Two years ago, Apple (AAPL) reportedly tried to get the music industry to cut its royalty rates to the point where it could offer its pending Apple Music streaming service for just $5 per month. While that effort didn't pan out, the company might now be on the verge of securing a favorable compromise.
Should such a compromise be obtained, it would say a lot about how the music industry now sees subscription services as a growth opportunity rather than just a distribution alternative, and pricing accordingly.
Citing "a pair of sources working closely with [Apple Music]," trade site Digital Music News reports Apple is in talks to cut the price of its music streaming service by up to 20%, something that would bring its cost to $7.99 per month for an individual subscription, down from $9.99. Family plan pricing could also be cut by $2, to $12.99 per month. The price cuts could reportedly arrive before Christmas.
Web radio leader Pandora (P) , which is set to launch an Apple Music rival and has been dealing with flatlining active listener growth, is down 2.5% in the wake of the report. Pandora sold off last week in response to soft results and guidance.
Amazon's (AMZN) recent launch of a streaming service that costs just $8 per month for Prime subscribers is said to apparently be "the biggest motivation" behind the price cut talks. Amazon charges non-Prime users $10 per month, and also offers a version of its service that only works with its Echo home assistants for $4 per month. The company's older Amazon Music service provides Prime subs with free access to a relatively limited song library.
In addition to Amazon, Alphabet's Google (GOOGL) has exacted some price pressure, albeit indirectly. The company's YouTube Red music service costs $10 per month, but also provides ad-free YouTube and a growing stable of original video content. Like Apple, market leader Spotify still charges $10 per month for its standard service, $15 per month for a family plan and $5 per month for student plans.