Apple's iTunes scores U2's new album. You score it free

Every iTunes customer -- more than 500 million people, but who's counting? -- get the band's new album free in what CEO Cook calls the largest record release in music history.

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U2 debuts new album and makes available for free on iTunes
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A half billion people are getting a new album in their iTunes library, as U2's first new LP in five years is distributed free for all iTunes users, the company said Tuesday at an event unveiling new iPhones and the Apple Watch .

The album, "Songs of Innocence," is available throughout the day in iTunes customers' music library. To begin listening, customers only need to click to play. The album will also be on Apple's iTunes Radio and Beats Music.

"It makes music history because it's the largest album release of all time," Apple Chief Executive Tim Cook said, as he noted the iTunes release will touch more than 500 million customers. The album is exclusive to Apple's platforms through October 13.

However, a release on such a grand scale wasn't without hiccups. Customers made reports on Twitter and other social networks about their attempts to download the album crashing. Apple didn't immediately respond to a message seeking comment.

Apple and its executive team have long had a close relationship with U2. Bono, U2's lead singer, was close with former Apple CEO Steve Jobs. In 2004, the company and the band released a special edition iPod with a facsimile of the band members' signatures on the back. Apple and U2 were also partners on lead singer Bono's Product (RED) charity, and they introduced another special edition iPod, this time a red iPod Nano, to support the global fund to fight AIDS, tuberculosis, and malaria in 2006.

Jimmy Iovine, Apple's newest employee, was U2's handler at its music label, the Universal Music Group, before he turned his attention to the Beats headphone and music streaming service created with rapper Dr. Dre. Apple bought Beats for $3 billion in November.

Tuesday's event, taking place at the Flint Performing Arts Center in Apple's hometown of Cupertino, Calif., was one of the most anticipated technology product launches of the year, as consumers, analysts, and investors have awaited Apple's introduction of "amazing" new products that Cook has promised for more than a year.

Apple revolutionized the music business with iTunes, and the platform -- especially app sales -- remains key to the company's efforts to build its ecosystem. Overall iTunes revenue continues to grow, but music hasn't been doing as well. Sales of digital downloads generally have been stagnating while streaming music services have been rising in popularity.

In 2011, US digital downloads climbed 17 percent to $2.6 billion, with album download sales rising 25 percent, according to the Recording Industry Association of America. Last year, though, permanent digital downloads fell 1 percent to $2.8 billion, while streaming music grew 39 percent to $1.4 billion in the US, the RIAA says.

Apple doesn't break out the different parts of iTunes sales, but analysts believe growth is coming from apps instead of the music side. J.P. Morgan analyst Rod Hall estimates iTunes content sales declined by about 8 percent for all of calendar 2013 and by more than 25 percent in the second half of the year. Streaming now represents 21 percent of total industry revenue, versus just 3 percent in 2007 when Apple then-CEO Steve Jobs said "customers don't seem to be interested in it."

"This illustrates just how big a problem Apple has with their music business given the rapid growth of streaming services like Pandora and Spotify," Hall noted in mid-May.

Apple founder Jobs was defiant about subscription music for years. He called the subscription model "bankrupt" in Rolling Stone in 2003 and told Reuters "people want to own their music" in 2007. Jobs' death in 2011 didn't precede the introduction of subscription music services -- Spotify launched in Europe a full five years earlier -- but it did precede the turning of the mainstream tide toward them.

Apple hasn't shunned the streaming business entirely. In September, it launched iTunes Radio, a Pandora-like streaming radio service that generates revenue from advertising -- and from sales promoted by a big red and green "BUY SONG" link included on the screen while a tune plays. Apple's purchase of Beats brings the company its first-ever music subscription model, but since the deal closed at the beginning of August, little has changed other than promotion of the Beats service with current iTunes users and of its headphones in Apple's online store.

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Bono fronts U2's performance at Apple's event, which marked the free launch of their new album through iTunes. James Martin/CNET

The company also has disputed worries about iTunes song downloads are falling off a cliff. Eddy Cue, Apple's head of iTunes, said in late May that talk that music sales "are going away or going down is way overrated." He noted that Apple just sold 35 billion songs.

"The rate is leveling off, that's true," Cue said. "We think music subscriptions [which Apple gains through its Beats acquisition] is the third thing we bring to the table, but we wanted to do it the right way. We have a lot of ideas."

Up until today, Cook, who took over as CEO from Steve Jobs three years ago, hadn't taken the company into new markets beyond those established by his former boss. The company hadn't entered a new category since Jobs unveiled the "magical" iPad tablet in 2010, and its new versions of the iPhone, iPad and Macintosh computer have lacked revolutionary changes that could help turn a tide of slowing profit and revenue growth. Though Apple has been generating about two-thirds of its sales from the iPhone and iPad, the markets for those gadgets are becoming saturated, with a host of rivals including Amazon, Google, Microsoft, and Samsung battling for customers and the billions they spend on mobile devices.


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