When the iTunes Music store debuted 16 years ago, digital music meant buying a CD and uploading it to a computer or illegally downloading a song from a file-sharing service. Apple changed all that by charging customers 99 cents for a song they could take with them wherever they went.
Over time, iTunes expanded into movies and podcasts, storing all forms of media in a single desktop application.
But that's not what today's customers want, and on Monday, Apple replaced its pioneering store on the Mac and integrated its library and store into three distinct apps -- music, podcasts and TV. The push comes as the tech giant races to catch up in the arena of subscription streaming services, which already has household names such as Spotify and Netflix.
"I see it as a logical, overdue realignment of media strategy," said Gene Munster, a managing partner with venture capital firm Loup Ventures. "Segmenting into apps makes most sense and helps them sell services."
Industry insiders have long predicted the iTunes Store's eventual demise as streaming media came to prominence and consumer tastes shifted.
"Customers love iTunes and everything it can do, but if there is one thing we hear over and over it's 'Can iTunes do even more?'" said Craig Federighi, senior vice president of software engineering, at the keynote speech kicking off Apple's annual Worldwide Developers Conference in San Jose on Monday. He showed what iTunes would look like if it integrated features like a calendar or email, but ultimately his team had a "better idea" -- spread the features across three apps for Mac users.
Sponsored Video Stories from LifeZette
When Mac users download the new operating system Catalina later this year, iTunes will no longer be on their desktop. Instead, users will go to the Music app to find their library of iTunes songs and the TV app to find their iTunes shows and movies. Downloaded audio stories will be found in the Podcasts app. IPhone users will still be able to access the iTunes Store app on their devices.
Apple might use the shift to expand subscription businesses in each app. The change might also allow Apple to focus on more customized features for each of its apps so they can better compete against their more specialized rivals.
"It's streaming competitors that have jolted the model," said Daniel Ives, managing director of equity research at Wedbush Securities. "The department store approach is not working in today's streaming environment, where Apple is not the only game in town."
Although Apple dominated the space for digital music purchases in its heyday, streaming music companies have hurt iTunes' business, pushing Apple to launch a subscription music service of its own, Apple Music, in 2015. Today, Apple Music has grown to more than 50 million paid subscribers, but it's still just half the amount of Spotify's global paid subscribers.