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Apple emphasizes acquisition of Beats Music streaming service in blockbuster announcement

post #1 of 109
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While Beats may be best known for its headphones, Apple made it clear in announcing its $3 billion acquisition of the company on Wednesday that its real interest lies in the subscription Beats Music streaming service, which will complement Apple's existing iTunes offerings.




The Beats Music product received top billing over Beats Electronics in Apple's press release announcing the deal, even though the headphone making side of the business is the brand's most recognizable role.

Apple said it plans to keep the subscription Beats Music service intact, alongside the existing iTunes Radio free streaming, and song purchasing through the iTunes Store. The company emphasized that the deal will make its music lineup "even better," in the words of iTunes and online services chief Eddy Cue.

Apple also touted the experience of Beats co-founder Jimmy Iovine in the music industry, noting that he has already been an "instrumental partner" for Apple and iTunes for over a decade.

Alongside the confirmation of the Apple acquisition, Beats on Wednesday updated its iPhone application with a lower annual subscription price of $99.99, down from the previous cost of $120. Monthly access without a yearly subscription is still available for $10 per month.

The purchase comes as sales of iTunes content have been slumping. New data released earlier Wednesday showed that monetization of Apple's online services declined an estimated 24 percent year over year in the first quarter of 2014.

Beats Music got off to a slow start, with just 110,000 subscribers as of March, but the fledgling operation did have an impressive subscription conversion rate: Just 0.17 percent of the 183 million tracks played on Beats Music in March were accessed by non-paying customers. Beats Music currently comes with a free 7-day trial, allowing users to sample the service before they commit to a month or full year.

When word of the deal first leaked earlier this month, industry watchers were baffled as to why Apple would make a play for Beats. Critics contended that Beats' bass-heavy headphones were a relatively niche market, and felt that the company was mostly driven by the Beats image and brand. Apple already has plenty of brand cachet, they said.


Photo via Paul Stamatiou.


But supporters of the deal were quick to point out that the newly launched Beats Music service is a unique and valuable offering that's different from Apple's established iTunes Store and iTunes Radio. Consumers' music listening preferences have been changing, and users have increasingly preferred low-cost subscription services like Spotify over paying for each individual album they want to hear.

Like Spotify, Beats Music allows users to play the songs and albums they choose on demand. It also features a unique "personalization engine" that recommends tracks to users.

Those products will now be available from Apple in addition to the free ad-supported iTunes Radio, which users can listen to ad-free with a $24.99-per-year iTunes Match subscription. And Apple's market leading iTunes Store -- which sells individual songs for between 69 cents and $1.29, along with full albums and deluxe editions -- will remain for those who prefer to own their music outright.
post #2 of 109
This is really probably more of an acqu-hire. Apple really needs someone like Jimmy Iovine to pick up where Jobs left off negotiating with the media companies. The brand and the streaming service is worth something, but the ability to make the labels and studios happy is an art that can't be managed the same way as fine tuning supply chains and creating great user experiences.
post #3 of 109

Hah. 110k paid users ~ $30,000 per user. 

Nicely done, Tim!

And good to know where my money go when I decide to upgrade my smartphone next time.

post #4 of 109

There's nothing "blockbuster" about hiring of 2 people for $3 B. It just shows how poorly Cook manages Apple.

post #5 of 109
Still do not see the value, we all seen it before, music consumers are fickle bunch and they will jump ship with every wind direction change. Over the years look at all the various methods people used to obtain and consume music content. Beats music service and just the new kid on the block and people will get tired of it and move on to the next greatest things someone comes up with.

There is no stickiness with music listeners
post #6 of 109
"users have increasingly preferred low-cost subscription services like Spotify over paying for each individual album they want to hear"

Who buys individual albums? Almost all the songs in iTunes can be individually purchased and have been that way for a long time. I know that companies want people to get into the per month subscription services though because they make more money over time and most people, once on the subscription, find it difficult to give up which means they are hooked. Gotta love it!!!
post #7 of 109
Quote:
Originally Posted by jason98 View Post
 

Hah. 110k paid users ~ $30,000 per user. 

