In the 1980s, about 20 million boom boxes were the primary way people listened to music. In the 1990s, radio/tape players outpaced boom boxes. As we rolled into the new century, CD players took the lead with over 50 million sold. Around 2006, MP3 players, including iPods, became popular, but sales were still under 50 million. The reason might surprise you.
As we reached 2013, 130 million smartphones have sold and are serving as the primary vehicle for music. Ryan Bradley summarizes (“Apple’s Streaming Music Problem” Fortune, 4/8/13, pp. 35–36):
“The smartphone is also an always connected listening device; it’s growth has vastly outpaced that of previous music players.” (p. 36)
Based on these numbers, Apple has some decisions to make about how it wants to handle music. Music is becoming increasingly less profitable. Business analyst Horace Dediu:
“estimates that iTunes is a $17-billion-a-year business that costs $5 billion to run. Overall operating margins are growing, thanks to app sales, but Apple basically breaks even on music and video sales because of high publisher payments.”
Steve Jobs once said consumers simply are not interested in a music-subscription model. Well, last year 20 million people paid for their music subscription services. It might be time for Apple to change its approach.