A year or two from now, when the music subscription business will surely have been transformed further by dealmaking and consolidation, the acquisition of Beats Electronics by Apple may be viewed as the turning point in the story of how the sector matured. The $3.2 billion deal, reportedly near completion but still not done, would represent the moment when the world’s richest tech company finally decided that access to music will be more important to consumers than owning music -- and may be the trigger for a faceoff among some of the world’s biggest tech companies to capture the music subscription market.
Until recently, subscription services have been viewed broadly as a niche business for music enthusiasts. Perhaps tens of millions of people worldwide pay for a music subscription today -- a tiny fraction of Apple’s 800 million iTunes account holders, or the 1.7 billion smartphones estimated to be in use by the end of 2014. For now, the subscription market is dominated by music-specific services: Spotify, Rhapsody, and Muve may be the only three that boast more than a million paying customers worldwide, while competitors Rdio and Beats likely have just hundreds of thousands.
Big tech companies have largely watched and waited. Google introduced Google Play Music, a cloud-based music locker/streaming service combo, in fall 2011, but it hasn’t gained much traction. Instead, the search giant is thought to be readying a subscription service based on YouTube, which already outdistances all others in terms of the overall amount of streaming music delivered to consumers. Meanwhile, Amazon.com is negotiating licenses with music labels that would allow it to bundle a music service with Prime, its membership club that receives free two-day shipping on purchases, on-demand streaming of selected videos, and a lending library of Kindle books.