Nicely done, Tim!

And good to know where my money go when I decide to upgrade my smartphone next time.

Well, the pundits were complaining for a long time that Apple hadn't spent it's money on something.  I guess they showed the pundits!!!

post #8 of 109
I think apple has been had by Iovine.
Unless there is some thing totally Hidden to the public.. This does not add up !
post #9 of 109
Quote:
Originally Posted by bighype View Post

There's nothing "blockbuster" about hiring of 2 people for $3 B. It just shows how poorly Cook manages Apple.

Did you even read the article? I didn't think so. You just read the headline and made dumbass assumptions from there. Glad you don't run Apple.

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post #10 of 109
What EXACTLY does it stream? Rap and Hip hop? Anything else?
 
Where's the new Apple TV?
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Where's the new Apple TV?
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post #11 of 109

Couldn't they have just bought this for $500mil and left the headphones out of it?  I assume they tried their damndest but to get Iovine, they had to buy the headphones...

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2012 27" iMac i7, 2010 27" iMac i7, 2011 Mac Mini i5
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post #12 of 109
Quote:
Originally Posted by Maestro64 View Post

Still do not see the value, we all seen it before, music consumers are fickle bunch and they will jump ship with every wind direction change. Over the years look at all the various methods people used to obtain and consume music content. Beats music service and just the new kid on the block and people will get tired of it and move on to the next greatest things someone comes up with.

There is no stickiness with music listeners

I agree, there has to be a lot I am missing on this as I think this  is a bad buy on Apple's part. I hope Tim has a plan that I either can't comprehend or know about yet to make this acquisition a good one for Apple.

"A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools." Douglas Adams

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"A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools." Douglas Adams

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post #13 of 109
Remember how Beyonce releasing an album first on iTunes was a massive hit?

That's going to happen again, and again, and again.

Do you know how people think Pandora better selects music for the listener than iTunes Radio?

That's going to change, too.

This is a brilliant deal, for a multitude of reasons. Though, I would've preferred to see it happen for $2.5b.

It's a great time to be a shareholder.
post #14 of 109

Wow! People are overreacting to this. Good lord, this about a tiny portion of Apple's business. I suppose this is typical for anything involving Apple though?

 

First of all, whenever Apple buys a company there's a lot going on in the background that we do not know about and won't until Apple decides to release a feature or product.

 

I'm sorry, but if Apple feels the deal was worth $3 billion then they see something real and valuable in the company, brand, employees and products they produce. Can anyone please think of a time that Apple wasted money acquiring a company?

 

You people need to get a life and stop all this whining - Apple deserves the benefit of the doubt.


Edited by mjtomlin - 5/28/14 at 2:53pm
Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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post #15 of 109
Couldn't Apple have hired someone for $3Bil to fix iTunes - the resource intensive hog that it is?
 
Where's the new Apple TV?
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Where's the new Apple TV?
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post #16 of 109

SAMSUNG'S INFERIOR ANNOUNCEMENT TODAY BECAME MORE INFERIOR WITH THIS APPLE NEWS. :d

post #17 of 109
Quote:
Originally Posted by rmgt008 View Post

Remember how Beyonce releasing an album first on iTunes was a massive hit?

That's going to happen again, and again, and again.

How could Apple have done that without Iovine's industry relationships? /s

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post #18 of 109
Quote:
Originally Posted by mjtomlin View Post
 

Wow! People are overreacting to this. Good lord, this about a tiny portion of Apple's business. I suppose this is typical for anything involving Apple though?

 

First of all, whenever Apple buys a company there's a lot going on in the background that we do not know about and won't until Apple decides to release a feature or product.

