The reason for Apple’s $3.2 billion interest in Beats? Spotify

“Why would Apple want to buy Beats Electronics?” Sam Gustin writes for TIME Magazine. “It’s a question many tech observers have been asking since the Financial Times reported Thursday that the Silicon Valley behemoth is ‘closing in’ on a $3.2 billion acquisition of the ‘high quality’ headphones maker founded by music producer Jimmy Iovine and hip-hop artist Dr. Dre.”

“Apple’s iTunes service long dominated digital music sales, but the company never quite figured out how to present a streaming music product. Apple’s flagship music brand iTunes has been criticized over its user interface — so it makes sense that the company would be eager for outside help,” Gustin writes. “At $3.2 billion, the Beats deal would be more than three times larger than any acquisition in Apple’s history.”

“For Apple, the streaming music service that Beats recently launched may be the most attractive part of the deal. Apple revolutionized digital music with the iPod and iTunes, but the company has yet to find a new formula to challenge Spotify, the streaming music darling of the moment,” Gustin writes. “‘This is a reactive move — at best,’ writes veteran tech journalist Om Malik. ‘Steve Jobs’ Apple would have pushed to make something better, but even he struggled to come to terms with the Internet and Internet thinking. That hasn’t changed.'”

“Subscription services are growing faster than any other area of the music industry. Music subscription revenue increased by 50% to $1.1 billion in 2013, according to a report by IFPI, the global music industry association, cited by my colleague Eliana Dockterman. Downloads fell 2% last year, in the first annual decline since Apple launched the iTunes store in 2003,” Gustin writes. “This situation raises a now-familiar question: What’s up with innovation inside Apple?”

Read more in the full article here.

MacDailyNews Take: The following video, “Dr Dre On His Way To Being The First Hip Hop Billionaire: Dre & Tyrese Announce Apple Buying Beats For $3.2 Billion,” contains language that may not be safe for work (NSFW), depending on where you work:

Related articles:
If Apple’s really buying Beats, here’s hoping it’s brilliant in a way which isn’t immediately obvious – May 9, 2014
The reason for Apple’s $3.2 billion interest in Beats? Spotify – May 9, 2014
Apple buying Beats Electronics: Its best idea since the iPad? – May 9, 2014
Why would Apple want to blow $3.2 billion on Beats Electronics? – May 8, 2014
Apple in talks to buy Beats Electronics for $3.2 billion – May 8, 2014

32 Comments

      1. I don’t speak out of my ass Hugo. Never. This time I’ll humor you. Read the Apple Insider article. An insider aware of Beats’ contracts says as much. I’m not going to footnote my every comment in a blog, FYI. You’re going to have to deal with that.

  1. Maybe Apple wants to make Beats be somehow exclusive to Apple products and provide functionality that will be unlocked when using Beats + Apple. T his would influence market buying behavior towards Apple products. I don’t know why we all of a sudden think that Tim Cook is off his rocker. He clearly has bigger plans than any of us know about.

  2. There was a time when I thought that subscription-based services just weren’t good business plans, but I’m starting to change my tune (sorry, bad pun).

    I think that in general people want to own their music and not rely on connectivity to the Internet or having to shell out money each and every month to hear what they want. For the music you really truly love, that will always be true.

    But, after 10 years of buying digital music I’ve come to realize that that I pretty much own every song I really love. I’ve reached an age where the new stuff isn’t that compelling — or I get sick of it pretty quick. And then there are thousands of songs I kind of sort of like but would not choose to own.

    The subscription model solves this, especially when you consider the ubiquity of high speed cellular networks that also didn’t really exist even five years ago nationwide.

    Having the true streaming “on demand” option from Apple, if priced right, would give me the best of both worlds and these days I’ve got the disposable income to rent and buy as I see fit.

    1. I think you are correct people are changing from purchasing the tracks they love to finding better ways of discovering music/artists they have never heard of. One of those cases where Apple hits the fatality curve of outright innovation and clear thinking into total self conscious denial. In such moods once they reject something they tend to refuse to even consider if it could be transformed into something desirable. Strange conflicting company at times.

