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1 Business That Could Cost Apple Billions

By Kevin Chen - Apr 23, 2013 at 1:09PM

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Apple should transform iTunes from micro-transactions to music streaming.

After surpassing 100 billion downloads this year, can Apple's (AAPL 0.04%) iTunes business continue to rake in $17 billion a year?

In a recent Fortune article, Asymco analyst Horace Dediu says that iTunes music sales are lagging. While its video and e-book sales rose 90%, the company saw its music sales increase only 10% last year. Worst of all, Apple is just breaking even on music. So what's the main culprit? Well, it seems like fulfilling millions of micro-transactions (each download from every iTunes user) costs Apple a handsome some. 

It costs Apple so much, in fact, that it's a reason why music-streaming competitors may soon surpass iTunes' popularity. In less than two years, top dog Spotify has reached over 24 million active users in the U.S. And realizing this huge opportunity, Google (GOOGL 0.90%) and Beats Electronics -- which makes the Beats by Dr. Dre headphones -- will soon launch their own music streaming services. 

However, Apple still has a chance to turn its iTunes business around. In the video below, Fool contributor Kevin Chen explains the one option Apple has left to disrupt its disruptors. (Hint: It has to do with the company's iPhone and iPad sales). To learn more, watch the video below.

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