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Is Apple’s Beats Acquisition All About Music Subscription Service?

Apple is currently said to be in talks to acquire Beats Electronics for a reported $3.2 billion, a deal that was apparently confirmed by Dr. Dre himself in an early morning video posted on actor Tyrese Gibson’s Facebook page. A new article by The Wall Street Journal points out how the the Cupertino company, who once shook up the music business with iTunes music store in 2003, is finally willing to invest in the music industry’s next model i.e a streaming music subscription service.

Beats By Dr Dre Logo

According to the source, a number of record-company executives claim to have been lobbying Apple for months to create its own subscription streaming service, similar to Spotify and Beats Music. They have been pushing Apple to use its brand power to familiarize consumers with music streaming, “a concept that is still foreign to many people, especially in the U.S”. Some executives even say they were surprised at Apple’s reluctance to take the plunge into subscription streaming earlier.

“Among the ideas record companies have floated to Apple in recent months: iTunes could suggest to users about to purchase certain albums that they instead buy a month-long subscription to a streaming service, for the same price.

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.”

Apple’s ongoing negotiations to buy Beats, which sells a $10-a-month Beats Music subscription in addition to selling high-end headphones, shows how the tables have turned around Apple’s decade-old business model of selling downloads through iTunes.

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  • xxxJDxxx

    I really don’t get this. I’ve never used a subscription service and find it hard to value a service like that at $3.2 billion

  • Biggy604

    Well they are also buying the headphones, speaker docks etc etc associated with the Beats brand besides the subscription service. If its only the subscription service, then somehow Apple payed way too much for it.

  • ChrisShield5

    At least Dre is one of the few hip hop producers (Along with the Neptunes, Timbaland and Rick Rubin) who seems to really understand good quality sound (Kanye is also pretty good but not at the same level). Out of those names, I’d say Dre is 2nd to the Neptunes/Pharrell in terms of star power. He could be a good guy to have in the audio department for his name and experience. The Beats brand is pretty good too. I personally hope Apple doesn’t go slapping *Beats Audio* on their stuff like HP did though. As long as my earpods sound better, I don’t need to be sold on the brand. If sound and music is important to Apple, then it’s a good acquisition. Much better than BB’s hiring of Alicia Keys. Not to mention Apple is stupidly rich right now.

    That said, the real reason behind this acquisition is obviously towards streaming services. Maybe Beats was building a nice back end and would be significantly cheaper then trying to buyout spotify or Pandora. I’m guessing this is like 60% Streaming Service 40% Beats Brand.

  • Shameer Mulji