Apple Denies Beats Music Shutdown, Yet Future Is Unclear

Will the streaming service bought for $3 billion remain in Apple's long-term vision?

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Techcrunch has backed off its report that Apple will shut down Beats Music, the $10-a-month streaming service it bought along with Beats headphones for $3 billion last May. Citing five anonymous sources, "including several prominent employees at Apple and Beats," the tech news site broke the news Monday — then backtracked to suggest Apple "may, however, modify [Beats] over time, and one of those changes could involve changing the Beats Music brand." Apple reps have denied the shutdown report to Rolling Stone. 

Apple didn't specify plans for Beats after announcing the purchase, but music-business sources suggested the company would combine it in some way with iTunes Radio, a service that competes with Pandora, Spotify and others in the $1 billion streaming-music market. So far, Apple has yet to change the service, although it has shifted Ian Rogers, the company's chief executive, to overseeing iTunes Radio. Also, one of Beats' top executives, Jimmy Iovine, is likely to have helped steer U2, with whom he worked as head of the band's powerful record label Interscope, into its free-iTunes-album deal.

When Apple bought Beats Electronics, many in the music business suggested the subscription service, which had a reported 111,000 subscribers at the time but has since expanded to 250,000, was a key part of the deal. While the late Steve Jobs insisted he disliked the streaming business, Tim Cook, the computer giant's chief executive, said recently he "couldn't sleep" after tinkering with Beats Music and is "100 percent sold on music subscription."

iTunes remains the dominant music retailer for downloads, but track sales dropped 6 percent in 2013, according to Nielsen Soundscan, and are down another 13 percent this year. Album sales are down 15 percent. Many in the record business have explicitly stated they're in a transition from selling music to selling streaming subscriptions. As for Apple, it's not unusual for the company to shut down purchased brands, as it did with Lala, which it bought in 2009 then integrated into iTunes.