 

I'm sorry, but if Apple feels the deal was worth $3 billion then they see something real and valuable in the company, brand, employees and products they produce. Can anyone please think of a time that Apple wasted money acquiring a company?

 

You people need to get a life and stop all this whining. 

I personally have no opinion on whether it's worth it or not - we really don't know what Apple's plans are (as usual).

 

I'm only negative on the quality of the Beats headphones - I don't want Apple to be manufacturing crap like that, with such bad bad sound. I would hope Apple would go in the other direction, like Neil Young's Pono project (high-resolution sound).

post #19 of 109
Quote:
Originally Posted by Andysol View Post

Couldn't they have just bought this for $500mil and left the headphones out of it?  I assume they tried their damndest but to get Iovine, they had to buy the headphones...

The answer to that is maybe but it sounds like you're assuming Apple doesn't want their HW brand, IP, revenue or profits.

In the end this is a small buy for the world's wealthiest company when you compare it to excessive purchases that others have made for companies that either can barely turn a profit, or more often, are taking a heavy loss each quarter. Based on the rumored data Beats is makign a lot of revenue and profits that will not result in a net loss for the company. Can the same be said for Google's Motorola purchase?

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #20 of 109

Just in time for WWDC !
More than 100 technical sessions presented by Dr Dre !

post #21 of 109
Quote:
Originally Posted by SolipsismX View Post


The answer to that is maybe but it sounds like you're assuming Apple doesn't want their HW brand, IP, revenue or profits.

In the end this is a small buy for the world's wealthiest company when you compare it to excessive purchases that others have made for companies that either can barely turn a profit, or more often, are taking a heavy loss each quarter. Based on the rumored data Beats is makign a lot of revenue and profits that will not result in a net loss for the company. Can the same be said for Google's Motorola purchase?

You're def. right- it's a drop in the bucket for Apple.

 

But it's Apple- we love to support, condemn, question, agree, and just flag out talk about them.  ;)

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post #22 of 109
Quote:
Originally Posted by elroth View Post

I don't want Apple to be manufacturing crap like that, with such bad bad sound.

You should listen to something with Apple's EarPods and then listen with Beat's urbeats. Even compare with Apple's in-ear phones for a more equivalent price and it's unlikely that Beats won't win in design, quality, and sound.

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #23 of 109
Quote:
Originally Posted by Andysol View Post
 

Couldn't they have just bought this for $500mil and left the headphones out of it?  I assume they tried their damndest but to get Iovine, they had to buy the headphones...

The Beats hardware division has high margins, presumably is one of the more profitable parts of the business. It's not a burden even if that might end up being the least interesting component to Apple.

 

Iovine and Dr. Dre's connections to the music industry are the most valuable part of the deal. If those two took off after the acquisition, Apple would have a fledgling streaming music service and some headphones. That's why Apple got Iovine and Dr. Dre's commitment to stay with Beats.

 

Whether or not Beats headphones are "any good" -- in terms of audio quality -- is irrelevant. The Beats brand's coolness is driven by Dr. Dre and Iovine's ability to enlist top contemporary talent to promote the brand.

 

Interestingly, the after-hours stock market is barely registering to the news (+0.03%) so it appears the rumor may have already been baked into the current stock price.

post #24 of 109
Quote:
Originally Posted by ihxo View Post

Just in time for WWDC !

More than 100 technical sessions presented by Dr Dre !

CWA (Coders with Attitude)? Will be get to learn how to bust a caps lock in someone's ASCII?

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #25 of 109
Quote:
Originally Posted by elroth View Post
 

I personally have no opinion on whether it's worth it or not - we really don't know what Apple's plans are (as usual).

 

I'm only negative on the quality of the Beats headphones - I don't want Apple to be manufacturing crap like that, with such bad bad sound. I would hope Apple would go in the other direction, like Neil Young's Pono project (high-resolution sound).

