Apple buys Beats; aimed at music streaming majors Spotify, Pandora

Why did Apple buy Beats? Is it the headphones? They do **look stylish and could gel well with the iPhones and iPads Apple designs** . Is it the company’s close relationship to Beats co-founder Jimmy Iovine? Yes, that too, because Iovine was instrumental in getting iTunes off the ground, helping Apple clinch deals with major music labels.   But the biggest **reason for Apple purchasing Beats** is it wants a larger piece of the music streaming market. Before Beats Music, Apple only had iTunes Radio, which has been struggling against Pandora, the largest internet radio service for smartphones and mobiles.   In March, iTunes accounted for only 8 percent of the market, despite being a preloaded system app on all iPhones, iPads and iPods in the US and Australia. In contrast, Pandora had cornered 31 percent of the market. iTunes Radio was third behind iHeartRadio, but ahead of Spotify. The data only accounted for the listening habits of US users over the age of 12 for the month of February.   It also emerged that iPhone users accounted for over 40 percent of Pandora’s active users, according to information revealed in court documents and reported here on Apple Insider. So clearly Pandora had exploited its first-mover advantage very well. [caption id=“attachment_224672” align=“alignnone” width=“640”]  iTunes Radio is the second choice even for some iPhone users[/caption]   Beats Music, on the other hand, is unlike Pandora or iTunes Radio, in that it’s an on-demand service like Spotify and there are no skip limits. So Apple now has two different products in the music streaming market, which have different features and use cases. It allows them to attack the market on two seemingly disparate fronts.   At the moment, it serves Apple’s interest to keep Beats Music as it is, because the news of the deal will help sway a lot more users to that service. But Apple’s acquisition could prove to be a double-edged sword. Beats’s biggest rival is Spotify, which will be banking on Apple’s heavy promotion of music streaming to expand its presence. Spotify is undoubtedly the bigger brand than Beats and is likely to hold more sway over new audiences. Spotify currently boasts 10 million paying subscribers among a total of 40 million active users. That’s a healthy proportion of paid subcribers, when you consider it’s not even available in many regions, including the large markets of Asia.   At this point you are probably wondering why Apple is even bothering entering a tight market, when it has a flourishing iTunes music business already. Right? Well turns out digital music sales are a thing of the past. Yes, it might seem modern and hip to buy songs from iTunes, but we are doing it less and less.

Digital music sales have seen their first year-on-year decline according to the 2014 Mary Meeker report. Music streaming business grew 32 percent, so the trend is definitely in favour of the latter, as our usage gets spread out across devices. In a multi-device world, one app which can be used seamless across all your gadgets is the best option, which is why Pandora and Spotify are winning subscribers by the millions every year. No wonder Apple wants a piece of that.