Beats Music is giving listeners on iOS devices the ability to subscribe to its on-demand service directly within the app, an option not previously available because of the high expense of doing so.
The in-app payment option is costly for Beats and other services that choose to sign up paying customers through that route because Apple demands a 30% cut of all subscription fees that go through its billing system. As a result, music services that charge $10 a month via iOS in-app billing receive $7, while Apple retains $3.
The alternative route for listeners to pay for a subscription would be to go to a separate website and manually enter credit card information. Services such as Beats wouldn't have to pay the 30% fee in this scenario, but the thinking is that more people would sign up via in-app billing rather than go through the trouble of navigating to a separate site, especially on mobile devices where the majority of listeners use music services.
Rhapsody, Slacker and Rdio also offer in-app payment to its listeners. Rdio charges users $14.99 a month if they go through Apple's iTunes in-app billing system, $9.99 if they sign up via Rdio's website. Rhapsody and Slacker, like Beats Music, charge $9.99 a month regardless of where customers decide to pay. Spotify does not offer in-app billing for its iOS app.
When Apple initially decided to extend its 30% fee for all subscriptions going through iTunes' billing, many music services declined to go that route, arguing that they couldn't afford it, particularly with music licensing costs already gobbling up half or more of their revenue. In recent months, more services are relenting, concluding that they can't afford not to give hundreds of millions of iTunes customers an easy way to pay.
For Beats, acquiring new users via iTunes as well as its partnership with AT&T is a high priority in what is turning out to be a highly competitive, though nascent, market for on-demand streaming music. While an estimated 20% of the U.S. recorded music industry's revenue came from subscription streaming services in 2013, according to the Recording Industry Association of America, the money comes from just 6.1 million customers, less than 3% of the adult population in America.
Many are optimistic that those numbers are set to surge as listeners grow more accustomed to streaming rather than owning content and as more options become available. YouTube and Deezer, for example, are among the two likely newcomers to the U.S. market this year, while Amazon and Apple also are said to be considering entering the fray.