Apple's (Nasdaq: AAPL ) on the cusp of reinventing its iTunes Music Store.
Three unnamed sources are telling Bloomberg that the world's most valuable tech company is in "re-download" talks with the music industry, pushing to launch a cloud-based service in a few months.
In an ideal world, iTunes purchases would be accessible through Apple servers across several devices.
The end result is that a digital track or album purchase through iTunes would be even more valuable. Believe it or not, Apple needs it. Sales growth of Apple iPods have stalled in recent years. It's true that the growth baton has been handed over to iPhones and iPads that also double as beefed-up iPods, but it's not just the hardware that's meandering. The actual sales of song downloads appear to have peaked.
Warner Music Group (NYSE: WMG ) has posted three consecutive quarters of sequential declines in digital sales. Rival labels can't be doing much better. This isn't the kind of trend that will reverse itself on its own. We're already out of the recession. If we're not buying new music now it's likely the result of a shift in how we're consuming music.
Making song purchases more portable will help renew some interest in Apple's digital storefront, but does this mean that Apple will be able to charge more? That seems unlikely, even if the company will be on the hook for streaming bandwidth costs anytime someone wants to access a previous download.
There's also a stumbling block here. How many peopled do you know have an iPod loaded entirely with iTunes-purchased tunes? I'd say less than 10% of my digital tracks come from Apple. Some are digital purchases through rival Amazon.com (Nasdaq: AMZN ) , but the balance are older CDs that I have ripped into my computer. Obviously there's also a large chunk of the population accessing pirated tunes. What good is moving iTunes purchases around if it's only going to be a sliver of any desired playlist?
There has to be more to this than just re-download right for earlier iTunes purchases.
Apple's endgame here has to be an unlimited music subscription service. Yes, this has been a digital graveyard for the most part. Best Buy's (NYSE: BBY ) Napster and Microsoft's (Nasdaq: MSFT ) Zune Pass don't seem to be a hotbed of profitability. RealNetworks (Nasdaq: RNWK ) threw in the towel last year on its shrinking base of Rhapsody users.
Apple wouldn't be reinventing the wheel here. It would be reinventing the flat tire. However, if anyone can do it, one would expect it to be Apple.
There are now more than 20 million Sirius XM Radio (Nasdaq: SIRI ) subscribers, so obviously there is a market out there for premium audio. It's true that Sirius XM's largest appeal is in the form of dashboard receivers. It's also cranking out live and proprietary content. A cloud-based iTunes would have to grapple with connectivity issues. There would also be the delicate balance of pricing. It can't be too high to scare away audiophiles with cheaper options. It also can't be too low to scare away the labels.
However, both Apple and the music industry need this to happen. It's not a slam dunk, but it's better than doing nothing and getting posterized.
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