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Old May 13, 2014, 12:13 PM   #1
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Beats Music's Subscriber Base Pegged at Just 111,000




A new screenshot shared by The Trichordist (via The Guardian) allegedly reveals that the Beats Music service had only about 111,000 subscriber accounts during the month of March, indicating that Apple is indeed likely to be purchasing Beats for some combination of its headphones business, streaming technology, brand, and industry connections rather than the existing subscription service.

An acquisition by Apple would undoubtedly boost exposure for the Beats Music service, and potential tie-ins with Apple's existing iTunes services would offer a strong platform for growth, meaning that Apple is likely relatively unconcerned with the small subscriber base.

The leaked royalty sheet breaks down the subscriber numbers according to the available plans, and of the roughly 111,000 accounts, just under 50,000 were individual accounts while 61,621 were joint "family" accounts available through a promotional arrangement with AT&T. Beats Music has not released subscriber numbers, but this leaked sheet appears to corroborate an earlier report from Billboard that claims Beats' early subscriber estimates have been "disappointing" to music label executives.

Apple had reportedly been impressed with the subscription conversion rate for Beats, although it is not entirely clear from the chart where those users are accounted for. Roughly 70% of total plays fall under a "promotional royalty rate" category, with the remaining being subject to standard royalty calculations, although it is unclear what criteria cause a play to be placed in either of the two categories.

Looking at the individual subscriptions, the numbers show that Beats pays out approximately 65% of its revenue to rightsholders, similar to other streaming services, with labels receiving by far the largest chunk and songwriters receiving only a tiny slice through their performance rights organizations (PROs).

Apple is reportedly acquiring Beats Electronics for music industry veteran Jimmy Iovine and musician Dr. Dre, both of whom may play a crucial role in Apple's future music strategy. The Cupertino company also will receive a high-margin headphone business that could be help Apple attract a wealthier and younger clientele.

Article Link: Beats Music's Subscriber Base Pegged at Just 111,000
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Old May 13, 2014, 12:15 PM   #2
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I'm sorry now that I complained when there were all those Angela Ahrents stories pummeling me.
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Old May 13, 2014, 12:15 PM   #3
Crosscreek
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What do you want for $3.2 Mil.

Alzheimer's
$3.2bil
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Old May 13, 2014, 12:16 PM   #4
MacLC
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ok...

Understood that Beats brand will grow, but how much will be cannibalization of Apple products or other licensed material, and how much will actually be accretive to Apple? ...
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Old May 13, 2014, 12:17 PM   #5
BornAgainApple
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Iovine and Dred must have something on TC et al.

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Originally Posted by Crosscreek View Post
What do you want for $3.2 Mil.
Mil ???

Last edited by BornAgainApple; May 13, 2014 at 12:52 PM.
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Old May 13, 2014, 12:18 PM   #6
Crosscreek
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Mil???
I'm sorry , Bil
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Old May 13, 2014, 12:23 PM   #7
i make movies
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For those who care:

3,200,000,000
/
111,000

=

$28,828 per user.
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Old May 13, 2014, 12:24 PM   #8
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.000126 per play? wow.
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Old May 13, 2014, 12:25 PM   #9
HurtinMinorKey
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You don't pay $3.2B for two dudes. Drop the pretense.

And nice job ignoring what that screenshot is emphasizing: extremely low royalty rates for content producers "artists".
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Old May 13, 2014, 12:25 PM   #10
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Originally Posted by MacRumors View Post
The Cupertino company also will receive a high-margin headphone business that could be help Apple attract a wealthier and younger clientele.
Yes, young and wealthy clients are demos where Apple is really falling short.
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Old May 13, 2014, 12:25 PM   #11
JoEw
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Originally Posted by i make movies View Post
For those who care:

3,200,000,000
/
111,000

=

$28,828 per user.
Don't forget headphones and brand
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Old May 13, 2014, 12:26 PM   #12
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So at 110,000 subscribers and a value of the headphone business at reported $1 billion. The rumored price is $3.2 Billion. So $2.2 Billion for 110K => ~$29,000 per existing subscriber.

The price has got to be a lot lower than the rumored $3.2 Billion.
8 months ago when Beats bought its shares back from HTC, Beats was worth about $1 billion based on the price paid for 25% from HTC.

I say this is a bad deal for Apple and me as a share holder.
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Old May 13, 2014, 12:26 PM   #13
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I said in another thread I don't think the fashion aspect should be discounted.

http://stratechery.com/2014/apple-buying-beats/
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Or are we witnessing a reinvention, into the sort of company that seeks to transcend computing, demoting technology to an essential ingredient of an aspirational brand that identifies its users as the truly with it? Is Apple becoming a fashion house? Think about it: you have Jony Ive as all-up head of design, the equivalent of a Tom Ford or Donatella Versace. There is the hire of Angela Ahrendts – why would she leave the CEO position of Burberry for a Senior VP role? You have an iPhone framed as an experience, not a product. And now you acquire an accessory maker differentiated almost completely by its brand, not its inherent technical quality.

