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Apple: Will It Finally Have Unlimited Music For Users?

CNBC.com

Apple is reportedly in talks with music industry giants to strike a deal to offer unlimited music to its customers which would be a dramatic shift from its business model of selling individual songs and albums.

According to the Financial Times, Apple is considering offering unlimited access to the millions of songs in its iTunes library via a subscription service on its iPhones, billed through the mobile carriers, or pre-loaded onto iPhone and iPod devices sold for a premium. Apple told me "we do not comment on rumors and speculation."

This rumor is as old as iTunes itself, Jupiter Research's Michael Gartenberg points out. And that's because it makes sense: this would boost gadget sales, while tying in a music purchase that could get more from iPod users who don't spend much on music.

According to Ingrid Ebeling at JMP Securities, Apple has sold only about 20 songs for each iPod its sold. Which means people are uploading their music from CDs and illegally downloading music. ITunes could snag more of the market.

And it does all comes down to selling more gadgets. Now it takes just a slim margin to drive sales on its bigger-ticket, higher margin gadgets. And Ebeling also tells me that an estimated 20 to 25 percent of the population would pay for a premium service.

These reported negotiations are similar to the deal Nokia struck with Universal Music in December to pre-load music on certain handsets launching mid year for a premium. Now Nokia is trying to make deals with other music carriers. It's been reported that Nokia is offering its music partners $80 per unlimited handset, while Apple is only offering $20--which would be, as you could imagine, a sticking point.

But the music industry is in such a pinch--battling declining CD sales and trying to boost digital music revenues that have yet to compensate for the decline--they may have no choice but to strike a deal with Apple.

We haven't been able to get any of the music labels to comment on the record, but an industry source weighed in, saying: "negotiations are going on with many of the majors, but where they stand, I couldn't stay."

I will say, that based on concerns about making forward-looking statements, it seems pretty clear that the negotiations are no rumor. How far along a deal is, we'll see.

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.