According to techcrunch.com, citing multiple sources inside Apple and Beats Music, Apple plans to discontinue the streaming music service it acquired in May.
Sources inside the two companies say that technicians and engineers from Beats have “already been moved off the product and onto other projects at Apple, including iTunes”. It still remains to be seen what will become of Jimmy Iovine and Dr Dre’s streaming music service, or what play Apple will make to enter the streaming music service game, but according to techcrunch “every source with knowledge of the situation that we talked to agreed Apple plans to sunset the Beats Music brand”.
With the launch of the iPhone6 just last week, the one glaring omission from the pre-installed apps (as well as those available on the Apple Watch) was Beats Music, even though Beats would be very easily integrated into both systems – the only mention Beats got at any press event was when CEO Tim Cook mentioned that the new U2 album would be available there.
Considering Apple’s history of keeping a standard and streamlined marketing strategy, this plays to the idea that the acquisition of Beats in May was more about getting Jimmy Iovine and Dr Dre’s talent on board and stepping into the headphone game then it was to acquire an already existing streaming service. In addition, former Beat’s Music CEO Ian Rogers has also been put in charge of iTunes Radio, adding credence to the reports that Apple is merely assimilating the technology into their own branding.
All of this generally makes good business sense. By getting in fairly late to the music-streaming game (after Spotfy, Rdio, Google Play, and Pandora, to name a few) and offering free-trials to over 5 million AT&T customers, Beats only about 250,000 customers actually signed up. Apple has the customer base (via iTunes) of over 800 million, with over 400 million credit card numbers. The client base the Beats offered Apple is a drop in the bucket in comparison, so by dissolving the brand (at least in the streaming game) is not a huge loss, even considering the $3 billion price tag.
So now what does Apple do to get into the streaming music game?
The most logical strategy would be to roll a streaming service into iTunes somehow. Another source, according to the article, said that “Apple plans to make some significant music announcement in the first half of next year”.
It’s going to be tough for Apple to find the correct way to transition from the download market to the streaming era. Streaming is growing at a pace of over 32% per annum, while digital music sales are falling at a rate of 13.3% over the same time period. Apple will have to do something to stay competitive.