Consider the financial allure: LVMH’s P/E ratio of 21 is low for a fashion brand, yet is 50% higher than Apple’s 14. Tiffany & Co is 62! Moreover, it is high-end fashion that is dominant in the fastest-growing region in the world, Asia, and especially in the fastest-growing country, China. Even with a recent slowdown prompted by an anti-corruption crackdown, China accounted for 29 percent of the worldwide luxury market, although Southeast Asia has recently eclipsed China in growth.
https://medium.com/editors-picks/ef40bb2cd162
Quote:
The strategy that Apple is undertaking is to reposition the company away from being valued as simply a very good tech company that also happens to have aspirational brand appeal and instead as the world’s most valuable fashion and lifestyle company that provides fashionable, attractive technology through its ecosystem of compatible products.

It’s a subtle shift, but one that could stand to increase the valuation of the company by several multiples. Because based on the fundamentals, the markets are currently undervaluing Apple’s upside. They should be able to achieve a higher valuation by putting greater emphasis on the emotional brand value.
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Old May 13, 2014, 12:27 PM   #14
reden
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Everyone here seems like they have this acquisition all figured out. You clearly don't know why Apple is paying that price, neither do I. You clearly don't know the full extent of the acquisition and the longterm benefits for Apple (if any), neither do I. Let it go, stop being so bitter, it doesn't affect you personally.
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Old May 13, 2014, 12:28 PM   #15
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An artist could become a millionaire IF only 8 billion people played a song once
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Old May 13, 2014, 12:31 PM   #16
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Quote:
Originally Posted by HurtinMinorKey View Post
You don't pay $3.2B for two dudes. Drop the pretense.

And nice job ignoring what that screenshot is emphasizing: extremely low royalty rates for content producers "artists".
But do those rates / rights transfer with the purchase of Beats, or do they have to be renegotiated? That's what I'd like to know.
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Old May 13, 2014, 12:32 PM   #17
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I see Apple revamping iTunes radio with technology from beats streaming services and maybe incorporating some of their audio technology into their devices and headsets.

Beat's headphones suck for the amount of money they cost, but they are better sounding than the Apple's offerings. I dislike how beats uses an EQ filter to massively increase the bass, but Apple's offerings tend to lack both bass and treble in my opinion.

I don't see apple ever putting beats logo's on their devices, but i do see them leaving beats alone for the most part and allowing them to continue to produce headphones and have a streaming service that shares the same back end as the new iTunes radio would.
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Old May 13, 2014, 12:33 PM   #18
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Assuming Apple buys them at all...
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Old May 13, 2014, 12:35 PM   #19
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Originally Posted by techwhiz View Post
So at 110,000 subscribers and a value of the headphone business at reported $1 billion.
I believe that at a minimum 2x revenue is normal when buying a business - I think I read somewhere that Beats did about 1.2b in Revenue, so that would put the price at around 2.4b...I could be wrong, but I think its somewhere in that range. If so, that would make the price high, but perhaps not as far off as some seem to believe.
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Old May 13, 2014, 12:35 PM   #20
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Originally Posted by HurtinMinorKey View Post
And nice job ignoring what that screenshot is emphasizing: extremely low royalty rates for content producers "artists".
It seems to me like it's an extremely low rate for song writers. The rate is much higher (about 10x higher) for the sound recordings, as seen in the screenshot. Unfortunately, any artist that signed with a label usually signs away all their rights to the recording. Artists that do not sign such agreements get paid more; they presumably get the royalty for both the sound recording and the song writing (assuming they wrote the song).
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Old May 13, 2014, 12:37 PM   #21
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So now the, "it's not the ****** headphones Apple want, it's the streaming business" argument has been debunked, just what the hell is Apple thinking?

Maybe they just want to show Facebook that they too can throw money away on a massively overvalued acquisition?
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Old May 13, 2014, 12:37 PM   #22
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What do you want for $3.2 Mil.

Alzheimer's
$3.2bil
My father has Alzheimer's. I don't think you have that. Perhaps it's some other disease?
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Old May 13, 2014, 12:38 PM   #23
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I wouldn't pay £30 for beats! i got some new Sony headphones which are much better for half the price!
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Old May 13, 2014, 12:40 PM   #24
aajeevlin
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headphone business? Someone care to talk from a professional perspective if beats is actually good headphones?
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Old May 13, 2014, 12:41 PM   #25
cdmoore74
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Apple did it to acquire the brand... Apple has a LOT of users that will buy that brand..
Guess you're correct. Anybody willing to buy a IPhone 5C, iPhone 4 in India, Mac computer, $20 USB cable, $400 iPad 2 or $400 iPad mini is gullible enough to buy Beats headphones with a Apple logo on the side.

Last edited by OllyW; May 13, 2014 at 01:52 PM. Reason: clean up to quoted post
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