How Apple Shook Up the Music Industry in 2014

Apple’s Sept. 9 press conference that unveiled the iPhone 6 was the year’s -- maybe even the ­decade’s -- watershed moment. 

In one presentation, the company went all in on streaming, hinted at the album’s future alongside one of the biggest bands in the world and quietly killed off the iPod age. 

Thirteen years after the iPod and iTunes led the industry into the great digital unknown, CEO Tim Cook effectively acknowledged that music’s post-MP3, device-agnostic, in-the-cloud future had officially arrived.

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It came just a month after Apple finalized its $3 billion acquisition of Beats Electronics, another game-changing event. The deal fortified Apple in three areas of weakness: hardware, with Beats’ headphones taking the place of the iPod as the company’s style beacon; streaming, with 11-month-old subscription service Beats Music; and not just one industry-facing visionary, a la the late Steve Jobs, but two: Beats co-founders Jimmy Iovine and Dr. Dre. That duo -- innovators who give Apple a more direct line to the entertainment business and its stars -- could be the pair to steer the company through increased competition from Spotify, YouTube and others. And Iovine could help Apple’s larger ambitions: Even before the deal closed, rumors swirled that Iovine could run lead on Apple’s content strategy, including a reported merging of Beats with iTunes in spring 2015.

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Beats Music fills a “hole,” as Iovine said in a recent GQ interview, in Apple’s music strategy. iTunes Radio, launched in September 2013, was a minor hit out of the gate, with 20 million users in its first full month. But that’s a fraction of the 70.7 million who listened to Pandora in October 2013 alone. Beats Music may offer an advantage -- or at least allow Apple to gain a foothold -- because of its emphasis on human curation to direct users through an immense catalog. “In a mass-market product, most consumers don’t know what to listen to, and they want guidance,” says Amanda Marks, global head of digital accounts at Universal Music Group.

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A series of bleak stats explains why Apple took its belated jump into streaming. iTunes track downloads were down an estimated 12 percent in 2014, based on its overwhelming digital market share reported to Nielsen Music (digital tracks were down 12.6 percent year to date, as of Nov. 30). And iPod shipments were down 45 percent in the four quarters that ended Sept. 30, compared with a 13 percent boost in iPhone shipments. The Beats deal had “a hint of panic,” says Midia Research founder Mark Mulligan, though Apple has a history of arriving after startups create a marketplace. “Subscriptions are still in their infancy. They most likely won’t be when Apple has finished,” he adds.

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Apple’s giveaway of U2’s Songs of Innocence created as big of a splash -- but was it also a belly-flop? With 26 million copies distributed worldwide, it made a statement about a future of even more free music and artist-brand bedfellows. But it also raised concerns about privacy, and showed that just because an album is free doesn’t mean people will want it.

Still, Apple’s most effective move may have been its quietest: the death of the iPod Classic, the last incarnation of the music player first released in 2001. Although Apple still sells other versions of the iPod (Shuffle, Nano and Touch), the market has shifted to phones and other devices with the ability to connect with streaming services and the cloud. Nostalgia can sell concert tickets -- but in 2014, it couldn’t sell personal electronics.

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Either way, the world’s biggest, most-watched music and music-tech retailer showed it can still stick and move. But will the music industry once again follow along? That remains to be seen.