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Apple's Cook says Beats buy provides head start in subscription-based music streaming

post #1 of 29
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In an interview explaining Apple's purchase of Beats Electronics and Beats Music, CEO Tim Cook looks toward expanding the iTunes business model and building future products co-designed by the two companies.

Tim Cook
Source: ImagineChina/AP Photo via Bloomberg


As for the deal itself, which is Apple's largest acquisition to date, Cook told Re/code that it's "all about music," going on to note the Mac program is rooted in sales to creatives like musicians.

While Cooks' statement seems obvious given Beats' audio-related wares, the reality is that many industry watchers are questioning the deal because Apple has sufficient resources to build identical -- or superior -- products in-house.

"We could build just about anything that you could dream of," Cook said of Apple.
"But that's not the question. The thing that Beats provides us is a head start. They provide us with incredible people, that don't grow on trees. They're creative souls, kindred spirits."

The Apple chief went on to say that Beats brings a set of workers with unique skill sets, giving Apple an "infusion" of great talent.

In mentioning the Beats' team, Cook alludes to co-founders Jimmy Iovine and Dr. Dre, music industry heavyweights who have essentially become high-priced acqui-hires. Reports note Iovine and Dre will answer to iTunes chief Eddy Cue, though their official capacity at Apple has not yet been disclosed. Both Beats co-founders will become Apple employees when the deal goes through, Cook said.

In Apple's statement to the press concerning the $3 billion deal, the company emphasized the acquisition of Beats Music, Beats' subscription-based music streaming service. Cook reiterated the importance of Beats Music, especially as a growth driver for iTunes in the coming years.

"We get a subscription music service that we believe is the first subscription service that really got it right," he said. "They had the insight early on to know how important human curation is. That technology by itself wasn't enough -- that it was the marriage of the two that would really be great, and produce a feeling in people that we want to produce."

Apple's own iTunes Radio streaming solution has seen a tepid response thus far, with other free services like Pandora continuing to dominate the market. While Apple said it plans to operate Beats Music as a separate entity, there could be some crossover down the line.

In a variation of the company's line "Apple buys smaller technology companies from time to time," Cook revealed Apple has purchased 27 companies since its fiscal 2013. Beats is by no means a small buy, and at $3 billion stands as Apple's largest-ever acquisition.

While controversial, an Apple-Beats tie-up has the potential to shake up the industry, not only with Beats Music, but co-developed hardware as well. Iovine, who makes a brief appearance in the interview, wouldn't give any details on future products, but said he was completely committed to Apple's new direction.

"We have a commitment to this, as you would imagine," Iovine said. "It's been our life's dream -- we've built Beats up, and wanted to finish this dream, and the best way to finish it is with this company."
post #2 of 29
Wish we had a crystal ball to look 18 months down the road...

2012 27" iMac i7, 2010 27" iMac i7, 2011 Mac Mini i5
iPad Air, iPad Mini Retina, (2) iPhone 5S, iPod Touch 5
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2012 27" iMac i7, 2010 27" iMac i7, 2011 Mac Mini i5
iPad Air, iPad Mini Retina, (2) iPhone 5S, iPod Touch 5
Time Capsule 5, (3) AirPort Express 2, (2) Apple TV 3

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post #3 of 29

To me, the simplest explanation of this otherwise baffling corporate "marriage" is still the most plausible: Apple wants Iovine's clout in the industry to get not just all the big labels, but also the notable artists who are holdouts from the music streaming game, and make iTunes a full-on music streaming service in the same vein as Spotify and Beats Music. Dr. Dre is onboard for his brand weight, and not much else.

 

Hopefully Apple will also be able to help them do something about their overpriced and underperforming headphones - making them into, at the least, overpriced and decent headphones. It will be interesting to see how this all sorts out.


Edited by nathanimal - 5/28/14 at 3:48pm
post #4 of 29
Too early to comment on what this will do, but Cook is a genius. I'm confident there are very good reasons for this. Plus, it gets Apple into the news in a good way.
Too many Apple products to list...Long on AAPL, so take what I say with a bucket of salt.
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Too many Apple products to list...Long on AAPL, so take what I say with a bucket of salt.
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post #5 of 29
So does this signal that Eddy and Phil are the top dogs at Apple? Or was Phil given the hardware piece because nothing's really going to change except the marketing? Does Beats electronics even employee hardware engineers or is that all contracted out?
post #6 of 29
At the risk of repeating myself, if anyone is interested in learning why this acquisition is significant, watch this interview of Jimmy Iovine at All Things D:

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

   

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post #7 of 29
Quote:
Originally Posted by TheWhiteFalcon View Post

Too early to comment on what this will do, but Cook is a genius. I'm confident there are very good reasons for this. Plus, it gets Apple into the news in a good way.

