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Old May 9, 2014, 03:06 PM   #1
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Apple Playing 'Catch Up' With Beats Acquisition as Music Labels Push for Subscription Services




Over the course of the last several years, streaming music services like Spotify, Rdio, Pandora, and Beats Music have been growing in popularity, usurping traditional music downloads as consumers' listening method of choice. Despite the shift in user preference, Apple has been slow to adapt, attempting to stick to its download model even as its iTunes music sales have declined.

According to a new report from The Wall Street Journal music labels had been urging Apple to get into the subscription music business long before the company decided to enter negotiations to purchase Beats Electronics, and with it, the Beats Music streaming service.

Record executives have been "lobbying Apple for months" to design a subscription streaming service that would introduce the streaming music business model to a wider array of consumers, but Apple has been reluctant to create such a service, instead focusing on download-centric ideas such as exclusive iTunes album releases.

Back in December, Beyoncé launched an iTunes exclusive album and Apple hoped to negotiate with record labels to secure additional exclusive releases to boost iTunes music sales. Record labels didn't believe that strategy would do enough to bolster flagging sales, and instead presented Apple with ideas like prompting users to subscribe to a music service over purchasing a music album.
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Apple, on the other hand, had pitched more download-centric ideas in recent months, according to people familiar with the matter. One such suggestion was that record companies release all new albums exclusively on iTunes in album-only format for a window of time to drive album sales, before releasing the singles separately and making them available on streaming services. But labels countered that such a strategy--employed successfully by Beyoncé last year--wouldn't work across the board.
Declining music sales have become a significant issue for Apple, to the point where the company has been forced to consider an entire overhaul of iTunes, introducing not only a streaming music service, but also an Android version of the iTunes store. Music downloads declined approximately 13.3 percent in the first quarter of 2014 compared to the first quarter of 2013.

Apple did launch iTunes Radio back in September of 2013, providing a station-based streaming music service similar to Pandora, but this was seen as a "baby step" aimed at bolstering sales of Apple devices rather than a dedicated entry into the streaming music market.

With the purchase of Beats Music, Apple is potentially signaling its readiness to adapt to the music industry's shift towards streaming services and its readiness to bring music streaming to the mainstream. While Spotify and other streaming services are relatively small, Apple's massive iTunes customer base gives it the potential to introduce streaming music to a huge number of users.

Toward that end, Jon Maples argues that an acquisition of Beats would give Apple an easy entry into the true subscription music streaming market without necessarily diluting iTunes.
Quote:
While music purchases may be falling, it's still a big business for Apple. So instead of creating another option in iTunes that would potentially cannibalize download sales, why not just buy a service and keep it separate? Streaming blows up: Apple wins. Streaming doesn't pan out, well, they still have the iTunes store chugging along.
With Apple having 800 million iTunes accounts to leverage, most with credit cards on file, the company can streamline and promote the Beats experience while still leaving its iTunes download service intact. And as Maples notes, Beats' headphone business is currently highly profitable, which means Apple's $3.2 billion purchase of Beats (Apple's largest acquisition ever by far) could pay for itself in a relatively short period of time and actually provide Apple with a low-cost entry into subscription music services on the side.

Article Link: Apple Playing 'Catch Up' With Beats Acquisition as Music Labels Push for Subscription Services
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Old May 9, 2014, 03:07 PM   #2
usarioclave
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Why not just buy Pandora or Spotify?
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Old May 9, 2014, 03:07 PM   #3
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Subscription music, aka Spotify- like?
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Old May 9, 2014, 03:08 PM   #4
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There are so many other areas Apple can improve on, this seems oddly out of place.
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Old May 9, 2014, 03:08 PM   #5
amirite
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Steve Jobs wouldn't have done this!
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Old May 9, 2014, 03:11 PM   #6
Zerilos
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Quote:
Originally Posted by usarioclave View Post
Why not just buy Pandora or Spotify?
Translation: Why not pay 5x more and not pick up a profitable accessory line in the process.
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Old May 9, 2014, 03:11 PM   #7
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Beats by dre is a drug...what does all kids have to say about drugs? JUST SAY NO!
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Old May 9, 2014, 03:12 PM   #8
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Originally Posted by amirite View Post
Steve Jobs wouldn't have done this!
Steve Jobs would hate this type of comment.
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Old May 9, 2014, 03:13 PM   #9
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Originally Posted by amirite View Post
Steve Jobs wouldn't have done this!
He wouldn't have done ping either .... oh, wait.
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Old May 9, 2014, 03:14 PM   #10
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The thing is launching a music subscription service is technically not difficult, and since music labels are already "pushing" for it, I see no reason Apple can't roll their own for much much less than 30 million.
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Old May 9, 2014, 03:14 PM   #11
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Relevant Rumors:

