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More on Apple/Beats: Cook talks future plans, praises Beats Music

  • "The ugly truth is that there is such a Berlin Wall between Silicon Valley and L.A. ... The two don't respect each other, don't understand each other," says Tim Cook. He's hoping new employees Jimmy Iovine and Dr. Dre will act as a bridge.
  • The WSJ states Iovine and Dre will "work with both Apple's (AAPL) electronics and music-streaming divisions, spending as much time at [Apple HQ] as necessary." In an employee memo, Cook says the Beats team will report to Internet services chief Eddy Cue.
  • Cook offers high praise for Beats Music, which pairs an algorithm with human curation. "We love the subscription service that they built—we think it's the first one that really got it right." He suggests in his memo the service will be integrated with iTunes.
  • In an interview, Cook refers to Beats' headphone ops as "a reasonable-size business that’s fast-growing." He also predicts the deal will be accretive to FY15 (ends Sep. '15) EPS.
  • IFPI estimates global music streaming/subscription sales rose 51% Y/Y in 2013, and that download sales (still 2/3 of all revenue) fell 2%. Back in March, Apple was reported to be mulling a subscription music service, and thinking of offering an Android iTunes app.
  • Pandora (P), which fell when the first Apple/Beats reports arrived, is down 1% AH.
  • Previous coverage
Comments (33)
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    "We love the subscription service that they built—we think it's the first one that really got it right." -Tim Cook

     

    This move is conceding that iTunes is dead, and that streaming is the future of music consumption. (iTunes sales down 12% y/y, ironically due in part to Apple's own iTunes Radio, a failed attempt to push song purchases).

     

    But Tim left Spotify and Pandora, the biggest streaming players (light years ahead of Beats Music!), on the table for Google or Amazon (or Microsoft or Facebook or Samsung).
    28 May, 06:19 PM Reply Like
  • Budavar
    , contributor
    Comments (1387) | Send Message
     
    Mind-bending?

     

    Finding bad words for good deeds.
    28 May, 06:26 PM Reply Like
  • djkidm
    , contributor
    Comments (364) | Send Message
     
    From an artist's point of view Spotify and/or Pandora are not industry leaders. They cannot consistently pay artists what they deserve, and in the end they will lose content.

     

    Jimmy Iovine has figured this out, for both the artists and consumers, and Tim Cook sees this potential.

     

    Besides it's a drop in the bucket for $AAPL
    28 May, 06:45 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    Both P and Spotify pay more than half their revenue to artists, to date over $1B from Pandora and another $1B from Spotify. Beats Music? Less than $250k, so far. Artists can chose to leave it, and some do. But deals that lovine inked are similar, which some think are still too low:
    http://bit.ly/1khEj4X
    28 May, 07:24 PM Reply Like
  • Drive23
    , contributor
    Comments (8) | Send Message
     
    Not sure how you quantified 'light years' ahead. I personally can't stand Pandora's recommendations. Beats Music curation service is much better. The lack of a desktop version is solved once it gets integrated into iTunes.

     

    Who cares if Pandora has millions more listeners. Samsung sells more phones doesn't mean its better. They purchased the best streaming service out there and combining that with iTunes is a win for the Apple consumer.
    28 May, 09:05 PM Reply Like
  • kana2003@aol.com
    , contributor
    Comments (6) | Send Message
     
    You nailed it. Apple neads an Elon Musk type at the helm. Tim Cook is a powder puff, who wears irregular sized jeans. Not sure what this deal is really about. Beats headphones were cool 5 years ago and the streaming music service has as many subscribers as the packed school bus that passes my house every morning. If it's really about the future of streaming music, Pandora all the way.
    28 May, 09:47 PM Reply Like
  • djkidm
    , contributor
    Comments (364) | Send Message
     
    @dgulick

     

    Your link is to an obscure complaint between artist (performer) and songwriter. That percentage has always been there. Artists (or performers) get more revenue per stream on Beats, and Apple can increase those numbers by who knows how much.

     

    Spotify and Pandora rely on ad revenue for their platforms.
    28 May, 10:07 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    @Drive23,

     

    "Not sure how you quantified 'light years' ahead."

     

    Pandora has 300x as many active users as Beats, and in March, streamed 1.7B hrs of music compared to ~11M for Beats (~150x as much). If you don't consider that substantial, I can't help you.

