In Wake of Apple Deal, Beats Music Drops Price

Beats Music

The streaming service Beats Music was launched in January 2014 with a hip hop star-filled show on Grammys weekend. Created to compete with Spotify and Pandora, the service promised "a unique stream of music that fits your situation perfectly."

The latest app update also extends the trial period for first-time users to 14 days.

Newly united Apple and Beats Music didn’t even wait a day after formally announcing their $3 billion union to start a price war with their competition. Beats Music’s latest app update includes a 17 percent drop in price for yearly subscribers in the U.S., to $99.99 from $119.88, while also extending the trial period for first-time users to 14 days.

The roughly $20-per-year savings works out to about $1.66 per month, but is only offered to subscribers who pay annually. Beats still charges $9.99 to those who pay by the month. The price change is effective for users of the Apple iOS, Android and Windows Phone operating systems.

Since Apple now owns Beats, the music service can more easily afford to lower the price it offers to users within the App Store. Consumers have the option of signing up for Beats via its web site or via in-app purchases. The latter is generally regarded as an easier but costlier method for services to acquire customers. For each consumer who signs up via an iOS app, Apple takes 30 percent, or around $3 monthly, from the $10-per-month price of most subscription services. That means Beats was previously surrendering about $36 to Apple for each annual subscriber.

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Beats Music began offering in-app purchases in April, just two weeks before rumors of a buyout emerged and about five weeks before the deal was announced. Most of its streaming competitors begrudgingly offer in-app purchasing, although heavyweight competitor Spotify has never done it. Some charge mobile in-app buyers higher prices -- Rdio has a  $14.99-per-month plan for those who choose that route, as opposed to $9.99 for those who sign up in a web browser -- while Spotify has always driven potential subscribers back to the web to sign up for its $9.99 per month web-and-mobile plan.

Launched in January, Beats had previously offered seven-day free trials to new users, and extended trials of up to three months for those with AT&T voice and data plans. The company was believed to have signed up fewer than 200,000 paying subscribers.

Label executives have grumbled privately that Beats Music hasn't offered enough free music to customers for long enough to entice them to get familiar with the service, build their playlists and share with friends. Such activity is believed to drive customers to sign up to to pay a monthly fee. Spotify said it signs up to 1 paying customer for every 4 music fans who use its free service — which has fewer on-demand features than its paid service.

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But Iovine has been adamant from the start in discussions with labels and investors that music should not be given devalued by being given away.

Beats said its new app update, numbered version 2.1.0, also includes “tons of bug fixes” for a smoother user experience.

Apple paid $3 billion for Beats in a deal that was formally announced today, but expected for about three weeks. The union could also offer numerous opportunities to bundle the Beats music service with the purchase of iPhones, iPads, iPods, Beats by Dre headphones, portable speakers, or other hardware.

Twitter: @bonanos