Would Apple Partner with Beats for Music Streaming? Maybe

| Analysis

Apple CEO Tim Cook met with Beats Electronics CEO Jimmy Iovine in February to discuss a possible partnership in a music streaming service. Reuters reported that the meeting was sparked by a streaming service called Project Daisy that Beats announced in January for a late 2013 launch. The question is, what's Apple's angle?

Jimmy Lovine

Beats CEO, Interscope-Geffen-A&M Chairman Jimmy Iovine
Credit: Wikimedia Commons

Apple has long been rumored to be interested in a music streaming service, though the late Steve Jobs famously made the case that people wanted to own their music. His comments were aimed at music rental services that the music industry was excited about 10 years ago, rather than streaming services like Pandora and Spotify, which have proved a hit with consumers.

Beats

Beats was founded by musician and producer Dr. Dre and Mr. Iovine to make high-end headphones (with an emphasis on bass). The brand has been fabulously successful, and the company announced Daisy as a new approach to streaming music with involvement from Ian Rogers, Luke Wood, and Trent Reznor.

"What's missing from the digital music landscape is a cultural context," Mr. Iovine said at the time. "We need to bring an emotional connection back to the act of music discovery. With Trent and now Ian we have the right team in place to do it."

Beats has kept details close to its corporate vest, but according to Reuters, Jimmy Iovine met with Tim Cook to talk about the service and a possible Apple partnership. Apple's Senior Vice President of Internet Software and Services Eddy Cue also took part in the talks.

Oh Yeah?

It would be a huge departure for Apple to partner with a third party company in launching a service. Apple's usual modus operandi is to buy small companies and use their technology and/or people to build and launch Apple-owned and operated services, software, or hardware.

The notion of Apple "partnering" with a company—even a company like Beats headed by an industry legend like Jimmy Iovine, who was one of the first record execs to sign up with Apple's disruptive iTunes Store in 2003—is difficult to swallow.

At the same time, there's not been any hint that Beats is for sale, and it's not likely that Apple would be interested in owning that company's headphone business. It's also difficult to imagine a co-branded service.

So what to make of this report? Reuters cited three sources "familiar with the matter," and we place a high degree of probability that the meeting did take place and that Daisy and music streaming was the topic of discussion.

It's conceivable that Apple could buy just Daisy, of course. Indeed, we believe that of all the possible scenarios, that one is the most likely, but there are some additional factors to consider.

Fear & Self-Loathing

The first is that no one who owns content is keen on giving Apple control. Apple has shown that it can offer content in a way that consumers want, and when it does so, it takes control of the customer relationship. That freaks TV and movie studios out, and the music labels themselves have always appeared to be angry about the success of iTunes.

To this end, Apple has apparently been stymied in putting together a TV streaming service, and in September the company's plans for a music streaming service reportedly stalled over fees. Tim Cook and Eddy Cue may have found that if they want to offer a streaming service through iTunes, they're going to have to have a third party partner.

Beats would be as good a partner as any and better than most. Jimmy Iovine is known for taking chances, and Project Daisy has prominent musicians involved. If those people have reinvented a music discovery process that actually works, it would make a co-branded Daisy a real asset for Apple.

Remember, however, that a meeting between CEOs is a far cry from a signed deal. They could have walked away from the meeting having only spit-balleds possibilities. Beats might not even be interested in a partner, even if Apple is.

If this story does have legs, there will be additional leaks in the weeks and months ahead. Daisy isn't supposed to launch until later in 2013, and that's plenty of time for all manner of possibilities.

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Comments

Michael

I’d guess they’re working on a deal where Apple hosts the service through iTunes under the Beats brand and handles the distribution (app development) for iOS. Let the Beats guys serve it up on other platforms.

While I agree Apple usually just rolls their own services, they have been reluctant after all these years to enter the streaming/subscription market. This would allow them to offer a service to their customers without really taking all the risks.

Doug Grinbergs

> Beats Electronics CEO Jimmy Lovine

It’s Iovine, not Lovine

Bryan Chaffin

Thanks for catching that, Doug. I fixed the piece.

Thanks for the note. smile

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