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Is Apple about to stop selling iTunes downloads?

Tech giant takes unexpected plunge in streaming wars

Is Apple about to stop selling iTunes downloads?
09 August 2016

Not for the first time, the music industry is about to be well and truly shaken up by Apple.

Just three months ago, the tech giant denied rumours that it was going to stop selling downloads from the iTunes store 'within 2 or 3 years'. However, reports are now coming in that it has launched its Apple Music streaming service, without a complementary iTunes download component, in South Korea, suggesting that a worldwide rollout of streaming-only may be imminent.

So why is this a huge deal for both the music industry and the music fan?

South Korea is a major music market

This is not Apple testing the waters in Vanuatu. South Korea, the home of K-Pop, is the eighth largest music market in the world. However, it's also a market where independents reign supreme as well as operating under conditions that are notoriously difficult for non-native companies to work in. Apple has never launched its iTunes store in the country, but has taken the plunge with Apple Music. It's also done the same in China. The fact that it's chosen to do this suggests that a download switch-off for the rest of the world may not be far behind.

Why would it turn off downloads?

Paid music downloads are experiencing double digit percentage declines as they fall in the gaps between streaming and those still wanting a physical product. Single track download sales fell an enormous 24 per cent in the US in the first half of 2016 compared to the year before, with album sales down 18 per cent year-on-year. CDs aren't fairing well either - down 11.6 per cent over the same period, while vinyl is growing, but still accounts for only 14 per cent of the physical market and will likely reach a sales ceiling fairly soon.

So paid-for downloads is the ugly middle kid that no one really wants. But again, why is this necessarily a problem for Apple - after all, they're still making money from them, right?

Apple has been caught in the middle

There are two central reasons why Apple might want to ditch downloads.

Firstly, it's bad news for a company that prides itself on coolness and image to be associated with a product that's clearly headed one way. For branding purposes, it makes sense for them to ditch them earlier than they might need to.

And secondly, there's no doubt that the less-than successful launch of their Apple Music streaming service was due, in part, from the confusion of trying to keep everyone happy. Customers reported huge problems trying to combine their personal files with Apple Music's library while many casual users were confused - why upgrade to Apple Music when I have iTunes? For those less tech-savvy music fans, they may not have even realised the difference between the two services. Even with the three-month free trial, people didn't necessarily see the need to move into the streaming realm.

If Apple bins iTunes, then customers will be forced to migrate to Apple Music, and they can finally start to take on the likes of Spotify.

But isn't it a good thing to move people to streaming?

Well, yes - unless you're in a part of the country that doesn't have a great broadband connection. Or you're a DJ. Or you're worried about not always being able to afford to pay a monthly subscription to something. And, as their free U2 album debacle proved, people don't like being told what to do, or how to listen to things. Apple could suffer a backlash from people who decide to try something new, and use the download switchoff to shift over to market leader Spotify.

But then, as a company for whom selling physical products dominates their bottom line, Apple might consider the risk of annoying a few customers a risk worth taking to keep hold of its image.

As for the music industry, it could be a blow: paid-for downloads still make hugely more money for the labels and the artists than current streaming rates. Although, of course, a big uptake in new streaming customers, forced to move by the loss of downloads, could help bridge the gap, although that hasn't played out as yet. It could be a tough time ahead for the industry once again.