Apple’s Beats buy is two-sided for music streaming rivals

“Apple’s US$3 billion ($3.52 billion) purchase of headphone maker and music streaming company Beats Electronics sheds light on a rarely recognised reality in the music streaming industry – it’s hard to succeed without offering other products and services,” Ryan Nakashima reports for The Associated Press. “Streaming music companies like Beats Music, which charge users up to US$10 a month, can sometimes pay as much as 70 per cent of their revenue in artist royalty fees. It leaves little for advertising and promotional campaigns to explain to consumers the benefits of paying for a music service.”

“Even streaming leader Spotify – with 10 million paying customers worldwide – is reportedly burning through cash as it seeks to attract enough subscribers to turn a profit,” Nakashima reports. “Although analysts say Apple’s purchase is largely an acquisition of talent and a way to offset the declining popularity of iTunes song downloads, the company notes its main source of revenue has always been from devices; music is just a hook to make the devices more usable and attractive.”

“Observers believe Apple’s purchase of Beats could have both positive and negative effects for other streaming companies,” Nakashima reports. “On the one hand, if Apple pushes hard to promote streaming music subscriptions and makes the idea more acceptable to a broader audience that currently purchases downloads or acquires pirated music, the company’s efforts could help all music services… Even so, there’s a downside for the industry. Apple could easily devalue music subscriptions by running the service at a loss because it makes plenty of money elsewhere. Apple is likely to advertise and possibly offer bundled discounts to make Beats Music a bigger force… If Apple creates an even more attractive bundle for people who buy Beats headphones or Apple devices, stand-alone music services may find it tougher to compete.”

Read more in the full article here.

Related articles:
Apple paying under $500 million for Beats Music streaming service – May 30, 2014
With Beats, Apple has its next iPod – May 29, 2014
Jimmy Iovine: Apple’s new music impresario – May 29, 2014
Tim Cook: Beats acquisition a ‘killer’ deal for Apple – May 29, 2014
Did Tim Cook just pay $3 billion for his successor, Jimmy Iovine? – May 29, 2014
Steven Levy: With Beats Music service, Apple’s Tim Cook goes against the wisdom of Steve Jobs – May 29, 2014
Apple + Beats = MTV? – May 29, 2014
Eddy Cue and Jimmy Iovine: Steve Jobs would be extremely proud of Apple today – May 29, 2014
Jimmy Iovine brings his own brand of ‘reality distortion field’ to Apple – May 29, 2014
JPMorgan: Apple may spin-off Beats Electronics business – May 29, 2014
Apple CEO Cook: Beats deal a ‘no-brainer’ – May 28, 2014
Tim Cook’s internal memo to Apple employees regarding Beats acquisition – May 28, 2014
It’s official: Apple acquires Beats Music and Beats Electronics for $3 billion – May 28, 2014

21 Comments

  1. I still posit the decline in iTunes downloads is that the market is saturated. By now, nearly everyone has nearly every song they ever wanted. I agree with Jobs when he noted people don’t want to rent their music, they want to own it.

    1. Don’t be stupid. There are tens of thousands of songs I don’t have, and thousands being added every month, and even if I spent every last penny I earn, I could never keep up with all the music that’s out there, and is yet to appear.
      I have several hundred CD’s, and 16,000 songs in iTunes, there are millions out there.
      Nobody could own everything.

        1. please don’t misinterpret my admiration and love for iTunes, 20 years ago the wealthiest man could not have my music collection that is at my behest anywhere I go at the click of a mouse or a touch on glass.

          It’s just business, and that business has been saturated.

  2. Here’s the skinny on the purchase: Apple has a tech coming out that requires the headphones to be involved (think wearable computer, biometric, and controlling functions with a turn or tip of your head.) They’re nervous that people don’t use their EarPods enough. This purchase lets them link with the largest headphone seller around (for phones above $100) and therefore to incorporate the patented tech at the debut.

    Granted, it’s a guess. But I’d put money on it.

    1. We have not seen the miniature possibilities for audio devices yet. Medical innovation today gives a clue as to what is possible.

      It should be possible for an audio notification to the ear from a miniature device smaller than a hearing aid today.

      We can expect implantable notification devices today much as miniaturized heart pacemakers are now being developed to be inserted via a catheter and recharged wirelessly.

      We’ve only just started into the next generation of personal comm-products.

