The music ownership model is dead. If anyone thinks Apple is buying Beats at a 3B valuation (officially not announced yet) to sell more hardware, it could not be further from the truth. It’s true that Beats has more than 50% of the market share in the high-end head sets, but that alone does not justify the cost.

My opinion is that Apple is buying Beats for http://www.beatsmusic.com/, its subscription based music platform that offers curated music.

 

growth of subscription vs downlaod

Image from ( http://www.digitalmusicnews.com/)

The beatsmusic.com website says:
Get unlimited access to over 20 million tracks. Play Pop, Rock, Hip-Hop, Country, Jazz, Speed Metal, Afro Beat, Classical, any genre. Plus expert curators to help you pick the right ones.

The pricing model:
THE FAMILY PLAN.
UP TO 5 ACCOUNTS
FOR $14.99 A MONTH.

Once you know this, why would you buy the .99 cents song from iTunes?

Spotify and Pandora are growing fast and proving that the ‘music by subscription’ model is the next thing in the music industry.

Apple knows this change is coming, most probably from its Big Data analytics which matches data from the iTunes store as well as the public domain content of it’s users etc. With this sort of insight, It needs to, and can, act fast.

If Steve Jobs was at the helm, I doubt he would go for an acquisition. Infact, the biggest purchases by Steve were in the 100s of millions… he would have gone for building the best subscription platform on the net…

Steve is not here to take such decisions but the market insight is here, and the new boss takes the best decision he thinks is practical.

Building a new platform is not going to be easy and making it best in the world even more difficult (Remember the Apple maps story?). So the next best alternative is to purchase the best out there for sale and improve it.

How this will unfold, will it overtake Spotify in terms of subscriptions, remains to be seen.

What is true is that Tim Cook did not have much options, the 3B price tag also gives it the much needed publicity and news which will drive up the brand value and brand recognition.

I am not sure if beatsmusic.com was known to as many people before the announcement of the 3B purchase by Apple. If the hype created increased the brand recognition and audience, the total cost of acquisition will be 0 in a few years from now.