Leaked document shows Beats Music with just 111,000 subscribers
posted by Alan F. / May 13, 2014, 10:49 PM
During this week, there was talk that Apple's main reason for buying Beats Audio is to pick up streaming music app Beats Music to help iTunes Radio improve. The latter service is only converting 1% to 2% of its users into paid subscribers, something that Apple wants to improve on. Apparently, Apple feels that it needs to learn from Beats Music, how to run a streaming music service.
But a new leak on Tuesday suggests that Beats Music is not doing nearly as well as thought. According to a document that shows Beat's royalty payments, Beats Music has just shy of 111,000 subscribers. That means Apple would be paying approximately $28,000 per subscriber. If Beats has gone through its marketing budget of $40 million, it would mean that customer acquisition costs, at $360 per subscriber, are through the roof. Beats rival Spotify has 6 million members, although it does have a head start. A year after its U.S.launch, Spotify had 1 million subscribers,
Even more embarrassing for Beats Music is the paltry sum it is paying artists for the music it streams to listeners. In March, Beats paid only $22,000 in royalties to artists. That works out to the anemic price of $0.000126 paid to the artist each time his or her tune is played on Beats Music. The record labels are getting $0.00136 per play, resulting in a figure of $250,000 paid to them in March. But this could be skewed by the three months of free service that AT&T offered its customers as a marketing promotion
The bottom line though, is whether Apple might actually learn something about improving iTunes Radio by making this purchase. That is the unsaid rationale for making the buy. Remember, at $3.2 billion this would be Apple's largest acquisition ever and could backfire if the deal is made and it turns out that Beats needed Apple more than Apple needed Beats.
source: TheTrichordist via DigitalMusicNews, SlashGear
Posts: 267; Member since: Jun 22, 2012
Apple buying Beats will be a huge failure. Should've purchased Spotify instead, they have over 6M paying subscribers.
posted on May 13, 2014, 10:53 PM 6
Posts: 1418; Member since: Mar 02, 2011
Apple would've had to have known this before making the acquisition. There's something that's either being overlooked or being kept hush that got Apple to pay such a large amount for this company. Maybe we'll have some answers at WWDC.
posted on May 13, 2014, 11:41 PM 0
Posts: 2383; Member since: Jul 18, 2010
I think the answer might have to do with comment #5 above... If AT&T's been pushing the Beats subscriptions, Apple could be thinking they're about to inherit a windfall, provided subscribers stay aboard after the free period expires.
posted on May 14, 2014, 1:48 AM 0
Posts: 3806; Member since: Apr 16, 2014
I used to be against this acquisition, but now I realize that it maybe the least of all possible evils. Apple is buying the worst streaming music provider and one of the world's crappiest makers of headphones. But also Apple is apparently working on 24-bit audio output, HD iTunes, and better in-ear headphones. So the world will pay more attention to audio quality. This is a good thing. We end up with Apple taking "Beats" streaming audio off the general market and making it part of the Apple monoculture. This is basically the same as Apple doing nothing as "Beats" streaming is irrelevant with 110K customers. Just as no one in their right mind would buy headphones from "Beats", this isn't going to change when Apple owns the headphones either. Basically we get the following outcomes: -- People who love music can buy HD music from Apple. This is a win for the customer. -- People who love music can buy headphones other than "Beats", the same as they do today. -- People will become more aware there are different quality levels of headphones. -- People who love music on Android can expect Android HW makers to get more serious about audio quality. -- People who aren't very discerning about music streaming can use "Beats" streaming. -- People who like Spotify can keep on using Spotify. -- Spotify will be under (some) pressure to increase their streaming quality. This is a win for Spotify customers. So all in all, Apple is basically taking out the garbage with this acquistion. Sure some of it will be around in the Apple monoculture, but really with iTunes already being so Hollywood focused, it will be very hard to tell if it gets any worse. Do it, Tim.
posted on May 14, 2014, 1:02 AM 4
Posts: 569; Member since: Dec 11, 2008
"Just as no one in their right mind would buy headphones from "Beats", this isn't going to change when Apple owns the headphones either." I'll disagree since Beats owns 60% of the premium headphone market in America. Someone is buying them or they would own that much market-share. I doubt that includes all the fake Beats out there too. You know you've made a product people want when the market gets flooded with knock-offs. Just because you may not buy them doesn't mean others won't or don't. You'd actually fall into the minority. Also, with pop and hop-hop killing all the other genres the majority want to hear bass more than anything, which again is personal option. Beats markets like Apple and has every 7-20 year old wanting their product. I was amazed at all the carts with multiple pairs of Beats in them when I was shopping black Friday this year and how every major retailer had some sort of sale on Beats. Plus having to hear my 9 year old ask for them over and over and I just told him no since they'd just end up getting stolen. Other than Bose, you can't even find any other brand of headphones that you can actually demo in-store so how is anyone going to know how these other brands sound or where to buy them? Apple would be foolish to spend $3.2 Billion on a company and then do nothing with it. The name is really the only value but it's a match made in heaven since each company is the king in their respective markets when it comes to marketing and profit margins.
posted on May 14, 2014, 10:24 AM 1
Posts: 3806; Member since: Apr 16, 2014
Yes, the masses always buy mass market brands. People with knowledge are a minority, will likely always be a minority. This is why things like advertising and marketing work and actually drive demand so well. If everyone had knowledge, we'd all laugh at the lies companies try to sell us and many of us would buy something else. Apple has a strange dichotomy of markets. The iPhone (and to a lesser extent the iPad) are for the mass market, but the rest of the company's products are not. As the iPhone in particular drives so much of Apple's revenue and profits, they are trying to expand their ecosystem. Adding music streaming that is better than iRadio makes sense. Adding headphones makes less sense, but could still work. As people with knowledge rarely buy "Beats", it could be that even if Apple buys them, other headphone manufacturers will not be all too negatively impacted by this. Of course, if Apple selects a few of the "Beats" models that are somewhat better and gets rid of the rest, that would be interesting too. There's a lot of unknowns as to what would shake out. The key point is that Apple doesn't want to lose the love of the market influencers and they risk that, to some minor to moderate degree, by having their own mass market headphone brand. Anyhow, just because some company is making a lot of money and has a high profit margin doesn't mean it is "match made in heaven". If this were the case, Apple should buy telecoms, energy companies, and banks. Anything with effective monopoly power, essentially. I hope Apple buys "Beats" as I mentioned above. It is the least of all possible evils in the streaming music space (though Rdio is a close second).
posted on May 14, 2014, 1:40 PM 0
Posts: 569; Member since: Dec 11, 2008
I agree with just about everything you said but what will the Beats music service add? I only know one person that uses it, and he loves his Beats headphones, but is cancelling his subscription due to lack of music he was looking for. He had both a Google play music sub and the Beats at the same time and said the Beats was worthless. Reading the reviews it get in the Play Store seem to echo his opinion so I guess I'm would be curious what Apple sees in that service to begin with. I haven't used iRadio since it first launched and thought it was decent, though not really any different than Pandora. I still think they are perfect for each other as the examples you provided are so far out of Apples current realm that it wouldn't make sense for a tech company to buy a bank or energy company. Telecom on the other hand would make some sense but any that are making money don't have a "for sale" sign out front. The brand name and maybe some patents would be it. Then they let Jony Ive do his thing as well as raise the quality of the product itself so the price matches the quality.
posted on May 14, 2014, 5:33 PM 0
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