I'm hard pressed to see the long term benefit to the Iovine relationship with Apple. The guy is a music industry shark who would be better off on his own packaging deals to offer to Apple (or other bidders, for that matter) and streaming subscriptions are still a very tough nut to crack... Perhaps something that can best be offered as an add-on to satellite radio services?
I must admit I will be following along to see when the ROI occurs. Any guesses on if and when Apple may see that?
The ROI on Beats will come from the headphones. They'll probably report this in their filings in January but lump it in with accessories. I reckon they'll be making about $175m net profit on the headphones every quarter so assuming it's growing, it would pay back the $3b in under 4 years. Streaming is popular with users but it doesn't monetize well so far. You can see this with the following example, the streaming services made just $200k vs $2.6m on iTunes:
If you look at Pandora and Spotify, Pandora's whole company is valued at $3.8b but in their 10k filing, they say they've never made a profit ( http://investor.pandora.com ):
"Since our inception in 2000, we have incurred significant net operating losses and, as of January 31, 2013, we had an accumulated deficit of $139.6 million. A key element of our strategy is to increase the number of listeners and listener hours to increase our market penetration, including the number of listener hours on mobile and other connected devices, such as automobiles and consumer electronics. However, as our number of listener hours increases, the royalties we pay for content acquisition also increase. We have not in the past generated, and may not in the future generate, sufficient revenue from the sale of advertising and subscriptions to offset our expenses.
While we have generated revenue from our advertising products at a rate that exceeds the growth in listener hours in certain fiscal years for traditional computers and for the fiscal year ending January 31, 2013 for mobile and other connected devices, to date we have not been able to grow our total advertising revenue at a rate that exceeds the growth in our listener hours.
Part of the challenge that we face in increasing sales to monetize inventory generated by mobile devices is that radio advertising has traditionally attracted primarily local advertisers and we are still at an early stage of building our sales capability and penetrating local advertising markets. In addition, to the extent that our listener base on mobile platforms may skew to different demographics than we have historically sold on our traditional computer platform, we must identify such demographics and convince advertisers of the capabilities of mobile advertising to maximize advertising inventory utilization across our multi-platform ad campaigns.
If we cannot successfully earn revenue at a rate that exceeds the operational costs associated with increased listener hours, we may not be able to achieve or sustain profitability."
The problem they face is they're an advertising company like Facebook and Google. You have to look past the things they're known for and focus on the bottom line. The music services make some money from subscriptions but it's mostly advertising (~80%). Pandora is still accumulating losses this year. ~$140m per quarter revenue with ~$14m loss. Assets are over $500m and this will have been from investors hoping they'll eventually make a return like with Amazon.
Spotify's financials are similarly pretty weak in terms of profitability:
Like with radio, they help with discoverability. The streaming services monetize this service with advertising. Apple can monetize it by selling songs on iTunes and growing their iTunes userbase. It doesn't have to profit directly. I think the best way they can improve discoverability is by uploading people's track lists anonymously and putting streaming tracks directly into the playlists based on music they already have (even if it's not bought from iTunes) with options to buy tracks on iTunes. Put the buy button right in the playlist to let people sync the songs to mobiles.
Sadly it is 2014 and no one cares about 40-ish minutes of music from one artist when there are a million said artists begging for our ears and our eyeballs. Said million artists are also BEGGING us to stop listening to other artists so we can also find time to slot them in as well.
Why did you like the liner notes and photos in the LP back in the day? There was no Twitter, no Instagram, no other way to feel closer to an artist.
You sound proud of the fact that you can't be bothered with long forms of musical expression. Do you find movie trailers to be similarly superior to their 120-minute counterparts?
There ARE many artists out there (music and otherwise) who have something to say within the context of a larger-than-3.5-minute sound bite. There always will be. And some of them are worth the time investment. Regretful that you don't get that.
And where did you get the idea that everyone wants to feel closer to an artist? And that current social media actually achieves that?
By all means, in this age of continuous distraction, enjoy your endless empty hors-d'oeuveres of singles, Twitters and Instagrams. Pass up that more-satisfying meal.
You sound proud of the fact that you can't be bothered with long forms of musical expression. Do you find movie trailers to be similarly superior to their 120-minute counterparts?
There ARE many artists out there (music and otherwise) who have something to say within the context of a larger-than-3.5-minute sound bite. There always will be. And some of them are worth the time investment. Regretful that you don't get that.
And where did you get the idea that everyone wants to feel closer to an artist? And that current social media actually achieves that?
By all means, in this age of continuous distraction, enjoy your endless empty hors-d'oeuveres of singles, Twitters and Instagrams. Pass up that more-satisfying meal.
He's right though. You're getting upset at him and accusing him, but he's talking about market trends and is dead on. You may care about the full album, but consumers at large no longer seem to. Sure, there's always going to be that niche market just like there are still people that go out and buy vinyl, but that is not the market at large and big companies like Apple have to know that and move accordingly.
