The end of this week did not see Apple officialising or completing the deal to acquire Beats as originally planned by Apple. Don’t be hasty to jump into conclusions that the deal is not happening though, it looks like Apple really wants to get them and they eventually would be. But it seems like a simple deal; Apple acquires Beats because they want a piece of action in the music streaming business right? Except that that music streaming business with 200,000 subscribers to start with is just another agenda for Apple acquiring Beats. So what else is Apple looking for in this deal; especially when this would be Apple’s largest acquisition to date.
For starters, when Apple acquires Beats they would be getting the two ‘maestros’ of the music industry. With Apple being so closely related to the music industry, through the iTunes the addition of the two ‘talents’ would prove to be critical. With the music industry at a critical stage Apple would need the expertise and advise of Jimmy Iovine and Dr. Dre to navigate through and survive it. But most of all, Iovine and Dr. Dre, as Beats brand owners and face are fashion and culture central, to put it in words they own culture and fashion with Beats. Apple needs that right now to keep their iTunes afloat in these troubled times. The only problem is Apple has yet to figure out the official roles Iovine and Dr. Dre would play in Apple when Apple acquires Beats. Hence, part of the reason behind the delay for the acquisition.
Beats Music is one big fat obvious reason Apple acquires Beats. Beats Music currently has 200,000 subscribers and counting. While that is nothing compared to Spotify’s 10 million subscribers, it is still something that Apple can build on especially that Apple has iTunes. Although there are talks that Apple wants to bring iTunes into the music streaming business, the current plan is to keep both Beats Music and iTunes separate entities; iTunes will continue to sell music and records while Beats Music would be in the music streaming business. The idea is that Apple would be able to tap into two markets this way; the early adopters of music streaming and the rest of the market who still prefers to purchase and own their music contents. Of course a bonus as mentioned previously, is that Apple gets to tap into the Android Users market where iTunes have failed previously.
That is not all, Apple acquires Beats to save the music industry. This is hard to sink in, yes but it is true. The music industry in the near future could be a financial black hole. The reason? There used to be a time when we want to listen to music we had to purchase a whole album, be it the CD, Vinyl, Cassettes and such. A while later, we had to purchase music through online means, we could and would get individual songs rather than buying a whole package; it’s good money. About the time when the smartphone gains popularity and connectivity being a common everyday live thing, we get to stream things; started with videos and then it moved to music. When people starts moving into the music buffet line (music streaming) there is not enough money flowing into the music industry and thus bleeding the industry dry. Apple sees this acquisition as a means for the music industry and Apple themselves to transition into the “streaming” stream.
As the music industry goes Apple knows that the age of a la carte music is running out and people would eventually pay $10 per month to listen to as much music as they want; be it new or old. This means that iTunes would be obsolete maybe by the end of the decade and it shows with the slower sales of music in iTunes; the demand is still big but there are no sales. Apple could make iTunes become a music streaming service as well but they figured out that there will be less contents in the near future if they do that as the industry keeps losing money; the amount of subscribers to music streaming now cannot yet sustain or hold the size of the music industry. With that in mind, and with strong dependence on the music industry (the sales of their MacBooks and Macs have a strong correlation with the rise of iTunes) they need to sustain the music industry by allowing the sales of a la carte music and albums at least until there is enough subscribers to streaming services. For that, as Tech Crunch analysed would mean Apple needs to get another 20 million subscribers paying $5 a month each to sustain the whole industry. No mean feat if you think about it. Beats Music would help Apple to achieve that and while that is happening, the music industry would be thankful to Apple as well (maybe).
So why is the deal not happening yet? We stated earlier in this article that Apple haven’t got Iovine and Dr. Dre’s roles totally figured out yet. Another reason for the delay is also that this being Apple’s largest deal, Apple hasn’t fully prepared themselves to commit to the deal and the leak to this deal happened earlier than expected hence the unpreparedness. Third reasoning behind the delay is that apparently Apple was outraged by a viral video of Dr. Dre and Tyrese, another R&B and Hip-Hop singer talking about how Dr. Dre is the first ever Hip-Hop billionaire in a less than pleasant language. Despite all this, reports are saying the deal is going to happen anyway. We sure are interested to see what will be the outcome of this deal in the future. What do you think will happen?