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How Apple and Beats could shake up the streaming music scene

James Careless | June 2, 2014
Spending US$3 billion for Beats Music is a big deal for Apple. But will it have big implications for the other top streaming music providers?

"This gives Apple a service that's available for Android devices, which they haven't chosen to support up until now," said Bob O'Donnell, founder and chief analyst at Technalysis Research. "And it lets them do it without the Apple brand."

"This is clearly a way for Apple to take revenue from other OSes, and potentially market iOS devices to them," added James Cridland, managing director of MediaUK.com. "It'll be interesting to see how they market Beats on these operating systems."

Money well spent?
At the same time, these consultants have their doubts about the overall effectiveness of Apple's foray into streaming music via Beats Music, which just launched in January.

"Beats only has around 250,000 paying customers, and Beats appears to pay the standard industry rate for music royalties to run the service," Cridland said. "I struggle to understand whether there's anything special here in terms of their streaming service for Apple to acquire."

"There's also a clear brand conflict--for iPhone users, at least," he added. "iTunes is Apple's music service: iTunes Radio is Apple's algorithmic jukebox. Apple is unlikely to want to confuse consumers by introducing the Beats brand as a streaming service, possibly alongside its own. Perhaps this heralds a sub-brand marketed separately for younger people: but would this also include an iPhone?"

Bob O'Donnell is also skeptical about the level of fear that Pandora, Spotify, and other streaming services should actually be feeling about Apple's purchase of Beats.

"I'm not convinced it's a great business move because I think [Apple] could have created a curated music subscription service on their own for a lot less than $3 billion," O'Donnell said.

For that reason, O'Donnell wonders if Apple bought Beats because "they felt they needed an injection of 'coolness.' Of course, they would never admit to that, but I have a nagging concern that they kind of blinked on this one."

Time will tell if the addition of Beats is enough to allow Apple to muscle aside Pandora and Spotify. At the very least, the $3 billion deal is a great attention-getter, and something that may motivated music fans to take a second look at both sites' services.

 

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