Apple Beats deal (Tim Cook, Jimmy Iovine, Eddy Cue and Dr Dre 001)

According to two Apple sources familiar with the development of iTunes Radio, current limitations of the free service and the $3 billion acquisition of Jimmy Iovine and Dr. Dre’s Beats talent, brand, headphone business and streaming service is all the result of the firm’s “arrogance” and shortsightedness of its managers.

Worse, some high-ranked members of Apple’s music teams reportedly didn’t even know that Spotify was an on-demand streaming service and not an Internet radio service akin to Pandora and iTunes Radio…

Aylin Zafar, writing for Buzzfeed, cites Apple sources privy to the matter who claim even company engineers used other streaming products rather than iTunes Radio:

“Everyone’s excuse was it’s because we work on iTunes, running and closing the app after every code change,” one source said.

“But it’s really because Spotify has all the free music with a real social platform.” In their personal time, sources said, employees used Spotify and Pandora.

That’s probably true, and who could blame them – Spotify is the #1 subscription music service and Pandora offers better features compared to iTunes Radio, which really lacks a social platform around music.

Besides, it always pays to keep tabs on what the competition is doing.

iTunes Ping?

Jof of Tech (iTunes Ping)

One source said:

When Steve Jobs announced Ping everyone was really excited for a music network. But the biggest reason why Ping failed was because Apple was not interested in making a network — they were interested in making a purchase pusher.

Ping was quietly shut down in 2012.

More worryingly, the report suggests that Apple’s management can’t tell the difference between a service like Spotify – which lets people create their own playlists and stream any song they want from the 20-million track catalog – and Internet radio services like Pandora and iTunes Radio – which stream random songs based on broad criteria, don’t offer playlist creation and limit the number of song skips per hour.

The management in particular were pretty much tone-deaf in what Spotify was and that’s why they’re panicking now. They didn’t understand how Spotify worked, which is why they thought iTunes Radio would be a Spotify killer.

Other managers referred to Pandora as a nonthreatening “dead company” because of its lack of revenue.

A mid-level Apple employee apparently wrapped up the conversation by quipping that “iTunes Radio sucks” because of “Apple’s arrogance” which eventually forced the $3 billion Beats buy, Apple’s largest acquisition to date.

iTunes Radio (three-up, iPhone 5)

I’m having a hard time believing this report.

First and foremost, Buzzfeed is not the most reliable of sources.

And if true, the report would suggest that Apple’s leadership is highly incompetent and stuck in the old ways when it comes to music, an industry vertical Apple turned upside down a decade ago with the introduction of the iPod and the iTunes Music Store.

I don’t think Eddy Cue, Tim Cook and other members of the leadership team, as well as their direct subordinates, are so out of touch that they couldn’t tell a subscription streaming music service from an Internet radio product.

Having said that, it is indeed true that Apple is late to the on-demand streaming-music game.

But unlike other streaming music startups that can afford to move fast and break rules, Apple must carefully consider its every move in the music space because the music industry has grown heavily dependent on iTunes for digital music sales revenues.

As the world’s top music retailer (physical and digital sales combined) with a commanding 70 percent market share in U.S. digital music sales, iTunes brings record labels an estimated $1 billion in annual music revenues.

This revenue is at risk should Apple put out a subscription music service incapable of taking on the likes of Spotify and Pandora.

And even assuming it does emerge as the top music-streaming product, there are no guarantees that subscription revenues would offset the likely (and substantial) drop in digital downloads on iTunes.


Besides, Eddy Cue, Apple’s online services chief, has made it clear at the Code Conference that Apple could have released a subscription music service a long time ago, but didn’t want to because it felt the current services were shortsighted.

Both Cue and Beats co-founder Jimmy Iovine reinforced this notion at the Code Conference, arguing that simply giving people millions of streamable songs in exchange for a fixed monthly fee, while disregarding human curation – and consequentially emotion that carefully curated playlists convey – would be a huge disservice to the music industry and users.

