Apple and Beats: Now What?

So the Beats/Apple deal is official (and at a slightly lower price than originally expected). Now, of course, the next question comes up: what next? Specifically, how does this deal potentially impact Pandora and Spotify? Both are the biggest players in the streaming music space. Conventional thinking is that Spotify is under the biggest threat, but that conventional thinking also appears to be making conventional assumptions about how the threat will appear. Just having more money won’t make Beats Music a threat to Spotify. And thinking Apple/Beats isn’t, or won’t be , a direct competitor to Pandora? Well, that’s dangerous and limiting as well.

It Won’t Stay Beats Music

Just for background, Beats and Spotify, like iTunes Radio, offer similar services, which is a form of interactive/on-demand streaming. Pandora, though, is much more like traditional radio, just without the “radio broadcast” part (unless, of course, if you use LTE or Wifi :-). Then it is sort-of like conventional radio technologically. Okay, bad joke). The analyst quoted doesn’t see Apple/Beats as a serious threat to Pandora, but more of a threat to Spotify.

The Forbes article linked above makes mention about Apple having deep pockets to grow Beats Music, and that will form the biggest threat to Spotify. That’s an unimaginative statement. The problem with all of this thinking is that they assume Beats Music simply carries on more-or-less as-is, just with a different owner and access to more money. Given Apple’s history with other technologies it has acquired, I can say one thing safely: a year from now, Beats Music probably won’t look much like Beats Music. It may carry the same name and brand imagery. But I fully expect Apple to give it a makeover, and to alter the service in-line with some idea Steve had some years back (that only the insiders in Apple know about) to present a different way of streaming music to listeners who don’t want to buy music from a store.

Lessons Learned

While Apple is usually thought of as a “go their own way” company, they are certainly capable of imitation of other products. Elements of iOS 7 are certainly based on things that Android had for many years (not the “flat” thing, though. If you don’t understand the difference between “flat design” vs. the “featureless design” that Android has, then you need to go back and learn about design). iTunes hasn’t been above borrowing other ideas. The whole iTunes Radio service is based on the same model as other services like Spotify.

But what Apple is usually capable of doing is learning from their imitation experience, and finding a different (and sometimes better) way forward. I fully expect Apple has learned from iTunes Radio. Externally, they’ll make all the right noises that they consider it a success. They had high hopes for it when it was first introduced last year at WWDC (as part of iOS 7). Sure, it had what you could call “explosive growth”, in that it went from zero to thousands of subscribers. The problem, though, is that growth appears to have tailed off. It isn’t the growth and revenue engine Apple was hoping for.

So what will Apple do? Specifically, I don’t know. I suspect that the company had some discussions over the years about streaming services and alternate ways to deliver content. I guarantee Steve had opinions, and likely shared them with Tim and the team. Apple’s focus has been, and continues to be, sales of music and other content via iTunes. Trying to add a streaming service to a retail store just hasn’t worked as well as it was probably hoped. Buying Beats Music gives them a new platform, and a new approach, that they can build on. But I fully expect a transformation of the Beats Music service. Hopefully, Apple doesn’t try to bring it under the iTunes umbrella. I believe that would be a mistake. I think it needs to remain an independent service, with an independent brand and image.

Think Different Still Rules

Whether they buy it or make it, Apple tends to do more than just change the logo. The core of what became the iPod was bought, and then made better, such that it dominated its market in a way few products have ever done. Apple’s approach to laptop/notebook computers has always been different (and I still think PowerBook is a way better name than MacBook). What is called Siri wasn’t invented by Apple, they bought it, and changed it to better fit the Apple ecosystem. The iPhone was an unconventional approach to smartphones. The iPad was a different take on tablet computing. The AppleTV was a different approach to a set-top device when compared to other products out there (the form-factor alone of the current generation is still impressive).

Apple hasn’t invented everything they have or sell, and whatever they buy tends to reappear in a different form beyond just cosmetic. Sometimes Apple will try to walk a conventional path (iTunes Radio is an example of that). But they seem to have more success when they carve their own path to a destination.

I fully expect Beats Music to change in the next year or so. What I would guess is that either next year at WWDC, or next fall when Apple normally does iTunes/music stuff, Apple will announce a new Beats Music service that is different in some way. It will be both a Pandora and Spotify competitor, and it will also be the end of iTunes Radio. Whether it succeeds is a different story, because without knowing what it is (or could be), it is impossible to say. But whatever Apple comes up with, you can bet it will be different. It has to be, otherwise what would be the point? And if Apple doesn’t change it, or worse, simply bolts it on to iTunes Radio, then Apple will have paid $3 billion for a manufacturer of really nice headphones.