Jimmy Iovine, one half of Beats Music, wants to do away with freemium music. In case you forgot about the details regarding Apple’s purchase of both Beats Music and also the headphones, Apple is looking to relaunch Beats Music streaming service despite recently launching iTunes Radio.
First, let’s define the term “freemium.” Combining the words “premium” and “free,” it describes a business model where you give away a core product for free and then generate revenue by selling premium products to a small percentage of free users, according to Freemium.Org. In this case, the core product would be music, with add revenue allowing the site to thrive. Along the way, the small percentage of free users purchase premium, add free services.
Whereas “freemium” brands like Spotify, Pandora, and Rdio have been producing good numbers, Apple and Beats have a storied brand backing them up. As Jill Krasny writes for Inc.:
By virtue of being an established brand, both have a better chance of negotiating good deals with the major record labels. Apple reportedly negotiated its deals directly with three major record labels (instead of acquiring a “pureplay” license negotiated by the third party Copyright Royalty Board). …
Apple doesn’t have much to lose the way a single-purpose start-up does. And that’s why so many of these companies will either be acquired or lost to history.
According to Matt Pincus, the founder and chief executive of music publishing firm, Songs Publishing, “Research is showing the $10.99 all-you-can-eat price point actually exceeds the amount of money that a large number of music buyers spent on downloads or physical products before. There may be a limit to how many customers [these companies] can capture.”
“These companies are serving hours and hours of music and it costs a lot to convert subscribers from a free to a paid model; in fact, it’s not even clear that it works,” Pincus adds. “To the degree that Apple can eliminate that, the better off everyone’s going to be.”
So it seems that there’s only a matter of time before Apple rocks the boat that is freemium streaming.
–Jamaal Fisher (@jamaalfisher)