      1. Will we, one day, rethink subscription-based television as some are rethinking the music scene?

        Napster came. iTunes painted a more righteous legal way for mp3 music. Yet, in terms of television and movies; sort of a Napter mindset has been reborn. This movement does express that generally, people do enjoy and want content ondemand. However, without the interruption of commercialism and high subscription prices. There is wide spread of Android applications outside of GooglePlay that cater to this trend. Cable is dieing and being replaced by internet wireless still the cable companies are wise to this and are keeping up with change.

        In my opinion, piracy is way out of control, and a pay per view or subscription to content you want is the right way to stay. Buying a seasons pass on iTunes is perfect.

    2. I’ve been gathering a music collection for as long as I can remember, but I don’t have any trouble finding bands I love just as much as the ones I’ve already downloaded. Just found a band called and so I watch you from afar. Great music. I still want to own it in my library. I also don’t buy it, I torrent it, so that might be why I don’t mind so much. I also use music streaming services, but it’s more or less a place to find new music, not listen to the current stuff I have. So, I don’t think this new model is going to get rid of owning music. I think it’s more a new way to listen to music and it’s gaining traction. So all the numbers will show that it’s increasing in popularity, but I never see the overall numbers. Like how many people listen to streaming services vs how many listen to personal library. And that’s still not the overall picture cause I do both.

      1. Streaming is taking the place of conventional broadcast radio, at least as far as music discovery is concerned. Broadcast radio, for decades, was the place to discover new music. But people are listening to broadcast radio less and less, primarily because you can’t get music on demand that way. It’s the on-demand part that is cutting into online music sales.

  3. Apple is already ahead of Spotify in subscriptions with iTunes Radio, so I don’t know what this bozo is talking about. Innovation is strong with Apple as all companies follow Apple. June should bring some muzzles to these doubters.

  4. As I keep saying like it or not its all about perception and in that regard Apple has been falling behind. The epitome of that is the mundane to poor marketing and advertising in recent years so reminiscent of the entrenched greyness of Microsoft in some cases if far more beautifully shot. Needs to be fresh assertive presentation so that as in the past the claims of conservatism and lack of innovation simply make those who mouth them look stupid because the comments will never go away, they have always been there.

  5. If this is real, if it really isn’t just a rumor echoing through the interwebs, my opinion of Mr Cook will plummet, and I’d sell my shares if I’d been smart enough to buy any.

    Don’t buy crap, Apple. It is beneath you.

  6. After watching that video:

    Are those really the type of people Apple wants to be involved with? Does Apple really want to taint their image and brand with that sort of thing?

  7. the only way this makes sense is if this is a clever way for Tim to siphon billions of dollars from Apple with Tim getting a huge three BILLION dollar kickback from Beats. Dre and Jimmy get to keep the .2

    see! everyone thought Tim was timid. He’s gagnsta all the way

  8. Hip-hop-old-pop. He’s tried this kind of thing before. Seems like another opportunist publicity stunt to make another million— or billion. 10 years ago there was an interview with Doc Dre in Fortune or somewhere, around the time of U2 iPod, saying he’s been hobnobbing with Apple, rapping with Steve about an Apple Beats inspired headset or something. Its in the archives somewhere. Maybe he’s hoping Google are stupid and desperate enough to swoop in and hand him $4 billion bucks to clinch the supposed deal. Like the world is bored and tired with iTunes and needs an exciting subscription service like his.

  9. DUDE, APPLE BEATS – SAY IT LOUD! put an emphasis on the word BEATZZZZZZ and drag it out… APPLE BEATZZZZZZZZZZZ.

    I wonder if they will take the Beats out of HP and HTC products. The only thing I have ever been jealous of a PC about was BEATS built in.

    Just a little red ring on the headphone jack of the iPhone could signify Apple BEATZZZZZZZZ, and boom – there’s extra value in that them there iPhone pushing it past 60 million units per quarter.

    All you all who don’t understand this brilliant brand mashup just don’t get how perfect they go together.

    My one caveat – I remember Steve being so proud of that black speaker system with just a volume knob – that product didn’t take off, and really put Apple of audio gear. My clear apple speakers that were powered off the G4’s speaker amp were DOPE. Apple should def. get back into audio equip.

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