Exclusives are a bit of a D move. People should want to use your service because the GUI is more intuitive, or it has the best search function, or it always downloads quickly. Not because they have to, because you're the only one with the album, because you did some deal to stop anyone else getting it.
So do you consider the years long iPhone exclusivity with AT&T a 'D' move?
I'm hard pressed to see the long term benefit to the Iovine relationship with Apple. The guy is a music industry shark who would be better off on his own packaging deals to offer to Apple (or other bidders, for that matter) and streaming subscriptions are still a very tough nut to crack... Perhaps something that can best be offered as an add-on to satellite radio services?
Combined streaming and purchasing. That's the only feasible solution that I can see.
I’ll never subscribe to a streaming-only service, but if I could keep some of the tracks, then yes, if the price is right.
[QUOTE name="Crowley" url="/t/184082/jimmy-iovine-spearheading-talks-to-lock-up-exclusive-releases-for-apples-beats-music/40#post_2655813"] Remarkable how much doubt you have for someone who claims to believe in a magic man in the clouds.[/QUOTE]
You do realise that Tim Cook doesn't actually live in the clouds, right?
iCloud is just a prosaic way of describing Apple's sync service.
If you meet him, he won't greet you: "How. I Cloud, you Crowley." He'll probably just call himself Mr. Cook or more likely Tim or Timothy.
Early? Iovine seems to have been hanging about for years.
I miss Steve Jobs's approach, when Apple would just launch something, no preview or musing, just wham bam thank you Ma'am.
There's just something about Jimmy Iovine that rubs me the wrong way. Like a snake oil salesman. When he and Eddy Cue attended the re/code conference they gave no vision at all to the future of music. All we got from Iovine was how everyone else sucks and Apple only designs headphones to test the headphone jacks on their phones. I have yet to hear anything from Iovine that makes me go 'ah, this is why Apple wanted him'.
It does make me wonder if it really was all about the profitable headphone business. Though I'm sure Jony Ive cringes anytime he sees the below products (that he's now inherited). I'll bet all my Apple stock that none of Apple's designers are rocking Beats headphones.
Comments
The ROI on Beats will come from the headphones. They'll probably report this in their filings in January but lump it in with accessories. I reckon they'll be making about $175m net profit on the headphones every quarter so assuming it's growing, it would pay back the $3b in under 4 years. Streaming is popular with users but it doesn't monetize well so far. You can see this with the following example, the streaming services made just $200k vs $2.6m on iTunes:
http://www.appvirality.com/blog/gangnam-style-go-viral-made-8-million-psy/
If you look at Pandora and Spotify, Pandora's whole company is valued at $3.8b but in their 10k filing, they say they've never made a profit ( http://investor.pandora.com ):
"Since our inception in 2000, we have incurred significant net operating losses and, as of January 31, 2013, we had an accumulated deficit of $139.6 million. A key element of our strategy is to increase the number of listeners and listener hours to increase our market penetration, including the number of listener hours on mobile and other connected devices, such as automobiles and consumer electronics. However, as our number of listener hours increases, the royalties we pay for content acquisition also increase. We have not in the past generated, and may not in the future generate, sufficient revenue from the sale of advertising and subscriptions to offset our expenses.
While we have generated revenue from our advertising products at a rate that exceeds the growth in listener hours in certain fiscal years for traditional computers and for the fiscal year ending January 31, 2013 for mobile and other connected devices, to date we have not been able to grow our total advertising revenue at a rate that exceeds the growth in our listener hours.
Part of the challenge that we face in increasing sales to monetize inventory generated by mobile devices is that radio advertising has traditionally attracted primarily local advertisers and we are still at an early stage of building our sales capability and penetrating local advertising markets. In addition, to the extent that our listener base on mobile platforms may skew to different demographics than we have historically sold on our traditional computer platform, we must identify such demographics and convince advertisers of the capabilities of mobile advertising to maximize advertising inventory utilization across our multi-platform ad campaigns.
If we cannot successfully earn revenue at a rate that exceeds the operational costs associated with increased listener hours, we may not be able to achieve or sustain profitability."
The problem they face is they're an advertising company like Facebook and Google. You have to look past the things they're known for and focus on the bottom line. The music services make some money from subscriptions but it's mostly advertising (~80%). Pandora is still accumulating losses this year. ~$140m per quarter revenue with ~$14m loss. Assets are over $500m and this will have been from investors hoping they'll eventually make a return like with Amazon.
Spotify's financials are similarly pretty weak in terms of profitability:
http://www.theguardian.com/technology/2014/oct/07/spotify-uk-revenues-2013-profit-music
Like with radio, they help with discoverability. The streaming services monetize this service with advertising. Apple can monetize it by selling songs on iTunes and growing their iTunes userbase. It doesn't have to profit directly. I think the best way they can improve discoverability is by uploading people's track lists anonymously and putting streaming tracks directly into the playlists based on music they already have (even if it's not bought from iTunes) with options to buy tracks on iTunes. Put the buy button right in the playlist to let people sync the songs to mobiles.