 

I'd wager that's why Apple is keeping Beats a separate brand. But I'd also like to say, that sound "quality" is not what's registered on meters but what sounds pleasing to the person hearing it. If Beats strikes a cord with a certain demographic, what's wrong with that? Apple has never produced anything that EVERYONE likes - it would be impossible for any company to do that. Beats offers a brand that is popular with younger kids... and what starts in urban areas eventually spreads to the suburbs then rural areas as well.

 

Steve Jobs used to go on and on about the high quality of iPod's earbuds and how excellent they sounded - and guess what, they have always just been, meh. They weren't horrible, but they certainly weren't the best on the market, or even near it.

Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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post #26 of 109
So let me get this straight, Beats has 110,000 subscribers while iTunes has 800 million credit cards on file and beats is worth 3 Billion how again?
post #27 of 109
Quote:
Originally Posted by ihxo View Post
 

Just in time for WWDC !
More than 100 technical sessions presented by Dr Dre !

 

Screw that... a live performance from a reunited N.W.A. (of course without Eazy-E).

Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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post #28 of 109
Quote:
Originally Posted by jason98 View Post
 

Hah. 110k paid users ~ $30,000 per user. 

Nicely done, Tim!

And good to know where my money go when I decide to upgrade my smartphone next time.

 

The word that seems to be missing from Jason's vocabulary is... accretive, as in, Cook indicated that the Beats deal will close at the end of Apple's fiscal 2014 and will be accretive to earnings in 2015.  So those Beats headphones really are a part of the deal, much as his $30,000 per user calculation would value them at $0.00.

 

You can imagine that Beats premium -priced headphones and earbuds, portable speakers, and car audio products, in the hands of Apple and with Apple's huge global market presence behind them, will sell in even greater quantities than Beats has been able to muster on its own.  And now those Beats products you already see in Apple stores will deliver all of their profits to Apple rather than the marginal share Apple gets from selling them in their stores today.

I don't care about what the ignorant masses perceive as truth. I'm concerned with the facts on the ground.
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I don't care about what the ignorant masses perceive as truth. I'm concerned with the facts on the ground.
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post #29 of 109

And "acqu-hire" makes no sense at 3 billion if they get sick and die. Someone point me to an acqu-hire anywhere that went for anything like this.

post #30 of 109
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Originally Posted by SolipsismX View Post

CWA (Coders with Attitude)? Will be get to learn how to bust a caps lock in someone's ASCII?
With this quote you have won the internet!

Everyone else..thanks for playing.
You can't spell appeal without Apple.
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You can't spell appeal without Apple.
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post #31 of 109
Quote:
Originally Posted by Eric Swinson View Post

This is really probably more of an acqu-hire. Apple really needs someone like Jimmy Iovine to pick up where Jobs left off negotiating with the media companies. The brand and the streaming service is worth something, but the ability to make the labels and studios happy is an art that can't be managed the same way as fine tuning supply chains and creating great user experiences.

Who do you think managed supply chains for Steve Jobs? You either don't understand what supply chain means or you are clueless about Tim's role in working closely with Steve. Are you serious in you delusion that Steve created all user experiences? And what great experience have you missed out on since his death? What basis do you have that Iovine is going to provide that for you?
post #32 of 109

Here is another issue to consider, more and more consumers are actually signing up for XM/Sirius and most people listen to music in their cars, and you can access your Sirius account on mobile devices so how many subscription services are people going to pay for. 

 

http://www.forbes.com/sites/greatspeculations/2013/04/12/can-sirius-xm-tune-in-big-subscriber-growth-this-year/

post #33 of 109
Quote:
Originally Posted by Chandra69 View Post
 

SAMSUNG'S INFERIOR ANNOUNCEMENT TODAY BECAME MORE INFERIOR WITH THIS APPLE NEWS. :d

 

$3 billion to upstage Samsung?

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GOA

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Proud AAPL stock owner.

