Having Faith In Apple Plus Beats

James McQuivey

A media frenzy arose last night when the Financial Times suggested it had word from the inside that Apple is closing in on buying Beats Electronics for $3.2 billion. The immediate response from all quarters has been puzzlement and on multiple levels. As the sun rose today, so did the doubts about the impending deal. Generally, large strategic acquisitions — like when Google bought Nest for a similar figure — can be justified on the basis of buying something you don’t already have: a promising new technology, a large customer base, or entrée into a desirable industry. None of these things apply to this acquisition by Apple. Acquisitions at a more mature business stage can typically be justified purely on a revenue or margin basis or the desire to snap up a brand with more energy. Those don’t apply here, either. Even those who have tried to stretch the argument a bit have suggested that Apple could be buying Beats purely for a quick road into the music streaming business as a hedge against Spotify — except that Apple owns the music industry and doesn’t need Beats to build the music streaming offering that the company has denied for years that it should even consider getting into.

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Google Music Service Doesn't Go Big Enough

James McQuivey

At Google I/O, the company managed to impress on a lot of fronts, enough that its stock began to climb as investors realized that Google is keeping up with — and in some cases, staying in front of — its digital platform competitors Apple, Facebook, and Microsoft. The new developer tools and resources announced will certainly lead to better apps, be developed more quickly, and be capable of generating more revenue. And consumer experiences in mobile, Google Maps, and the browser are about to get significantly more useful and elegant.

But one announcement debuted at I/O that doesn’t move the needle for Google — at least not as much as it could have — is the Google Play Music All Access pass. Despite the convoluted moniker, the service is straightforward: Pay $9.99 a month (in the US for now, more countries to come), and you’ll have unlimited access to a cloud-based music library with intuitive features that allow elegant discovery, consumption, and sharing of music.

If it sounds familiar, it’s because it is. The service can’t differentiate on its music library because the best it can do is license the same library that Spotify and Rdio already offer. All Access also creates playlists for you based on your music tastes as expressed by you directly or learned from your listening patterns and friends. That should also sound familiar because the same value is contained to various degrees in Pandora, iTunes, and Amazon Cloud Player.

Bottom line: Despite working really hard, the best that Google can do in music is to catch up to everybody else in the field. And that’s precisely what the company has done.

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Music Industry Stops Losing Money, Finally

James McQuivey

Yesterday The New York Times picked up the hopeful news from the global music business that the revenue free-fall from $38 billion a year more than a decade ago appears to have stopped at $16.5 billion, leaving the industry at less than half its pre-digital size. This bottoming out of the revenues will come as some relief to industry executives who have wished and prayed for this day because, until it actually arrived, nobody knew for sure what type of revenues to expect in the future. That can make running a business pretty tough.

The music industry is everybody's favorite example of digital disruption done wrong -- including mine, since I covered music for Forrester several times. I have some classic stories I could tell to illustrate the point about executives who believed that suing customers was the path to profitability and so on, but I'll spare you those. However, as the author of a book called Digital Disruption, I actually owe it to the music industry for teaching me a few key principles of how to manage digital disruption:

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Ninety Percent Of The Online Population Will Regularly Watch Online Video By 2017

Michael O'Grady

The music industry in Europe has had a traumatic time, losing more than 31% of its revenue in the past five years to piracy. Given the increasing digitalization of content in the music, video, gaming, and newspaper industries, our recently published Forrester Research Online Paid Content Forecast, 2012 To 2017 (EU-7) maps content’s evolution from an audience, payer, and revenue perspective for each of these categories and for each of seven European countries. Here are some high-level results for the four categories:

Music.With more than 35% of music revenues in Europe coming from digital, spending on physical music will soon be overtaken by its digital counterpart. Although digital music use in Europe still lags behind the US (where digital revenues exceeded physical revenues for the first time in 2012), Forrester found that more than 50% of online Europeans already listen to online music regularly.

Video.Video is the fastest-growing digital content category; we forecast that more than 90% of the online population will regularly watch online video by 2017. Online video audience penetrations will rise significantly as video on demand, pay per view, and catchup TV become mainstream. And with pay-TV penetrations in the EU-7 nations considerably lower than in the US, there’s more scope for paid online video to grow.

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