Can Apple Save the Music Business, Again?

Can Apple and Beats Music make a difference in an industry that has been beaten down by online piracy and now streaming music services that can't seem to get enough paying subscribers to be profitable?
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Can Apple and Beats Music make a difference in an industry that has been beaten down by online piracy and now streaming music services that can't seem to get enough paying subscribers to be profitable?

Caught in the middle of all this are musicians and songwriters who have seen their careers crater and their paychecks disappear. For many working artists the digital revolution has been a nightmare.

Speaking out last May, just after the Beats deal was announced, Jimmy Iovine, Co-Founder of Beats Electronics and one of the few remaining music business icons, had this to say:

We have a lot of dreams for the subscription service, it is very important to every recording engineer, producer, artist, songwriter and the music industry....we have to get this model right, we don't know the exact model yet, but we need to put steroids into this thing and get it done quickly, Apple is the best company in the world... and 800 million subscribers doesn't hurt either.

In an interview at the Code Conference, literally hours after the Apple, Beats Electronics deal was announced. Mr. Iovine and Eddy Cue, long time head of iTunes, spoke in detail about Beats Music; its emphasis on curated playlists and their shared passion and respect for music. For those looking for something positive in an industry hammered by technology, this interview was nothing less than a revelation.

Mr. Iovine was actually one of the first people from the music business to meet with Steve Jobs and Eddy Cue back in 2003 to see a demonstration of iTunes. Mr. Iovine 'got it' and helped Apple convince a doubting music industry to allow iTunes to sell music downloads.

The sticking point? Jobs insisted that iTunes offer songs and not just albums for sale as digital downloads. Jobs was right. Widespread piracy was making music free for an entire generation and without an inexpensive solution even more people would have felt 'entitled' to get their music without paying.

Now, a decade later, just hours after Mr. Iovine had officially joined Apple, the two men were together, once again, to see what they could do to save what's left of the music business in 2014. For the first time, since Apple introduced the iTunes store over a decade ago, digital download sales of music were down. The challenge for Apple? How to promote Beats Music without destroying iTunes.

Their solution may be in building a music streaming service rooted in discovery that transitions the listener to iTunes and creates an opportunity to sell more music to those who prefer to own it, not borrow it. And don't underestimate Mr. Iovine's value in putting together exclusive release deals with top artists. He's not just connected, he has iTunes as part of the deal and in today's marketplace, even the biggest artists are looking for ways to sell more music.

Mr. Iovine understands that most people who listen to music don't want to search for it. They want it simple and they want a human connection with the music they hear. As a music guy, he knows that It takes people who love music, and know music, to create great playlists, not the computer generated playlists that Pandora, Spotify and others use.

"You need curation, not give me your credit card here's 20 million songs. Of course you have to have the right curated playlists. Without it you don't have the emotion."

Since those revelations back in May, Apple has been actively evaluating their options and making changes. Quietly eliminating Apps from their App Store that enabled users to download music, movies and e-books from sites like YouTube and even ending their relationship with Google's YouTube. All moves designed to support the legitimate sale of recorded music.

Even weeks before the rumors started about the Beats deal, an article ran in Bloomberg about Apple's plans to incorporate a song identification feature in their next iOS upgrade for the iPhone and iPad. The article indicated that Apple was in talks with Shazam Entertainment to incorporate Shazam's song recognition software in all their mobile devices.

Shazam is actually one of the bright spots in today's music business with over 70 million monthly active users, generating over $300 million in sales in 2013 for iTunes and other paid music download services. Currently, the Shazam App is on about 30 percent of Apple's iPhones.

But there's more. Apple was recently granted a patent for speaker audio technology and is reported to have secured a huge chunk of additional Internet bandwidth, which among other things, can support the streaming of high quality audio files. Which raises the question, will Apple get more entrenched in the home entertainment business?

Fast forward three months, to now. Some believe Beats Music will play a major role at Tuesday's announcement, when Apple is expected to introduce the iPhone 6 and the latest IOS upgrade. An upgrade, in all probability, that will include Beats Music with an extended free trial, a voice activated version of Shazam connecting directly to iTunes and 10 million new Beats Music Subscribers within days of the launch of iPhone 6.

For Apple, Beats Music isn't simply an acquisition, it is the logical next step in their evolution as a leader in online music distribution.

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