1. Didn't apple try to make iTunes radio a Spotify clone, but hit a wall in that the labels wanted to charge them more than they charge Spotify? I am certain I read this somewhere.

2. Someone on Twitter today said that if Spotify or Rdio is purchased, their licensing deals don't pass to the new owner. However, Beats Radio (which they obtained by buying MOG) does not have this restriction, and the purchaser (Apple) gets the streaming rights.

Combine both rumors-- the purchase gets Apple the streaming rights they wanted, at a better price. Plus they get the current biggest brand in music and a pricey accessory to sell.
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Old May 9, 2014, 03:14 PM   #12
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Apple should just buy Beats By Dre.

Wait
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Old May 9, 2014, 03:14 PM   #13
Zerilos
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Originally Posted by koban4max View Post
Beats by dre is a drug...what does all kids have to say about drugs? JUST SAY NO!
Ummm...what?
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Old May 9, 2014, 03:15 PM   #14
Benjamins
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Originally Posted by Godzilla71 View Post
He wouldn't have done ping either .... oh, wait.
ping cost almost nothing for Apple. And it was initially for an integration with Facebook, but Facebook turned it down.
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Old May 9, 2014, 03:15 PM   #15
Classzero
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Good purchase.
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Old May 9, 2014, 03:16 PM   #16
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Quote:
Originally Posted by rosalindavenue View Post
Relevant Rumors:

1. Didn't apple try to make iTunes radio a Spotify clone, but hit a wall in that the labels wanted to charge them more than they charge Spotify? I am certain I read this somewhere.

2. Someone on Twitter today said that if Spotify or Rdio is purchased, their licensing deals don't pass to the new owner. However, Beats Radio (which they obtained by buying MOG) does not have this restriction, and the purchaser (Apple) gets the streaming rights.

Combine both rumors-- the purchase gets Apple the streaming rights they wanted, at a better price. Plus they get the current biggest brand in music and a pricey accessory to sell.
Exactly.....
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Old May 9, 2014, 03:17 PM   #17
flash84x
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First order of business, rebrand to "Beets"
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Old May 9, 2014, 03:17 PM   #18
Benjamins
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Quote:
Originally Posted by rosalindavenue View Post
Relevant Rumors:

1. Didn't apple try to make iTunes radio a Spotify clone, but hit a wall in that the labels wanted to charge them more than they charge Spotify? I am certain I read this somewhere.

2. Someone on Twitter today said that if Spotify or Rdio is purchased, their licensing deals don't pass to the new owner. However, Beats Radio (which they obtained by buying MOG) does not have this restriction, and the purchaser (Apple) gets the streaming rights.

Combine both rumors-- the purchase gets Apple the streaming rights they wanted, at a better price. Plus they get the current biggest brand in music and a pricey accessory to sell.
Still if Apple put 3 billion on the table, I am sure the music labels would be extremely happy to sign the deal.

Unless Beats' music label deals are for eternity and beyond, I see no reason why it would worth 3 Billion.
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Old May 9, 2014, 03:18 PM   #19
cashxx
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Let them push!!!!!!!!!

Let them push, its going back to the old model and bad for consumers!!! You have to subscribe to get one song.

Everything is going to subscription from Games, to Music, to Software, etc and its bad for consumers!!!