One "good way" for Apple to get into the news, would be to do it more frequently.

All the BS about "can't innovate" is generated by long quiet periods. I like that Apple doesn't give clues where it may be headed, it just needs to have more presence.
"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #8 of 29
Quote:
Originally Posted by PatchyThePirate View Post

At the risk of repeating myself, if anyone is interested in learning why this acquisition is significant, watch this interview of Jimmy Iovine at All Things D:

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

 

hadn't seen it last time. Thanks for this. Iovine is not only a musical genius, but he cares about it, and that matters more than anything.

post #9 of 29
Quote:
Originally Posted by Macky the Macky View Post


One "good way" for Apple to get into the news, would be to do it more frequently.

All the BS about "can't innovate" is generated by long quiet periods. I like that Apple doesn't give clues where it may be headed, it just needs to have more presence.


It would be nice if we had announcements throughout the year, instead of just September and October, with a few WWDC tidbits thrown in.

Too many Apple products to list...Long on AAPL, so take what I say with a bucket of salt.
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Too many Apple products to list...Long on AAPL, so take what I say with a bucket of salt.
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post #10 of 29

I wonder if Cue signalled he's interested in succession planning. Or if he has hit a brick wall after a decade of successful negotiations.

 

I look forward to the day that I can go back to using iTunes for my music, but Spotify offers such a much better service right now. Hopefully this deal will end that.

 

I'm happy to pay a months subscription to access all the music I want. And would love it if it integrated with the rest of my iTunes (which is still the best featured user interface).

 

Like I've said before, a premium "rent to buy" model would be great. A monthly subscription that:

 

a) allows me to stream and/or temporarily download all the content I want

b) gives me a discount if I chose to buy content so that I can download it permanently

 

That would give Apple a real edge.

 

Better genius algorithms would always be nice, but they work great for me right now.

 

 

ps, any one else getting intermittent errors: AJAX response unable to be parsed as valid JSON object.

post #11 of 29
I hope Ive isn't being spread too thin. He has all Apple hardware and software design and now Beats hardware design is transitioning to him, apparently within the next couple of months. Does Beats have a lot of hardware engineers or will most of that work fall on existing Apple employees.
post #12 of 29
Quote:
Originally Posted by Rogifan View Post

I hope Ive isn't being spread too thin. He has all Apple hardware and software design and now Beats hardware design is transitioning to him, apparently within the next couple of months. Does Beats have a lot of hardware engineers or will most of that work fall on existing Apple employees.

 

Well, if the hints are accurate, I suppose the Beats designers would interface with Apple to refine or engineer Beats products to Apple's specs?

Proud AAPL stock owner.

 

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Proud AAPL stock owner.

 

GOA

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post #13 of 29
Quote:
Originally Posted by Rogifan View Post

I hope Ive isn't being spread too thin. He has all Apple hardware and software design and now Beats hardware design is transitioning to him, apparently within the next couple of months. Does Beats have a lot of hardware engineers or will most of that work fall on existing Apple employees.

Ive must be appalled with all those CRAPTASTIC Beats headphones shoved at him. I hope he stays.
 
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post #14 of 29
Quote:
Originally Posted by SpamSandwich View Post

Well, if the hints are accurate, I suppose the Beats designers would interface with Apple to refine or engineer Beats products to Apple's specs?
Beats has severed ties with its design firm. Robert Brunner (who actually hired Jony Ive at Apple) just announced that Beats design would be transitioning to Apple over the next few months.

http://www.ammunitiongroup.com/work/1922-2/

I'm not sure how involved they were with engineering. I'd be curious to know how large Beats engineering staff is of if most of that stuff was contracted out like with design?
post #15 of 29
That's design? Plastic earmuffs?
 
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post #16 of 29
Quote:
Originally Posted by Rogifan View Post


Beats has severed ties with its design firm. Robert Brunner (who actually hired Jony Ive at Apple) just announced that Beats design would be transitioning to Apple over the next few months.

http://www.ammunitiongroup.com/work/1922-2/

I'm not sure how involved they were with engineering. I'd be curious to know how large Beats engineering staff is of if most of that stuff was contracted out like with design?