  3. The idea that iTunes downloads is decreasing is sheer nonsense. The rate is still increasing. The average downloads per account is decreasing but why anyone would expect that to increase is beyond me. As Apple expand to newer territories, begin capturing price conscious customers, it is obvious that many of those new clients will not be buying songs through iTunes.
    We will have to see if the addition of Iovine and Dr. Dre can add another aspect to the music business to help generate more sales and growth for Apple.
    The hardware aspect will be interesting. Clearly a big money maker with large margins and considered cool and hip for many people. So although people are discounting this aspect it could help Apple build out another layer of accessories.
    The software aspect could take longer to evolve. If Apple merge iTunes Radio with the new acquisition then they may be onto something interesting.

      1. Dr Dre:

        “I’ma say this and I’ma gettin mine. If you ain’t down for the Africans
        here in the United States, period point blank. If you ain’t down for the
        ones that suffer in South Africa from apartheid and shit. Devil you need to
        step your punk ass to the side and let us brothers and us Africans step in
        and start puttin some funk in that ass”

        Cole Porter

        “Night and day, you are the one
        Only you beneath the moon, under the sun
        Whether near to me or far
        Doesn’t matter baby, where you are
        I think of you day and night

        Night and day, why is it so?
        That this longing for you follows wherever I go
        In the roaring traffic’s boom
        In the silence of my lonely room.”

          1. how does the second stanza of the same “composition” strike your fancy:

            “They wonder where me bailin and don’t really understand
            The reason why they take me life and me ???? hand
            Me not out for peace and me not Rodney King
            Me gun goes click, me gun goes bang
            Them riot in Compton and them riot in Long Beach
            Them rion in they Lakers and don’t really wanna see
            niggaz start to loot and police start to shoot
            Lock it down at seven o’clock, then again it’s like Beirut
            Me don’t show no love cuz it’s us against them
            Them never ever love me cuz it’s sport to break de,
            and kill at my own risk if I may
            Delay to spray with my AK and put it to rest “

            1. War poetry is disturbing, like Frank Zappa’s social commentary, about the Watts riots, set to music in 1966, the year I was born:

              Well I’m about to get sick
              From watchin’ my TV
              Been checkin’ out the news
              Until my eyeballs fail to see
              I mean to say that every day
              Is just another rotten mess
              And when it’s gonna change, my friend
              Is anybody’s guess

              So I’m watchin’ and I’m waitin’
              Hopin’ for the best
              Even think I’ll go to prayin’
              Every time I hear ’em sayin’
              That there’s no way to delay
              That trouble comin’ every day
              No way to delay
              That trouble comin’ every day

              Wednesday I watched the riot . . .
              Seen the cops out on the street
              Watched ’em throwin’ rocks and stuff
              And chokin’ in the heat
              Listened to reports
              About the whisky passin’ ’round
              Seen the smoke and fire
              And the market burnin’ down
              Watched while everybody
              On his street would take a turn
              To stomp and smash and bash and crash
              And slash and bust and burn

            2. at least it rhymes…that requires a modicum of discipline.

              Miss Jane, it is probably best you do not ally with me, you will be raked upon the coals for guilt by association. A fallacy preferred by my adversaries. No place for a lady.

            3. Hey, you know something people?
              I’m not black
              But there’s a whole lots a times
              I wish I could say I’m not white

              Well, I seen the fires burnin’
              And the local people turnin’
              On the merchants and the shops
              Who used to sell their brooms and mops
              And every other household item
              Watched the mob just turn and bite ’em
              And they say it served ’em right
              Because a few of them are white,
              And it’s the same across the nation
              Black and white discrimination
              Yellin’ “You can’t understand me!”
              ‘N all that other jazz they hand me
              In the papers and TV and
              All that mass stupidity
              That seems to grow more every day
              Each time you hear some nitwit say
              He wants to go and do you in
              Because the color of your skin
              Just don’t appeal to him
              (No matter if it’s black or white)
              Because he’s out for blood tonight

              You know we got to sit around at home
              And watch this thing begin
              But I bet there won’t be many live
              To see it really end
              ‘Cause the fire in the street
              Ain’t like the fire in the heart
              And in the eyes of all these people
              Don’t you know that this could start
              On any street in any town
              In any state if any clown
              Decides that now’s the time to fight
              For some ideal he thinks is right
              And if a million more agree
              There ain’t no Great Society
              As it applies to you and me
              Our country isn’t free
              And the law refuses to see
              If all that you can ever be
              Is just a lousy janitor
              Unless your uncle owns a store
              You know that five in every four
              Just won’t amount to nothin’ more
              Gonna watch the rats go across the floor
              And make up songs about being poor

              Blow your harmonica, son!

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