     

    @djkidm,

     

    "Spotify and Pandora rely on ad revenue for their platforms."

     

    Not entirely, P gets 20% from subscribers and Spotify gets 80%. But also, traditionally 80% of music listening has been free/ad supported radio, and P's success in disrupting this market is what prompted Apple's iTunes Radio (among others). Question for you, don't performers want a share of the $18B AM/FM radio ad revenue? (something that, rather amazingly, they have never gotten a share of in the US).
    29 May, 04:17 PM Reply Like
  • milehr
    , contributor
    Comments (475) | Send Message
     
    This is a bridge to nowhere. Wrong company, wrong move, too much money.
    28 May, 06:25 PM Reply Like
  • Ashraf Eassa
    , contributor
    Comments (8816) | Send Message
     
    What a waste of money.

     

    C'mon Apple.
    28 May, 06:33 PM Reply Like
  • Jack Baker
    , contributor
    Comments (886) | Send Message
     
    Ashraf.

     

    You and I both know that Apple does not spend money foolishly.

     

    Apple will redesign beats hardware and make it world class quality and look even cooler. Then Apple will promote the hardware through its online store and its global retail stores. Sales will skyrocket. That's the hardware side.

     

    Apple will then promote the curation streaming business to Apple's massive installed base and guess what? 110k users (98% of which are paying customers) skyrocket. That's the streaming part.

     

    Then there's the talent. Jimmy lovine will give Apple massive leverage with artist and and music labels. He will also bring a great culture of creativity from the music content side to Apple. Cupertino is full of techie nerds. They can definitely use more people like Jimmy that know what's cool and what people will buy. Anyone who can make mediocre headphones and start a streaming business and sell it all for 3 billion dollars knows something about merchandising.

     

    The deal is scheduled to close at the end of 2014 and Cook says it will be accretive by the end of fiscal 2015. That's only 3 quarters. I would say that's money well spent. Or would the 3 billion be better off collecting dust with the other 150 billion earning 2% interest? And, they may be using offshore money for the purchase (Beats set-up an Irish domicile last year probably in anticipation of the deal) which would make the effective purchase price closer to 2 billion.
    28 May, 07:03 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (4048) | Send Message
     
    Ashraf, did you check the revenue and margins of Beats Electronics (just the hardware) in 2013 and Q1 2014?

     

    $3bn (especially if done via Irish holding) is actually a bargain and Cook reiterated a fast ROI, accretive by FY 2015 as Jack pointed out already, see various Cook interviews in the WSJ and FT.

     

    So what exactly is a "waste" in your opinion? Please back this up with numbers or more details.

     

    Beats is not some dotcom bleeding money and AAPL is not known for wasting money either.
    29 May, 04:04 AM Reply Like
  • Ashraf Eassa
    , contributor
    Comments (8816) | Send Message
     
    "Beats is not some dotcom bleeding money and AAPL is not known for wasting money either."

     

    For Apple's sake, I hope not. Apple is an incredible company and it would be a true shame to see them throw away money.
    29 May, 02:18 PM Reply Like
  • Shaduc
    , contributor
    Comments (948) | Send Message
     
    " true shame to see them throw away money."

     

    Yeah death of an American brand, just like Motorola, Palm, Levis.

     

    This brings a comparison to Warren Buffett and the dot-com boom. Finally before the bust, he gave into the pressure and ...
    30 May, 12:40 AM Reply Like
  • Shaduc
    , contributor
    Comments (948) | Send Message
     
    this seems to be money spent wastefully.

     

    NBA record $2 billion offered for Clippers
    Los Angeles Times - ‎27 minutes ago‎
    Steve Ballmer, center, attends an NBA playoff game. The proposed $2-billion sale price would be almost four times the previous NBA franchise high: the $550 million paid earlier this month for the Milwaukee Bucks.
    30 May, 12:59 AM Reply Like
  • djkidm
    , contributor
    Comments (364) | Send Message
     
    The Bucks play in Milwaukee. The Clippers in LA.... You do the math?

     

    Do you know how much the LA Dodgers sold for? Do you know how much their TV contract is worth?

