According to Daniel Ek, the CEO of Spotify, Apple Inc. (NASDAQ:AAPL) is metamorphosing from a plain electronics manufacturer into a “lifestyle business.” Mr. Ek spoke at the Brainstorm Tech conference in Aspen, Colorado, which took place on July 14th to 16th, 2014. This gathering, organized by Fortune magazine, is a meeting place for “entrepreneurs, innovators, and thinkers” to meet and discuss current and future trends. He stated that Apple’s acquisition of Beats is a clear sign of the Cupertino company’s transformation.
Mr. Ek’s half-hour interview, which is available as a video on YouTube, naturally spent much of his time describing Spotify’s advantages over iTunes. As a background to his later statements about Apple, Mr. Ek claimed that iTunes’ purchase model deters listening. He describes the purchase model as a barrier to listening because of the risk of wasting money on an unknown song that the purchaser then dislikes. According to the Spotify CEO, people have only listened to 20% of the music offered on Apple’s (AAPL) iTunes.
Mr. Ek goes on to develop his theme by stating that the streaming/rental model of Spotify causes 80% of the music there to be heard, because of the lack of a purchasing decision before listening to music. However, the music industry executive thinks that Apple’s acquisition was all about “Jimmy and Dre,” due to the fact that Beats, despite being a streaming music service, has a very small user base by industry standards. He goes on to assert that the purchase of Beats was primarily about “fashion” and “lifestyle” rather than the streaming music service.
Sam Mattera of the Motley Fool takes the opposite view, stating that Apple’s acquisition was a slick move designed to bring it up to speed in the lucrative music streaming industry. Mr. Mattera says that Steve Jobs’ dislike of the subscription model was a major error, and that Beats can correct this by supplementing or perhaps even replacing iTunes as Apple’s main music service.
There seems little reason to think, of course, that Apple (AAPL) cannot pursue several major goals with one business maneuver. There is nothing in Beats being “fashionable” and “lifestyle”-centered to prevent Apple from cashing in on the superior music streaming model. Nor does the addition of music streaming to Apple’s entrepreneurial repertoire prevent the Cupertino company from pursuing a “cool” or “chic” image at the same time.