 

GOA

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post #34 of 109
Perhaps the article could have mentioned Beats Music's recent history. Beats acquired the music service MOG, with the intention to shut it down and replace it with a new service. MOG was regarded as one of the highest-quality streaming music services available (320 kbps), with a very large library of music and compatibility with Sonos music players, among other devices and set top boxes.

Unfortunately, after acquiring MOG, the new Beats Music doesn't stream anywhere near 320 kbps so they can no longer claim they have the best quality streaming. I believe Google Play is among a very short list of services that stream at or above 320 kbps.

Beats is distinguishing itself by curating its playlists, unlike MOG, who distinguished itself by having superior audio quality. I don't find that to be a fair trade.

After Beats revamped and started shutting down MOG, they made sure Sonos and others could continue to stream Beats Music content. Will Apple cut the ability to stream Beats Music on non-Apple devices? I think that would be unfortunate.
post #35 of 109
Quote:
Originally Posted by mjtomlin View Post
 

 

Screw that... a live performance from a reunited N.W.A. (of course without Eazy-E).

 

They were interesting in their time (purely for their controversial message), but NWA today would be a shame.

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GOA

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Proud AAPL stock owner.

 

GOA

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post #36 of 109
Quote:
Originally Posted by SolipsismX View Post


CWA (Coders with Attitude)? Will be get to learn how to bust a caps lock in someone's ASCII?

 

Awwwww, yeah BOOOOOY!

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #37 of 109
Quote:
Originally Posted by Maestro64 View Post

Still do not see the value, we all seen it before, music consumers are fickle bunch and they will jump ship with every wind direction change. Over the years look at all the various methods people used to obtain and consume music content. Beats music service and just the new kid on the block and people will get tired of it and move on to the next greatest things someone comes up with.

There is no stickiness with music listeners

 

That next new thing will first need to sign up the music content owners to acquire a catalog of music.  Apple's catalog, last I checked, was on the order of 26 million tracks, which is 26x Pandora's BTW.  It will need to offer the content owners something better than what Pandora, for example has negotiated, as Apple came in after Pandora made its deals and made deal that offer more revenue to the record labels and content owners.  And then the new entrant will need to create something more compelling than what's on offer from iTunes Radio, which mimics the Pandora model, or Beats, which mimics the Spotify model while adding human playlist curation.  Plus the new entrants will need to fight it out with iHeartRadio and others while trying to make a name for themselves while Apple, and to a lesser extent, existing incumbents like Pandora and Spotify, have the mindshare and muscle to take the broad majority of the market.  Then the entrant needs to survive having its model usurped by Apple or others, as Apple usurped Pandora's model without acquiring Pandora.  So, yes, there will be new ideas, and Apple will be there with its own new ideas right along side and with a war chest to buy up anything that shows promise.  I'd say Apple is in the catbird seat, as it has been for over a decade, in terms of the music business.

I don't care about what the ignorant masses perceive as truth. I'm concerned with the facts on the ground.
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I don't care about what the ignorant masses perceive as truth. I'm concerned with the facts on the ground.
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post #38 of 109

This is great news! Very exciting possibilities here. And so much whining and troll activity around this issue. It's sad how so many people can't see the potential. I was taken aback initially just like everyone else, but now that there's been a ton of info out there, the only explanation for the continued hyper reactions against the deal is willful ignorance.

 

Apple pretty much spelled out how they're going to use Beats, and the benefit is obvious. For anyone that still does not understand this deal, you need to watch Jimmy Iovine's interview from All Things D last year, and it should all become much more clear:

 

http://ben-evans.com/benedictevans/2014/5/9/music-and-curation

   

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post #39 of 109
Quote:
Originally Posted by SolipsismX View Post

CWA (Coders with Attitude)? Will be get to learn how to bust a caps lock in someone's ASCII?

+infinity
post #40 of 109

It'll be interesting to see if any 1st tier Apple employees, who are connected with this deal, walk over the next few months.

na na na na na...
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na na na na na...
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