     

    I'm just curious where you derive value from?
    30 May, 08:14 AM Reply Like
  • scott trader
    , contributor
    Comments (4511) | Send Message
     
    Dre...not sure of the doctor part???.better be better at keeping secrets than he has so far otherwise Cupertino headquarters may be off base.....I agree apple could have done this organically....oh well just a shareholder just along for the ride...
    28 May, 06:39 PM Reply Like
  • Moderation
    , contributor
    Comments (194) | Send Message
     
    Are you down with Dr. John? Dr. Demento? Dr. J ?
    29 May, 12:44 AM Reply Like
  • scott trader
    , contributor
    Comments (4511) | Send Message
     
    @moderation I must admit yes.. But it kinda pains me that I could not afford to get my doctorate..
    29 May, 06:08 PM Reply Like
  • gelstretch
    , contributor
    Comments (811) | Send Message
     
    This is a "brilliant" move for Apple. Most really informed and "smart" folks will appreciate the move made here by Apple.

     

    Are you informed and "smart".... take the test to find out.....

     

    http://bit.ly/1khwpbC
    28 May, 06:46 PM Reply Like
  • Skeptic84
    , contributor
    Comments (277) | Send Message
     
    the pundits were calling for Cook to make a big move. This is it. Time will tell if it was a waste of money or not. I can't believe this was about headphones. It has to be about the streaming service. (The curation algorithm?)
    28 May, 06:47 PM Reply Like
  • Budavar
    , contributor
    Comments (1387) | Send Message
     
    If you call that a "big move", wait to see what happens next!
    29 May, 11:13 AM Reply Like
  • youngdub774
    , contributor
    Comments (36) | Send Message
     
    Beats by Dre arent the best headphones, guess what nobody cares. Beats were able to brand better than everyone else and convinced people to scrap cheap headphones for theirs, that is valuable.
    28 May, 06:49 PM Reply Like
  • berylrb
    , contributor
    Comments (2179) | Send Message
     
    actually the audiophiles say its the best for the genre, heavy bass
    28 May, 09:08 PM Reply Like
  • Jack Baker
    , contributor
    Comments (886) | Send Message
     
    Accretive in 2015 is all I needed to hear; especially since the deal doesn't close until the end of the first fiscal 2015 quarter at the end of 2014.
    28 May, 06:52 PM Reply Like
  • JMajoris
    , contributor
    Comments (637) | Send Message
     
    Funny how the doubters don't understand that. They're too caught up in their emotional baggage to have any vision. Not that you really need any vision to appreciate this.....

     

    <<Accretive in 2015 is all I needed to hear>>
    28 May, 07:13 PM Reply Like
  • a alto
    , contributor
    Comments (122) | Send Message
     
    And if Jimmy and Dre get killed in a car wreck ? Too much money on two guys .
    28 May, 07:20 PM Reply Like
  • hhess13892
    , contributor
    Comments (228) | Send Message
     
    "And IF"

     

    If you make business decisions like that you won't be around long. Some things are well worth the expense.
    28 May, 08:26 PM Reply Like
  • berylrb
    , contributor
    Comments (2179) | Send Message
     
    and if tim cook ...
    and if elon musk ...
    and if mark zuckerberg ...
    and if ...

     

    and if steve jobs ...

     

    lifestyle aside, that's a nonsensical argument
    28 May, 09:11 PM Reply Like
  • Budavar
    , contributor
    Comments (1387) | Send Message
     
    If pigs can fly...
    29 May, 11:14 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (4048) | Send Message
     
    The hardware alone pays for the deal (Betas had well over $1bn in revenue/year and high margins), all else, inlcuidng the two top execs, is basically free for Apple in this deal.
    30 May, 07:55 AM Reply Like
  • randiego2
    , contributor
    Comments (15) | Send Message
     
    For those saying Apple paid too much...
    1) how much revenue does Apple make in a week?
    2) Does the business they are buying currently make a profit?

     

    What's the problem again?

     

    29 May, 12:02 AM Reply Like
  • Budavar
    , contributor
    Comments (1387) | Send Message
     
    Comes old Budavar,
    Not such a big star
    In young Florida,
    Not in Omaha,
    To re-iterate,
    For you please just rate...

     

    his first switch reco of 2014 published here + elsewhere on April 24:

     

    (Switch = sell one stock + use proceeds to buy another)

     

    >>> Sell AMZN, then $338, now $311, buy AAPL, then $569, now above $600.
    Not too late to do that switch.

     

    The best is yet to come.
    29 May, 11:35 AM Reply Like
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