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Apple and Oranges

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Re/Code has reported on Friday March 6, 2015 that Apple plans on having a music streaming service that will not feature a free tier. Apple wants to have a single premium only model that will leave consumers paying $9.99 a month. Others speculate that Apple will have a two-tier model. The premium model is like a buffet of all you can listen to music, while the lower $7.99 service will come with limitations. Many may recall that the Beats music service took on the same business model and failed big time. Beats had a premium only service when it launched, but was later forced to introduce a free trial period that required consumers to pay after the expiration of the trial date. Insiders are saying that there will not be a free trial however maybe a reduced rate for a limited time frame.

Some believe that Lucian Grainge, Universal Music Group CEO, end of the year memo to his employees inspired Apple to eliminate the freemium or free trial to the new service. Grainge added, “expecting more from the streaming marketplace, and having the clout to do so, seem to be taking shape in the form of the wider industry’s discussions with Apple.”

Re/Code also said, “Apple executives have been telling the music industry it can help them roll back the tide of free digital music by relaunching its own subscription streaming service this year, unlike Spotify and YouTube, Apple’s service won’t offer a free tier of music interspersed with ads, after an initial trial period, you’ll need to pay to play. Apple executives, led by media head Eddy Cue and Beats Music founder Jimmy Iovine, have been arguing that the music business ‘needs to get behind a paywall‘.  Apple’s anti-free pitch syncs up with public and private comments from top executives at the big music labels in recent months.” With that being said, Spotify cut their subscription plans and eliminated the subscription on free, Google is offering a $3 three month subscription to Play Music All Access, and YouTube and Pandora will remain free.

It seems like a poor time for Apple to reenter the streaming market at such a high price point. Keeping the price lower and showing the consumers the value of their service would be a smart move to make. However, Apple is one of most innovative companies in the world in my book. If anyone can squeeze ten dollars out of the consumer’s pocket, it’s definitely Apple.

I do believe that this will be one of Apple’s epic failures, because there has not been a streaming service this far that has turned a profit. Also, with consumers stuck on the freemium level, it will be hard to show them the value of a paid service. Never the less, Apple will launch its streaming service late spring or early summer.

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