 

The details are coming fast and furious now.

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Proud AAPL stock owner.

 

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post #17 of 29
Quote:
Originally Posted by PatchyThePirate View Post

At the risk of repeating myself, if anyone is interested in learning why this acquisition is significant, watch this interview of Jimmy Iovine at All Things D:

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

This is the best thing I've seen since this rumor started. He sounds as passionate and excited about his product as Steve Jobs used to sound. I think the culture of these two companies goes together well. For the first time, I'm pretty excited about this.

post #18 of 29
Quote:
Originally Posted by Hopeless View Post

This is the best thing I've seen since this rumor started. He sounds as passionate and excited about his product as Steve Jobs used to sound. I think the culture of these two companies goes together well. For the first time, I'm pretty excited about this.

$3Billion worth?
 
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post #19 of 29
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Originally Posted by pazuzu View Post

$3Billion worth?

And then some.

The trolling is getting really pathetic. Have some dignity.

   

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post #20 of 29
Quote:
Originally Posted by PatchyThePirate View Post


And then some.

The trolling is getting really pathetic. Have some dignity.

Your high and mighty passing of judgement on all others is pathetic.  You have no dignity.

 

Questioning the spending of $3 Billion by Apple on a music service and two guys is not trolling.  A lot of people question why Apple would spend so much on something they would have created on their own in the past.  I have been a Tim Cook fan, but I have to question this move.

post #21 of 29
Quote:
Originally Posted by msimpson View Post

Your high and mighty passing of judgement on all others is pathetic.  You have no dignity.

Questioning the spending of $3 Billion by Apple on a music service and two guys is not trolling.  A lot of people question why Apple would spend so much on something they would have created on their own in the past.  I have been a Tim Cook fan, but I have to question this move.

Ok.

There's a difference between questioning and trolling. But thanks for your input.

   

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post #22 of 29
Quote:
Originally Posted by msimpson View Post

 A lot of people question why Apple would spend so much on something they would have created on their own in the past.  I have been a Tim Cook fan, but I have to question this move.

Not all of Apple's in-house creations have been home runs. Numerous examples come to mind.

It's done. Move along.
post #23 of 29
Quote:
Originally Posted by pazuzu View Post


$3Billion worth?

 

Use your brain for a moment.

 

Apple has hundreds of millions of credit cards on file. Apple now has a very sticky new service with Beats. Even if Apple converts 10% of those cards it translates to a reliable, large, revenue stream that will only get larger because this is the future of the music industry.

 

Apple is also in the cross platform business now. They can fight Spotify, and Google Play music on Windows Phone, Windows PC, Android, Mac and iOS further expanding their potential customer pool.

 

I use Beats' music service and it's freaking awesome, and interface is way ahead of Spotify and GPM. Dare I say, Apple like.

post #24 of 29

I don't understand.

 

Why not buying Soundcloud instead?

post #25 of 29
Apple will still continue the app support on competing platforms I assume. Other wise can see some angry android cusotomers mad at being cut off and the single person with a windows phone would be mad.
post #26 of 29

Maybe the reason music sales are falling is because music sounds too mass produced these days, nothing to do with subscription vs buy vs radio vs ...

post #27 of 29
Quote:
Originally Posted by PatchyThePirate View Post

And then some.

The trolling is getting really pathetic. Have some dignity.

Beyond pathetic. They're feeding off each other like bitter, jealous gossips. What's most disgusting is they seem proud of themselves.

Anyway, I've enjoyed your posts, since you're among the ones who get the significance of this deal.
post #28 of 29

Why not just buy Spotify? Then use that as a backdoor to music purchases on Android. Beats only has 250,000 customers.

post #29 of 29
Quote:
Originally Posted by msimpson View Post
 

Your high and mighty passing of judgement on all others is pathetic.  You have no dignity.

 

Questioning the spending of $3 Billion by Apple on a music service and two guys is not trolling.  A lot of people question why Apple would spend so much on something they would have created on their own in the past.  I have been a Tim Cook fan, but I have to question this move.

 

Both of you have points.

You are right about questioning not being trolling.

Patchy is right because quite a lot of us know Pazuzu's posting history.

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