Perhaps the biggest announcement (unless you like overpriced watches) at Apple's event Tuesday was that U2's new album, "Songs of Innocence," is being given away free to Apple's 500 million iTunes subscribers. The announcement sent shockwaves through U2's fan community and sent them scrambling to iTunes to download the album. As a U2 fan, I can tell you Apple's site and iTunes' ability to play the album were briefly down right after the announcement, but quickly came back in time for fans to be thrilled.
The business case for U2 to do this is clear. Album sales are down worldwide and even a powerhouse like U2 could be unlikely to sell more than a million or so copies. Their last album, admittedly a bit of a commercial failure, sold 1.1 million copies in the US. Music sales are in a bigger decline since that album was released in 2009. U2, like most bands these days, makes its money playing live; it's expected to make hundreds of millions from LiveNation for the next tour. With record sales in decline, getting the album distributed to a potential audience of half a billion people is the best way to make sure the tour is a success.
The harder part to figure out is what is in it for Apple. Apple will be using the music as part of a $100 million marketing campaign for the new iPhone and iWatch. But clearly, Apple could have simply bought the songs if that's all it wanted.
One possibility is to get back some users to iTunes. Many Android users (such as me) abandoned iTunes when they replaced their iPods with Android devices. Live streaming services such as Spotify are also cutting into the iTunes market share. Despite the robust user base, iTunes has a lower market share than it has had since 2006.
If this is the strategy, there are problems with it, however. For one, the deal is only for five weeks. After those five weeks, it is assumed that it will be available for streaming or download on non-Apple devices. At that point, users like me, who downloaded iTunes to hear the new album, will likely delete the app.
[Check out Apple's other big news Tuesday. See Apple Watch: Useless Beauty, Brilliant Engineering.]
There's also this problem of reduced sales for music. If there are fewer people interested in albums (as opposed to digital singles), how many people will actually flock to iTunes even if the album is free? Even if you assume the free tag leads to 10 or 20 million people (instead of the 1 million who bought the last album), how many of those users are non-iTunes users? Even half (or all) would be a drop in the bucket with 500 million existing users. And how long will they stay?
Another reason Apple may have chosen to do it is to simply add cache and "cool factor" to the new products. After all, Apple did this with a special U2 iPod which is widely given credit for launching the iPod from early adopter status to mainstream icon. Again, the problem with that is that U2 is not quite as cool now as it was then. As a giant fan it pains me to say it, but their long held title of "biggest band in the world" carries less weight as the band ages. Wouldn't new Apple partner Dr. Dre have produced more of a cool factor at this point?
Exactly what Apple was thinking is unclear. But it provides a fantastic test for the current health of the freemium model and the use of content to bolster platforms. U2's impact on the announcements of yesterday bears watching for this reason alone. In the meantime, enjoy U2's new album. I've only gotten to play it twice, but it is very good.
What do you think of Apple's strategy? And while we're at it, what do you think of U2's new album? (I'll give my review in the comments sometime soon.) Share your thoughts below.
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