Apple emphasizes acquisition of Beats Music streaming service in blockbuster announcement

Posted:
in iPod + iTunes + AppleTV edited May 2014
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.
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Comments

  • Reply 1 of 108
    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.
  • Reply 2 of 108
    jason98jason98 Posts: 763member

    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.

  • Reply 3 of 108
    bighypebighype Posts: 148member

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

  • Reply 4 of 108
    maestro64maestro64 Posts: 4,562member
    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
  • Reply 5 of 108
    sambirasambira Posts: 90member
    "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!!!
  • Reply 6 of 108
    sambirasambira Posts: 90member
    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!!!

  • Reply 7 of 108
    yojimbo007yojimbo007 Posts: 962member
    I think apple has been had by Iovine.
    Unless there is some thing totally Hidden to the public.. This does not add up !
  • Reply 8 of 108
    macxpressmacxpress Posts: 4,861member
    bighype wrote: »
    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.
  • Reply 9 of 108
    pazuzupazuzu Posts: 1,728member
    What EXACTLY does it stream? Rap and Hip hop? Anything else?
  • Reply 10 of 108
    andysolandysol Posts: 2,506member

    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...

  • Reply 11 of 108
    realisticrealistic Posts: 1,139member
    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.

  • Reply 12 of 108
    rmgt008rmgt008 Posts: 9member
    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.
  • Reply 13 of 108
    mjtomlinmjtomlin Posts: 1,854member

    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.

  • Reply 14 of 108
    pazuzupazuzu Posts: 1,728member
    Couldn't Apple have hired someone for $3Bil to fix iTunes - the resource intensive hog that it is?
  • Reply 15 of 108
    chandra69chandra69 Posts: 638member

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

  • Reply 16 of 108
    andysolandysol Posts: 2,506member
    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

  • Reply 17 of 108
    elrothelroth Posts: 1,201member
    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).

  • Reply 18 of 108
    solipsismxsolipsismx Posts: 19,566member
    andysol wrote: »
    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?
  • Reply 19 of 108
    ihxoihxo Posts: 562member

    Just in time for WWDC !

    More than 100 technical sessions presented by Dr Dre !

  • Reply 20 of 108
    andysolandysol Posts: 2,506member
    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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