Mobile Fix: Apple, Beats and Anchors
As speculation rises over whether Apple is going to buy Beats, Simon Andrews, founder of Addictive!, looks at how the tech giant is developing in the music space…
Is it happening or isn’t it? Almost a week on and it is still unclear whether Apple is going to buy Beats.
But the lack of news hasn’t stemmed the opinions and speculation. As someone on Twitter said: when Google, Amazon or Facebook announce something everyone goes – Ooh interesting move. Yet when Apple announces something (or even a rumour) lots of people say – Ooh Stupid move.
We don’t think Apple is at all stupid and believe this could be a great deal. Beats is a very successful company with a really strong brand.
The first reason is that Beats could resolve the issues around a cheaper iPhone. Many people have pointed out that a lower price iPhone – an iPhone Nano – could allow Apple to take the fight to the mid-price androids that are doing so well all around the world.
But the problem has always been about what a low price version does for the brand and does it affect the higher price iPhone?
We have termed Apple the Audi of smartphones before and it’s worth considering how that brand deals with market segmentation. There are many flavours of Audi but all at the top end of the market. For lower price points they have VW and Skoda – all sharing the same technology as Audi but each operating in its own market sector.
So a Beats phone at around $300 could be a big hit; iPhone 5 technology – which is still top parity with the best Androids even though it’s a year old – with the very popular Beats branding, sold through the awesome distribution networks of Apple.
The second reason why it would be a good deal is that it should allow Apple to reinvent its music offering. Remember the renaissance of Apple was driven by the iPod and iTunes. As streaming grows in importance, iTunes Radio – which is to be ad-funded – probably isn’t a strong player.
Now Beats streaming hasn’t done that well so far, but with some Apple love it could do a lot better.
Music industry insiders are very excited about the potential of streaming, but they see a different model to Spotify, et al. Mark Geiger, head of music at talent agency William Morris Endeavour, believes streaming can transform the music industry.
He envisions Streaming revenues of $72 billion – five times the total music sales (globally) in 2013. Lucian Grange, who heads up the biggest label, Universal, tends to agree. But Geiger thinks it will take one of the the big players – GAFA – to make it work and they need to have all music on it, not the relatively limited supply that current players have.
In his presentation at Mipcom he makes it clear that the people behind the streaming firms aren’t from music – but the Beats people clearly are. Could Apple deliver the 500 million users who pay $15 a month for all you can eat streaming music?
One other point on this – we are told that the music rights that Beats has can be transferred in the event of a takeover whilst the Spotify rights can’t. So Apple may have pulled up the drawbridge behind them with this deal.
Music as an Apple anchor
Is music that critical for Apple? Sure they built a big business with iTunes but everyone now has a music offer and many thought that it had become a commodity – something you have to offer but unlikely to make a big difference to a customer.
We disagree – we think if you can get music right then it can be very powerful. Along with sleep, music is the most underrated drug in the world. Hearing the right song at the right moment can enhance your mood just as well as any narcotic.
But whilst the music that does that for me may be Marvin Gaye, Frank Ocean or 1960s Brazilian Jazz, yours will be different. And that’s where music services have to go next – to discovery and personalisation. Jimmy Iovine of Beats talks about curation:
“There’s an ocean of music out there,” he said. “And there’s absolutely no curation for it.”
What better raw material to start with than someone’s iTunes collection, and scrobbling that (remember how clever LastFM was at that) to deliver a curated stream.
If Apple can use its knowledge of my music and deliver a great personalised stream – helping me discover new music that I love – it has something hugely powerful. And 500 million people paying $15 a month generates $72 billion a year – and a 30% share gives Apple over $20 billion a year in new revenue.
Apple Anchor – Passbook
We see music as a crucial Anchor – something that will cause Apple users to pause before moving over to Android and losing something they value.
Right now getting your music out of iTunes is a huge faff and that acts as a sort of negative anchor – as does the way iMessage buries your texts once you quit Apple.
If you are Apple though, you now want to build positive Anchors that keep people delighted with their iPhone. The Appstore used to be an anchor but now most of the top apps are on Android too.
Music can be one and we are convinced that Passbook could be another. If I have a Passbook full of my loyalty cards, coupons and boarding passes, will I just leave that behind as I switch to a Galaxy? And if Apple gets the Passbook working really well with iBeacons to offer a new level of utility around shopping, will I just leave it?
When Apple leverages its 600 million credit card relationships to offer a real wallet service it becomes even more of an Anchor. Like moving banks – I know it can be done, but do I really want to?
This is an edited and abridged version of Mobile Fix – click here to read the full article on Addictive!’s website