Are you guys so TV-addled that you can no longer think in cause and effect terms?
A cartilage skeleton is an evolutionary dead end. You need bones to get up on the land, m'boys, BONES!
Sadly it is 2014 and no one cares about 40-ish minutes of music from one artist when there are a million said artists begging for our ears and our eyeballs. Said million artists are also BEGGING us to stop listening to other artists so we can also find time to slot them in as well.
Why did you like the liner notes and photos in the LP back in the day? There was no Twitter, no Instagram, no other way to feel closer to an artist.
You sound proud of the fact that you can't be bothered with long forms of musical expression. Do you find movie trailers to be similarly superior to their 120-minute counterparts?
There ARE many artists out there (music and otherwise) who have something to say within the context of a larger-than-3.5-minute sound bite. There always will be. And some of them are worth the time investment. Regretful that you don't get that.
And where did you get the idea that everyone wants to feel closer to an artist? And that current social media actually achieves that?
By all means, in this age of continuous distraction, enjoy your endless empty hors-d'oeuveres of singles, Twitters and Instagrams. Pass up that more-satisfying meal.
You sound proud of the fact that you can't be bothered with long forms of musical expression. Do you find movie trailers to be similarly superior to their 120-minute counterparts?
There ARE many artists out there (music and otherwise) who have something to say within the context of a larger-than-3.5-minute sound bite. There always will be. And some of them are worth the time investment. Regretful that you don't get that.
And where did you get the idea that everyone wants to feel closer to an artist? And that current social media actually achieves that?
By all means, in this age of continuous distraction, enjoy your endless empty hors-d'oeuveres of singles, Twitters and Instagrams. Pass up that more-satisfying meal.
He's right though. You're getting upset at him and accusing him, but he's talking about market trends and is dead on. You may care about the full album, but consumers at large no longer seem to. Sure, there's always going to be that niche market just like there are still people that go out and buy vinyl, but that is not the market at large and big companies like Apple have to know that and move accordingly.
So do you consider the years long iPhone exclusivity with AT&T a 'D' move?
I'm hard pressed to see the long term benefit to the Iovine relationship with Apple. The guy is a music industry shark who would be better off on his own packaging deals to offer to Apple (or other bidders, for that matter) and streaming subscriptions are still a very tough nut to crack... Perhaps something that can best be offered as an add-on to satellite radio services?
Combined streaming and purchasing. That's the only feasible solution that I can see.
I’ll never subscribe to a streaming-only service, but if I could keep some of the tracks, then yes, if the price is right.
Well, there is a reason sharks haven’t meaningfully changed shape in several hundred million years.
Indeed.
Because evolution is not quite what we crack it up to be.
Please tell me you do believe in evolution as a proven theory?
I remain skeptical of Beats, Dre, and Iovine, vis a vis a profitable or productive relationship with Apple short or long term.
That's a fair criticism at this early stage.
Early? Iovine seems to have been hanging about for years.
I miss Steve Jobs's approach, when Apple would just launch something, no preview or musing, just wham bam thank you Ma'am.
Early? Iovine seems to have been hanging about for years.
I miss Steve Jobs's approach, when Apple would just launch something, no preview or musing, just wham bam thank you Ma'am.
It's still early days in terms of the deal.
The reason fewer and fewer people are willing to buy music is because there is less and less new music worth buying these days.
I give you Nicki Minaj.
Quantity doesn't equal quality.
Indeed.
Because evolution is not quite what we crack it up to be.
You accept that sharks have been around for several millions years? That's refreshing at least.
I accept that they appear to have been around for as long as I have been aware of them.
Beyond that, I couldn't say.
Remarkable how much doubt you have for someone who claims to believe in a magic man in the clouds.[/QUOTE]
You do realise that Tim Cook doesn't actually live in the clouds, right?
iCloud is just a prosaic way of describing Apple's sync service.
If you meet him, he won't greet you: "How. I Cloud, you Crowley." He'll probably just call himself Mr. Cook or more likely Tim or Timothy.
He's right though.
He's correct re: market trends, but the inflammatory choice of words overwhelms that (which is what I was responding to).
Do you consider variances in species as evolution?
Might not be a 'D' move but imagine where Android would be (or more likely wouldn't be) had iPhone been available on Verizon day one.
There's just something about Jimmy Iovine that rubs me the wrong way. Like a snake oil salesman. When he and Eddy Cue attended the re/code conference they gave no vision at all to the future of music. All we got from Iovine was how everyone else sucks and Apple only designs headphones to test the headphone jacks on their phones. I have yet to hear anything from Iovine that makes me go 'ah, this is why Apple wanted him'.
It does make me wonder if it really was all about the profitable headphone business. Though I'm sure Jony Ive cringes anytime he sees the below products (that he's now inherited). I'll bet all my Apple stock that none of Apple's designers are rocking Beats headphones.
Dead in the water.