with the decline in the iTunes market? When it comes to the ‘Owning vs Streaming’ debate, we think both have their place in the market. Streaming is great for discovering new artists and exploring new material, but we understand and support that artist make music for their fan base to buy and add to their collection.

With Apple’s share of the digital music market falling from 69 to 63 percent, how could they possibly bounce back?

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