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Apple won't shut down Beats Music, but it will probably revamp it (+video)

Apple denies that it will shut down Beats Music. What will Apple do with the fledgling Beats Music streaming service?

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Commuters walk past a Beats brand display in the subway system of New York, May 29.

Lucas Jackson/Reuters/File

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Will Apple end Beats Music or not? That is the question.

Monday, TechCrunch reported that Apple was planning to shut down Beats Music, an online music streaming service created by producer Jimmy Iovine and rapper Dr. Dre. Since the story broke, Apple's spokesman Tom Neumayr has announced, “This is not true.”

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Apple bought Beats Electronics, known for its popular headphones, for $3 billion in May. Since then, Beats Music hasn’t done so well. While the exact number of users isn’t known, it’s believed that there are 250,000 paid subscribers to Beats Music. That’s far less than the industry giant Spotify’s 10 million paid subscribers and 30 million free users.

Recommended:Quick guide: iTunes Radio vs. Pandora vs. Spotify vs. Rdio vs. Google Play Music

If Apple won't shut down Beats Music, then what will it do?

It’s believed that Apple will merge Beats Music and iTunes Radio. When Apple announced the acquisition of Beats Electronics, it wasn't clear what the company would do with its new streaming service. Apple suggested that Beats Music and iTunes Radio would coexist. A merger of Beats Music and iTunes Radio diverges from that statement, but it is in character with previous moves by Apple.

In 2009, Apple bought the music streaming service Lala. After the purchase, Apple moved Lala’s employees onto its iTunes team. Then, last year, Apple bought Embark and HopStop, two apps that provide public transit directions. Instead of leaving the companies intact, Apple moved the start-ups’ employees to Apple’s Maps service.

In some ways, the merger has already begun. In August, Apple put Ian Rogers, chief executive of Beats Music, in charge of iTunes Radio. 

Apple's acquisition of Beats was an attempt to gain a stronger foothold in online music streaming. Music streaming is an industry worth almost $1 billion globally. In 2013, users streamed 118 billion songs, according to Nielsen. Thirty percent of online consumers stream music and a fifth of those pay for the services, states a report by the research group Midia. The report predicted that "streaming and subscriptions will grow by 238 [percent] on 2013 levels to reach $8 billion in 2019."

Even with rising consumer use, most streaming companies are losing money, according to Bloomberg. Spotify has lost $200 million since its founding, according to a report last year by research firm PrivCo. Pandora has almost 70 million users but lost $40 million in 2013.

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And as these companies lose millions of dollars, artists are complaining about about the minuscule royalties they are paid from streaming services. Damon Krukowski said his song would need to played 47,680 times on Spotify or 312,000 times on Pandora to equal the amount of money he would get from a single album sale, according to Bloomberg.

Though there are problems, it's believed that streaming is the future of the music industry, and Apple surely wants a part of the business. But it hasn't worked out thus far. Maybe a merger of Beats Music and iTunes Radio will change that.

“Apple’s next move will be key,” states a report by the research group Midia. “The acquisition of Beats and its streaming service was a statement of intent and a strategic shift of gears. Whatever Apple does could reshape the entire streaming market.”


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