When Apple (NASDAQ:AAPL) bought Beats Music and Beats Electronics for $3 billion in May 2014, the company was vague about its plans for the brand.
"Music is such an important part of all of our lives and holds a special place within our hearts at Apple," said Apple's CEO Tim Cook in a press release announcing the deal. "That's why we have kept investing in music and are bringing together these extraordinary teams so we can continue to create the most innovative music products and services in the world."
Whispers and rumors abounded that it was not so much the company's signature headphones that made the deal attractive but its nascent subscription music service. Apple did nothing to confirm that but laid out in the press release how Beats Music filled in hole in the iPad-maker's service lineup.
"The addition of Beats will make our music lineup even better, from free streaming with iTunes Radio to a world-class subscription service in Beats, and of course buying music from the iTunes Store as customers have loved to do for years," said Eddy Cue, Apple's senior vice president of Internet Software and Services.
Now it appears Apple is ready to relaunch Beats under its own branding as a subscription music service designed to compete with industry-leader Spotify.
Price could be a factor
Apple has never made much effort to compete on price with its computers, phones, and tablets. It appears the company attempt wants to reverse that trend with its new subscription music service and come in at a price that's lower than the $9.99 a month Beats was charging (though it may not be able to). Apple is likely trying to offer a better price than the $9.99 Spotify charges for a single user.
An article on 9to5Mac.com cited sources that confirmed a $7.99 price for the music service, as well as a June beta launch.
The new iTunes music streaming service is based on technology acquired from Beats Music, including curated playlists, cloud-based libraries, and offerings customized to the musical tastes of individual users. The service will be priced as high as $7.99 per month, which is less expensive than current $9.99 pricing for Beats Music, Spotify, and Rdio.
That may have been the planned price, but Apple may not be able to deliver it. Billboard is reporting that labels are rejecting the idea of a service priced at less than $9.99 a month.
"Industry sources say Apple has backed down from its effort to lower monthly pricing for its subscription service to $7.99 from $9.99," the music news site reported, noting that Apple could still offer a $7.99 price, but would have to absorb the loss. This type of fight is not new for Apple, which has historically been able to leverage its user base for better pricing.
Apple wants Android users too
While the key demographic for Apple is customers already in its ecosystem using iPhones, iPads, and Macs, its new music service won't be exclusive to them. The company also plans to roll out a full Android version, though that may take longer than planned.
"The new Apple-made service will also make way for Apple's first entirely in-house Android application, but sources say that delays to the Android app are also possible as some of Apple's Android developers have also left the company," 9to5Mac.com wrote.
Beats had an Android app and Apple leaving it on the OS makes sense given the huge number of Android devices in the marketplace. Of course, offering Beats on Android devices also gives those users a little taste of the Apple experience, which may lure them to iPhone or iPad in the future.
Apple believes music should be paid for
Unlike Spotify, Apple's service will not have a ad-supported free streaming option, according to a report from Re/code. Instead, Apple will offer a free trial period in the way Netflix and Hulu do, and then require users to pay.
Apple executives have been making the argument to music industry leaders that it can help stem the tide of music being free, the tech news site reported.
"Apple executives, led by media head Eddy Cue and Beats Music founder Jimmy Iovine, have been arguing that the music business 'needs to get behind a paywall,' say people who have talked to them," Re/code reported.
The challenge for Apple is getting customers to pay for something that they have become accustomed to receiving for free. But not having an ad-supported free tier should help Apple's bottom line because that model has struggled to turn a profit.
Apple is fighting to bring value back to music. That's no easy feat, but a lower price than the competition and a user base already accustomed to buying on iTunes and paying for apps in the company's app store might be enough to make it happen.
Daniel Kline owns shares of Apple. He still buys CDs. The Motley Fool recommends Apple and Netflix. The Motley Fool owns shares of Apple and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.