Hence, Apple has sought a partner with a player that understands music, one that would bring world-class expertise in human curration. And that’s exactly what Beats Music and its 500 employees provide Apple with.


  • Jacob Galea

    Bull shit. They don’t really care about human curation… And neither do I… They just need to justify why the bought beats and not say… SPOTIFY!

  • Blaqheart

    Ping was surprisingly one of the few sad efforts Apple has ever had on a product…hopefully the Beats music service doesn’t suffer the same fate…

    • Guest

      and the gaming console haha

  • Tony

    Streaming services for music will always fail. People want to be able to download their material and keep it. They don’t want to stream unless it’s a cloud-like feature where you can pick any song at any time to listen to. Monthly prices are still to high for these services. And sadly.. that’s just a small part of why music downloads (illegal) are still going strong, there’s no real alternative… yet. Maybe one day someone will invent a whole new way to get, listen and store your music but for now everyone is either in the “get on the bandwagon”, “live in the past” or “download illegally” sections.

    • Chris

      I completely disagree. In my opinion no one wants to own music anymore, why would you when you can lease it for free on spotify? Younger individuals also like to listen to the popular songs for a few weeks or months and then move on to the new popular music, often completely forgetting about music from a year ago.

      • Antzboogie

        No one want to own music anymore wow lol!! I want to be in control of my own music not let other people create playlists for me. I want to have tons of Personal Playlists at my disposal. Not have to pay a subscription service to access my own music. Pandora is the boss right now they help me discover music, although random, lets me discover whats out there.

      • Chris

        You contradicted yourself multiple times in your response… You don’t want to let other people create playlists for you but love pandora, how does that work? Secondly, Spotify could not be any more personalized than it is. I have dozens of playlists that I have handpicked the music for (all of which I can listen to for free with a few ads). I will however agree with yiou that pandora is the best for discovering new music

      • eXoguti093

        He means that he uses pandora to find music randomly which is easier than looking for best bands/artists so he can go download and OWN it, not to wait until it plays again on pandora.

      • Chun-Li aka ThunderThighs

        That’s straight incorrect I want to own my music that is why I don’t use spotify because you only stream and can’t own it after subscription. I want control over my music.

    • Chindavon

      You must not be seeing what’s out there. Streaming is King right now and that’s an understatement.

      • Tony

        Yes.. same was said 10 years ago and look at how many services continue to fail yearly. Same can be said for CD sales too, they are dying as well. Illegal downloading is the real King.. and no I’m not suggesting doing that, I’m just stating the obvious. Plenty of musicians in the business want actual copies, not streams of material. Streams are not HQ as an actual disc or even in some cases a mp3 file. Though personally I have a lot of my stuff in FLAC.

      • Niclas

        You’re plain wrong.

        Spotify 320kbps OGG same quality as MP3
        Wimp FLAC+ALAC lossless = CD

      • Tony

        lol have you actually listened to 320 on spotify? awful quality. I seriously doubt it’s in that format.

      • Niclas

        lol, I have had Spotify for well over 4 years now.
        It’s 320kbps is in perfect quality.
        This was proved in the early days when there was a program that could “catch” the ogg files when streaming.
        That possibility has been closed but the proof is still valid. You could also check the cache file if you want to examine it yourself.

      • Plistumichu

        It’s just me or Spotify has better quality than Beats?

    • jack

      I agree… I want my music not some random stuff like old radio. Radio was always free through AM/FM now ppl wanna pay for it?

    • Gregory D Foster

      I guess I’ll chime in and disagree as well. I’ve been subscribed to Spotify since it came to the U.S., haven’t missed a payment yet. I pay to have it on my mobile phone and the content can be downloaded for offline use, even if I stop paying for the mobile service, I can still have access to all of the music on my laptop. If for some reason Spotify completely dies out, then maybe I’m screwed but lets be honest, with todays music, I wouldn’t be missing much anyways.

