22 Dec 2014
When Apple paid a whopping $3bn for popular headphone manufacturer Beats Electronics, eyebrows across the tech industry were raised. While many thought it was a blatant attempt at recapturing the youth market it had become so popular amongst a number of years ago, others thought it merely a sign of a once innovative company throwing its cash at whatever business happened to be popular on that day.
However, while Beats’ headphones are certainly a popular and successful brand, another part of the deal could potentially be of far greater value to the tech giant. The music streaming service Beats Music was snapped up as part of the deal at a value of $500m, and the brains behind the service is set to be the key to Apple’s re-emergence as the dominant player in digital music in 2015.
Jimmy Iovine, music mogul and co-founder of Beats Electronics with hip-hop artist Dr Dre, has a long and illustrious career in the industry that dates back more than 40 years. The co-founder of record label Interscope – which later merged with industry giant Geffen – Iovine has won numerous accolades during his career in the music industry. However, it was his launch of the Beats Electronics headphones brand in 2008 that transformed him from being not only a senior music industry executive, but also an extremely successful entrepreneur.
So far there hasn’t been any serious integration between Apple and the Beats brand, aside from the headphones being heavily promoted on the firms website. However, in the coming months Apple is expected to unveil a brand new version of its frustratingly cumbersome iTunes music service that will have streaming at its heart, all based on Iovine’s Beats Music service.
Having seen a dramatic decline in the sale of music downloads over the last year – according to Nielsen SoundScan a fall of 13 percent was seen in the first six months of 2014 – Apple has seen music fans flock to streaming services like Spotify and Rdio. With the company’s belated entrance into the streaming market, the music industry could see a dramatic shift away from ownership of music files and towards a subscription model. How artists feel about this – especially in light of the concerns about lower royalties they receive – could cause a lot of debate. However, with such an industry insider on board in the form of Iovine, Apple is well placed to get the sort of licensing deals that have eluded them in the past.