Beats Music, the beleaguered streaming arm of Dr. Dre and Jimmy Iovine’s popular headphones brand, recently was pulled into Apple’s ecosystem along with the rest of the company. However,  sources like Techcrunch indicate that the service will not survive in its current form.

According to TechCrunch, “every source with knowledge of the situation that we talked to agreed Apple plans to sunset the Beats Music brand.” Users of the service may be upset at the thought, but there aren’t many users to begin with. Despite a highly aggressive marketing campaign through AT&T, Beats Music only has 250,000 paid subscribers. In comparison, Spotify boasts 40 million users, including 10 million paying customers, and Pandora has 76.4 million listeners.

Not only has music streaming grown significantly in the past year, digital music purchases have begun to decline. Image courtesy of TechCrunch and KPCB.

Music streaming has grown significantly in the past year, while digital music purchases have begun to decline. Image courtesy of TechCrunch and KPCB.

Same Issues

Apple’s own iTunes brand is starting to suffer some of the same problems as Beats Music. As services like Spotify have seized more and more users, iTunes’ growth has slowed, with digital music sales actually declining in 2013. MacRumors wrote in April that the service’s revenue was on track to surpass iTunes’ in Europe.

The issues of both services suggest that Beats won’t be folding, but will not continue in its current incarnation. While it’s tempting to start accusing Apple of buying Beats just to kill the streaming service, it’s much more likely Apple will integrate the technology into iTunes.

Beats struggled to coax users over from competitors like Spotify and Rdio; current users of iTunes may be happy to cancel their subscriptions at those competitors and pay Apple instead.

Right now, Beats Music isn’t included in iOS8, nor is it pictured on the home screen of the new iWatch in any promotional photos. In fact, Apple has seldom mentioned it at all. Whatever the Cupertino company is planning, it’s being kept under wraps.

Competitive Advantage

Beats Music brings with it a number of unique features that Apple may be planning to carry into iTunes. Crutchfield has a full writeup. Notably, Beats streams at 320 kbps, as opposed to iTunes, which downloads at only 256 kbps.

Audio enthusiasts with the ears and equipment to appreciate the difference would be drawn to the higher quality sound, and Beats also boasts some other features. These include a smart music discovery algorithm, which finds new artists and tracks to suggest based on everything from previous listening habits to a sentence about the user’s current listening interests.

Beats offers several smart listening features that the competition can't match. Image courtesy of Crutchfield.

Beats offers several smart listening features that the competition can’t match. Image courtesy of Crutchfield.

These unique features, coupled with sleek design, failed to draw a significant number of users to the service. However, Apples’ ownership and development may bring new opportunities for Beats.

It may turn some tempers that Apple can acquire a service paid for by 250,000 people and completely rework it, but the purchase is complete–now all that’s left is to see what Apple chooses to do with its new prize. Spotify is pushing Apple aside as king of music sales; Apple may be gearing up to retake the throne.

What are your thoughts on these tactics? Can Apple buy and gut a service just to reinforce iTunes to take on new, innovative competitors?

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