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Does Apple Plus Beats Equal MTV?
Apple's purchase of Dr. Dre's audio company goes well beyond headphones.
Michael Comeau    

Apple (NASDAQ:AAPL) bought Beats, but it isn't buying headphones and it isn't buying a streaming music service.

It's buying cultural authority.

Apple wants to create the next MTV, with Dr. Dre and Jimmy Iovine leading the charge. I'm not talking about the modern reality-TV machine MTV. I'm talking about the original MTV that reinvigorated the music business in the 1980s while serving as the premier pop-culture tastemaker.

What Is Apple Buying With Beats?

In terms of hardware, Beats is a very strong lifestyle-infused electronics brand. But it doesn't make anything Apple couldn't make itself. Perhaps the only advantage is that if Apple were to make high-end, expensive headphones, it would primarily appeal to Apple freaks and not outsiders from the Google (NASDAQ:GOOG) Android and Microsoft (NASDAQ:MSFT) Windows camps.

The Beats Music streaming service is a more complex topic. Compared to rivals like Pandora (NYSE:P) and Spotify, Beats Music's main point of differentiation is that it has a human-driven curation model for suggestions and playlists, rather than a data-driven one.

The paid music-download model is clearly failing. In the US, digital music sales fell 13.3% in Q1 2014, according to Nielsen SoundScan. Meanwhile, music streams were up 35%. In 2013, Apple dipped its own toe in the streaming game with iTunes Radio, but largely as a way to generate paid downloads -- a strategy that hasn't paid off.

Nothing to Lose

The surging popularity of Beats headphones basically ensures that the $3 billion Apple is spending doesn't go down the drain, so perhaps the thinking is, "Let's take the Beats Music mentality and scale it." And why not? The download model is on the decline no matter what.

As of now, Beats Music is small, with just 250,000 paid subscribers; Spotify just crossed the 10-million mark. Beats Music by nature has trouble scaling because it has no free component beyond a seven-day free trial -- but that's where iTunes Radio comes in.

At the end of the day, what's Apple really buying with the Beats Music streaming service? It's not a $2.5-million-per-month revenue stream. So it's got to be the dealmaking and tastemaking capabilities of the Beats team headed by Dre and Iovine.

Will it succeed? I suspect the current Apple and Beats Music models will be fused and turned upside down in ways we can't imagine now, so there's really no telling what will happen. I see Apple/Beats functioning as more of a creative/curatorial force than a technological one. Time will tell if it's the best way forward, but I do know one thing: What the world doesn't need is just another music streaming service.

It needs a new MTV.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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Position in AAPL
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Does Apple Plus Beats Equal MTV?
Apple's purchase of Dr. Dre's audio company goes well beyond headphones.
Michael Comeau    

Apple (NASDAQ:AAPL) bought Beats, but it isn't buying headphones and it isn't buying a streaming music service.

It's buying cultural authority.

Apple wants to create the next MTV, with Dr. Dre and Jimmy Iovine leading the charge. I'm not talking about the modern reality-TV machine MTV. I'm talking about the original MTV that reinvigorated the music business in the 1980s while serving as the premier pop-culture tastemaker.

What Is Apple Buying With Beats?

In terms of hardware, Beats is a very strong lifestyle-infused electronics brand. But it doesn't make anything Apple couldn't make itself. Perhaps the only advantage is that if Apple were to make high-end, expensive headphones, it would primarily appeal to Apple freaks and not outsiders from the Google (NASDAQ:GOOG) Android and Microsoft (NASDAQ:MSFT) Windows camps.

The Beats Music streaming service is a more complex topic. Compared to rivals like Pandora (NYSE:P) and Spotify, Beats Music's main point of differentiation is that it has a human-driven curation model for suggestions and playlists, rather than a data-driven one.

The paid music-download model is clearly failing. In the US, digital music sales fell 13.3% in Q1 2014, according to Nielsen SoundScan. Meanwhile, music streams were up 35%. In 2013, Apple dipped its own toe in the streaming game with iTunes Radio, but largely as a way to generate paid downloads -- a strategy that hasn't paid off.

Nothing to Lose

The surging popularity of Beats headphones basically ensures that the $3 billion Apple is spending doesn't go down the drain, so perhaps the thinking is, "Let's take the Beats Music mentality and scale it." And why not? The download model is on the decline no matter what.

As of now, Beats Music is small, with just 250,000 paid subscribers; Spotify just crossed the 10-million mark. Beats Music by nature has trouble scaling because it has no free component beyond a seven-day free trial -- but that's where iTunes Radio comes in.

At the end of the day, what's Apple really buying with the Beats Music streaming service? It's not a $2.5-million-per-month revenue stream. So it's got to be the dealmaking and tastemaking capabilities of the Beats team headed by Dre and Iovine.

Will it succeed? I suspect the current Apple and Beats Music models will be fused and turned upside down in ways we can't imagine now, so there's really no telling what will happen. I see Apple/Beats functioning as more of a creative/curatorial force than a technological one. Time will tell if it's the best way forward, but I do know one thing: What the world doesn't need is just another music streaming service.

It needs a new MTV.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
Position in AAPL
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Does Apple Plus Beats Equal MTV?
Apple's purchase of Dr. Dre's audio company goes well beyond headphones.
Michael Comeau    

Apple (NASDAQ:AAPL) bought Beats, but it isn't buying headphones and it isn't buying a streaming music service.

It's buying cultural authority.

Apple wants to create the next MTV, with Dr. Dre and Jimmy Iovine leading the charge. I'm not talking about the modern reality-TV machine MTV. I'm talking about the original MTV that reinvigorated the music business in the 1980s while serving as the premier pop-culture tastemaker.

What Is Apple Buying With Beats?

In terms of hardware, Beats is a very strong lifestyle-infused electronics brand. But it doesn't make anything Apple couldn't make itself. Perhaps the only advantage is that if Apple were to make high-end, expensive headphones, it would primarily appeal to Apple freaks and not outsiders from the Google (NASDAQ:GOOG) Android and Microsoft (NASDAQ:MSFT) Windows camps.

The Beats Music streaming service is a more complex topic. Compared to rivals like Pandora (NYSE:P) and Spotify, Beats Music's main point of differentiation is that it has a human-driven curation model for suggestions and playlists, rather than a data-driven one.

The paid music-download model is clearly failing. In the US, digital music sales fell 13.3% in Q1 2014, according to Nielsen SoundScan. Meanwhile, music streams were up 35%. In 2013, Apple dipped its own toe in the streaming game with iTunes Radio, but largely as a way to generate paid downloads -- a strategy that hasn't paid off.

Nothing to Lose

The surging popularity of Beats headphones basically ensures that the $3 billion Apple is spending doesn't go down the drain, so perhaps the thinking is, "Let's take the Beats Music mentality and scale it." And why not? The download model is on the decline no matter what.

As of now, Beats Music is small, with just 250,000 paid subscribers; Spotify just crossed the 10-million mark. Beats Music by nature has trouble scaling because it has no free component beyond a seven-day free trial -- but that's where iTunes Radio comes in.

At the end of the day, what's Apple really buying with the Beats Music streaming service? It's not a $2.5-million-per-month revenue stream. So it's got to be the dealmaking and tastemaking capabilities of the Beats team headed by Dre and Iovine.

Will it succeed? I suspect the current Apple and Beats Music models will be fused and turned upside down in ways we can't imagine now, so there's really no telling what will happen. I see Apple/Beats functioning as more of a creative/curatorial force than a technological one. Time will tell if it's the best way forward, but I do know one thing: What the world doesn't need is just another music streaming service.

It needs a new MTV.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
Position in AAPL
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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