Beats seeks to unseat Spotify with music service
Beats Electronics, the audio equipment maker started by Jimmy Iovine and Dr Dre, the hip-hop star, has launched a new service with the aim of unseating Spotify as market leader of the nascent music subscription industry.
Beats Music will be available first in the US with other countries, such as the UK, to follow. Backed by music industry heavyweights and a group of billionaires that includes Len Blavatnik and James Packer, it has also struck a partnership with AT&T, to offer “family plan” subscriptions to the telecom operator’s customers.
The launch comes as competition heats up in music subscription, with Google-owned YouTube working on a paid and advertising-supported service, which is likely to launch this year.
Beats Music said its service would be more personalised than rival offerings, with data analysis and playlists from top artists helping subscribers discover new music. “The future of media is all about curation by trusted sources,” said Ian Rogers, Beats Music chief executive.
Unlike Spotify and YouTube, Beats will have no ad-supported free service. “We think you should pay for music,” said Mr Rogers. The design of the service reflected the shift to mobile music consumption, he added. “It was designed first for the mobile, not a [web] browser.”
The service will be available on iOS, Android and Windows phones and will cost $10 a month. AT&T customers will be able up to sign up to five family members to a single $15 a month subscription, similar to its family text message plans. “We know our customers have a big passion for music but there’s an affordability barrier . . . this solves that,” said David Christopher, chief marketing officer of AT&T Mobility.
By launching the new service, Beats hopes to capitalise on the popularity of its headphones and audio devices, which have been a hit with sports stars and musicians. Sales of so-called “premium” headphones have soared since the company launched its first range five years ago and a rash of imitators has joined the market.
The launch of Beats Music comes at a pivotal time for the music industry, which continues to grapple with the transition to digital distribution. US digital music sales declined in 2013 for the first time since the launch of Apple’s iTunes store a decade ago, according to recent data from Nielsen SoundScan.
Some artists, such as Beyoncé, bucked the trend: the singer gave the ailing album format a shot in the arm when she released her latest album as a fixed bundle on iTunes and became the fastest-selling release in the history of Apple’s online store.
But the broader trend is towards subscription services such as Spotify, Deezer and Rdio. A report last year from Nielsen SoundScan found that audio and video streams increased 24 per cent to 50m streams during the first half of 2013 compared with the previous year.
Beats last year sold a $500m equity stake to Carlyle, the private equity group, in a deal that valued the company at more than $1bn.
It also spun out Beats Music, raising $60m from a group of investors, including Mr Blavatnik, who paid $3.3bn for Warner Music in 2011, and Mr Packer, son of the late Australian investor Kerry Packer.
Marc Rowan, a co-founder of Apollo Global Management, the private equity firm; and Lee Bass, a Texan billionaire, have also invested in Beats Music.
Spotify last year raised about $250m in new financing from an early backer of Netflix, valuing the Swedish digital music service at more than $4bn. Technology Crossover Ventures led Spotify’s most recent financing, which came a year after a $100m investment led by Goldman Sachs had valued the company at $3bn.