People need to stop buying into these subscription based models or they will just keep coming!
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Old May 9, 2014, 03:19 PM   #20
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Originally Posted by Benjamins View Post
The thing is launching a music subscription service is technically not difficult, and since music labels are already "pushing" for it, I see no reason Apple can't roll their own for much much less than 30 million.
It's about negotiating contracts. Prices and terms can vary greatly. Spotify has never been profitable, despite the hype, but Beats certainly is. And with his industry influence and contacts, Iovine is very valuable.
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Old May 9, 2014, 03:20 PM   #21
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Originally Posted by usarioclave View Post
Why not just buy Pandora or Spotify?
Pandora mkt cap close to $5 billion and you don't get any closer to on-demand streaming. Spotify is rumored to IPO in $6 billion to $8 billion range. You buy this Beats business for $3 billion, get a profitable headphone business to help pay the bills, and get instant entry into the streaming space. Based on the WSJ article, it doesn't appear the labels are going to stand in the way of letting licenses transfer etc. They want Apple to get into streaming. Apple has been stubborn and been on their heels. Ultimately, Apple has been wrong (exhibiting behavior similar to Ballmer's attitude towards Windows on iPad etc.). Apple has obviously decided that they can't build the technology to their satisfaction internally. Or maybe they're so stubborn they're not even close to having any on demand streaming technology ready to go. Whatever the situation, Apple is not sitting in the catbird seat here and aren't controlling their destiny in music without their own streaming service.
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Old May 9, 2014, 03:20 PM   #22
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It's just another sign how Apple is totally behind the ball. Still no streaming service even though it's clear it's a favored service over downloading.

I shouldn't have to pay for a second service and install yet another app because Apple completely now lacks the foresight of what their customers want, something Apple doesn't have. iTunes should be all encompassing for all of my music needs by now. When I want to hear random songs I don't own in a given genre - radio on iTunes; download songs on my device from the cloud - iTunes Match; discover and listen to new music - streaming iTunes; love the album enough to purchase? iTunes.

Why is this so hard Apple?

Still no large screen iPhone, again customers wanting something they don't have.

Apple is behind in just about everything tech these days. 7 years later, they are still pushing 16GB phones as base and apps still don't talk to each other to share and work with files (why do I have to have 5 photos of the same picture just because I used 5 different apps to final version of the photo I wanted?).
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Old May 9, 2014, 03:20 PM   #23
Thoir
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Quote:
Originally Posted by TWSS37 View Post
Apple should just buy Beats By Dre.

Wait
😄 haha


I was expecting something like Pandora or Rdio or something or maybe even something in the TV sector. But if the licensing deal rumour is true, this makes a little more sense.

But I don't know why you want to connect a famous name like Dre to your brand other than project red. Doesn't sound smart.
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Old May 9, 2014, 03:21 PM   #24
unobtainium
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Quote:
Originally Posted by rosalindavenue View Post
Relevant Rumors:

1. Didn't apple try to make iTunes radio a Spotify clone, but hit a wall in that the labels wanted to charge them more than they charge Spotify? I am certain I read this somewhere.

2. Someone on Twitter today said that if Spotify or Rdio is purchased, their licensing deals don't pass to the new owner. However, Beats Radio (which they obtained by buying MOG) does not have this restriction, and the purchaser (Apple) gets the streaming rights.

Combine both rumors-- the purchase gets Apple the streaming rights they wanted, at a better price. Plus they get the current biggest brand in music and a pricey accessory to sell.
Bingo.
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Old May 9, 2014, 03:22 PM   #25
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#2 is correct

Quote:
Originally Posted by rosalindavenue View Post
Relevant Rumors:

1. Didn't apple try to make iTunes radio a Spotify clone, but hit a wall in that the labels wanted to charge them more than they charge Spotify? I am certain I read this somewhere.

2. Someone on Twitter today said that if Spotify or Rdio is purchased, their licensing deals don't pass to the new owner. However, Beats Radio (which they obtained by buying MOG) does not have this restriction, and the purchaser (Apple) gets the streaming rights.

Combine both rumors-- the purchase gets Apple the streaming rights they wanted, at a better price. Plus they get the current biggest brand in music and a pricey accessory to sell.
#2 is on point. Spotify and Rdio are not worth buying since the licensing is exclusive to them. If purchased all agreements must be renegotiated.
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