  • Plistumichu

    Beats service will be a good solution for a big problem in Apple, and that’s iTunes.
    As part of the “cut the cord” policy users are not using iTunes as frequently as they did. We don’t even need to connect the device to upgrade the iOS!
    If Beats it’s integrated on iTunes, it will be running on our PC as Spotify nowadays, and will provide us the possibility to be tempted to buy songs, books, apps, movies during the whole day (as we have Spotify playing music all day, right?).
    So don’t think only on the iPod, iPad, iPhone family which is a small part of the equation, think about PC/Mac users as it is the target they’re trying to re-gain.

  • ohdame

    Where spotify and pandora will lose, is the seamless compatibility between Siri – and Shazam, to Itunes – to download, to icloud, to play from ALL YOUR DEVICES, and then play it offline as well. Only Apple has that platform. They didn’t need to build a streaming service early to compete with Spotify and Pandora. Data prices were still very high at the start of Spotify, now that they have come down and the mobile industry is changing, Apple chooses to join the market. Very strategic. Spotify and Pandora are not in the picture at all.
    iTunes sales are dropping just based on the changing ways of how people download music. Its shifting towards making LESS CLICKS/LESS TIME to get music and add it to the device. Streaming services reduce clicks, so does Itunes Radio/itunes match.
    on the contrary how can you argue that iTunes, a software that has existed for YEARS, has dominated for so long, will lose its customers when its only getting better. They already have millions of users.

    The only thing that will ever compete with iTunes will be Soundcloud.
    Artist upload free music and their plays still count in the RIAA for record downloads etc….Soundcloud plays are actually a good gage of artist popularity etc. iTunes radio/store only includes records that an artists decides they would like to MAKE money from. Its a different batch of songs, more tailored to the radio, hit-singles, but with the internet nowadays, radio music is not reaching the masses as much as it used to – the same reason why itunes sales are dropping…the same reason why Soundcloud is thriving. Soundcloud is also a streaming service but its free. Remember majority of artists dont make as much money from iTunes records, than they would from giving out free good music that they can go on tour with.

  • p_amXtr

    I don’t belive this! It’s not like Apple ( or any company for that matter) is gonna take the time and resources to build a streaming sevice and not know what the competition has to offer..

    I think the Beats accucition was simply because Beats already has one built and ready to go, all Apple has to do is promo it! And also if they built an iTunes steaming service to go against Spotify it would bring competion to iTunes so now that they have Beats Music they have a service to compete against Spotify and not take away from iTunes. It’s as if it was an iTunes steaming service just under another name (and having Beats from promo won’t hurt either)

  • madmaxmedia

    If offering a subscription service means that regular iTunes revenue would drop, that simply means you’re not offering the right product/service, and that other companies will do it (or have been doing it.) Better to have your sales cannabalized by you, rather than by other companies.

  • M_thoroughbred

    Everyone here has a good valid point but the problem I also think it’s happening is that the younger crowd don’t really wanna pay for anything. What they want it’s FREE and if it costs a dollar more then it’s not worth it. Wether it be apps, music, music services, video services it’s got to be free. This is why I a agree with most of you when mention of downloading it illegally. These is the measures that a lot of people will resort to cause the paid option isn’t an option for them. I have a subscription with beats music I like the app I can create playlist of hand picked songs as well as download them for offline listening I’m no audiophile so for me the music quality is good. But I also understand that beats music isn’t for everyones liking and that’s ok. That’s why there are options and more will come. The other problem that I see is that iTunes isn’t just about music anymore it’s about movies music apps books tv and so on. So to me iTunes needs to be about music and return to its roots of course it also needs to evolve. But how? Well that’s for Apple to figure out and for us to determine wether it’s enough.

  • babiloe

    From the nation who can’t listening spotify, pandora without VPN and iTunes Radio without Apple US account, I don’t care much unless theiPhone price goes up or down.

  • Diego Milano

    I haven’t even been able to test iTunes Radio because of their geographical limitations, so… perhaps they should start by ceasing that practice to begin with?