It has been reported that Apple is about to close a deal, in which they will be acquiring Beats for a reported $3.2 billion. Streaming services are not sustainable. Why would Apple invest in the Beats streaming service? This past weekend alone it has been reported that Beats only has about 111,000 subscribing members. Not only that, Beats is reportedly paying artists a royalty scale of $0.000126 per stream, which is concerning and problematic. Despite what people think, streaming will not be the future of the music industry. Streaming hasn’t shown profitability. It has yet to step away from the free model and capture the membership status.
There was much speculation that Apple was going to buy Pandora. iTunes Radio wasn’t the huge hit that Apple anticipated. There was much anticipation and speculation that Apple would buy Pandora to replace iTunes Radio. This speculation made sense since Pandora’s stagnant business practices were failing and iTunes Radio’s weak performance. Not only that, but Pandora stock was chopped in half. If Apple bought Pandora, they could have acquired their technology, along with their advertising protocol. Everyone was anticipating Pandora and what seemed over night Apple threw us a curveball with their forthcoming deal with Beats.
In my opinion this is just a small piece of the pie, when their meat and potatoes is their hardware. Apple should focus on what they know and not stray away. It’s almost as though they are diluting their brand by bringing someone else into the grand scheme of things. Apple transformed the music scene with iPods and now with iPhones, but that does not mean their music app will be able to keep up.
Clearly Beats is not a good match for Apple’s brand. Apple is a brand that stands for quality and excellence. Beats are trendy headphones that have an expiration date. Beats poor quality has already been pointed out. Maybe Apple is trying to off set their declining iTunes sales and thinks that the Beats streaming service will help generate extra revenue. According to DigitalTrends.com, iTunes has reported at the end of 2013 that their single track and album sales finished lower than the past years. Single track sales went down 1.34 billion units in 2012 to 1.26 billion units in 2013, totaling about 6% with digital album sales declining 0.1%. Apple feels as though they could gain back the lost sales from iTunes and increase their sales width. Whatever the case, we all know that Apple is not in the music business, they sell hardware (iPods, iPads, iPhones) that is driven by music and media. When was the last time you saw someone from Apple at a music conference? It’s as if Dr. Dre and Jimmy Iovine are playing a hand of poker with Apple and they can’t see the bluff.