"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.