Sad rumor…

[David Mathis]

Now if they would only come out with iVacuum, would make life easier. Just chill out, watch Apple TV, check quotes on the iPhone while cleaning the carpet. Maybe an iFridge that comes to where you are sitting and hand you a nice cold beer. Sorry, just could not resist this post.

My Final Cut Studio:

Core Software
Final Cut Pro X
Motion 5
Resolve
Pixelmator

Plug-ins
Red Giant Universe

Utilities
7 to X
Clip Exporter
Ultrascope

Cameras
Black Magic Cinema Camera
Canon (consumer model)

[Tim Wilson]

[Lance Bachelder] “don’t surf the Cow under the influence of Pinot”

We’re cows, so might we suggest grass.

KIDDING, but I couldn’t resist.

[Tim Wilson]

[Mitch Ives] “The fact that someone said they do $1 Billion in sales is damned impressive though. What was it P.T. Barnum said “nobody ever went broke underestimating the taste of the American public”…”

Two quick notes…

It was more like $1.5 billion last year. Apple basically bought them for 2x, give or take. From straight-up M&A, that’s pretty slick.

That “never went broke” quote was said ABOUT Barnum by one of his competitors – ie, Barnum is a huckster, and he’s making a fortune by pandering to morons. The observation is still sound, but I think the proper context sheds a slightly different light on it.

I’ve got a post cooking on this topic that I’ll get to soon, but I think you fellers are dramatically underestimating the value of the work Beats has already done to build a subscription music infrastructure. The digital music SALES business is down 14% this year, and the rate of loss is accelerating incredibly quickly — and the bite is coming out of people like Spotify, who are drawing blood from Apple that Pandora never did.

Heck, Apple responded to Pandora with a flick of the wrist: iTunes Radio, done and done. Not that Apple needed to replace Pandora. They just needed something good enough to stop the bleeding. If Apple could have developed the subscription business in a timely fashion, for less than a billion dollars, they would have.

As Tim Cook said, the great thing about being bazillionaires is that we can buy other bazillionaires to do that stuff more quickly, and in the end, less expensively than we can do ourselves.

I’m paraphrasing.

But we’re basically talking about the Netflix of music…with Apple being the video store of old. Apple isn’t in the business of staying in businesses whose pie is shrinking by double digits every year. It’s no wonder that this is the biggest investment in the company’s history. Watch. It’ll pay the biggest dividends in the company’s history too.

Another quick note: I’ve seen people say that Jimmy Iovine is the real gem in this package. On the one hand, true enough. On the other, Apple could surely have bought Jimmy’s services for less than $3b. LOL But Apple has a long tradition of buying smart PEOPLE along with their businesses, and Jimmy brings something that Steve never could. Entertainment execs LIKE Jimmy. They RESPECT Jimmy. They don’t fear him or disdain him the way they did Steve.

Apple TV programming never took off as hoped because TV guys didn’t have a problem like kids swiping MP3s that Apple could immediately solve, and they had no use for Steve’s bullying them into deals they weren’t interested in taking. The saying was, “We don’t want to get iTuned.” This doesn’t get talked about much, but the extent to which Steve was the obstacle for acquiring Apple TV programming that couldn’t be overcome can’t be overstated.

Jimmy will do a much better job getting them excited about the possibilities of working with Apple, rather than trying to back them into a corner. He’s a master of cross-platforming entertainment, and as one of the elites among his peers, he has a trust and a respect that no outsider could bring. And those other peers are going to want a slice of the pie, rather than let Jimmy be the only one who gets to avail himself of a collaborative, rather than threatening, Apple.

Although, who knows? Maybe Apple’s approach under Tim may not be any different besides putting Jimmy at the front of it…but that doesn’t seem at all likely. It seems a lot more likely that this indicates a sea change in Apple’s approach, and I think the investment will start returning FAST.

The speakers and hearing aids things, plus the stuff we don’t know about yet…and maybe never will, because it’ll just sneak in where it can…are all intriguing, but no kidding. People like Spotify and Beats are Netflixing music, and Apple shaved years off their development time and dozens if not hundreds of millions in infrastructure money. This was a great deal for them for that alone.

[Andrew Kimery]

[Tim Wilson] “I’ve got a post cooking on this topic that I’ll get to soon, but I think you fellers are dramatically underestimating the value of the work Beats has already done to build a subscription music infrastructure. The digital music SALES business is down 14% this year, and the rate of loss is accelerating incredibly quickly — and the bite is coming out of people like Spotify, who are drawing blood from Apple that Pandora never did.”

Just to riff off this for a second, if Apple goes after the music streaming like it went after the downloadable music sales market then ‘independent’ streaming services like Spotify are toast.

When the iTMS rolled out Jobs said he didn’t worry about the competition because the competition was trying to make money selling music where as Apple was trying to make money selling iPods. The music store was just a feature and it only needed to hit the break even point. Apple and Amazon currently own about 85% of the downloadable music sales businesses and I think they’ll eventually rule the music streaming business too.

I think the biggest losers in all of this are the artists themselves. CD sales have been in free fall for like 15 years, digital download sales (which barely eclipsed the plummeting CD sales) are leveling off, and streaming services pay peanuts.

[Mitch Ives]

[Tim Wilson] “People like Spotify and Beats are Netflixing music, and Apple shaved years off their development time and dozens if not hundreds of millions in infrastructure money. This was a great deal for them for that alone.”

You’re right, it was another circus owner.

I recall Fed-X saying the same thing when they bought Roadway (RPS)… to shave off two years. Turned out to be the biggest disaster in the history of the company for years before it got fixed. Let’s hope this is different?

Mitch Ives
Insight Productions Corp.

“Criticism may not be agreeable, but it is necessary. It fulfills the same function as pain in the human body. It calls attention to an unhealthy state of things.” – Winston Churchill

[David Mathis]

Same here. Until then I will sing “99 Bottles of Beer On The Wall”.

[Tim Wilson]

[Mitch Ives] ” Turned out to be the biggest disaster in the history of the company for years before it got fixed.”

Trivia footnote: they hired my father to fix it!!! More precisely, the consulting company for whom he was an SVP, but this was his account, and all concerned were quite pleased with how it eventually worked out.

I don’t think this will be like that that, though. Delivering physical things, and managing trucks and warehouses — that’s actual work. LOL

[Tim Wilson]

[Andrew Kimery] “Just to riff off this for a second, if Apple goes after the music streaming like it went after the downloadable music sales market then ‘independent’ streaming services like Spotify are toast.”

I think Spotify is safe-ish because the social features are so deep. You’d have to take down Facebook to take down Spotify. In fact, now that I think about it, Spotify is ripe for being picked up by Facebook. FB has gotten acquisitions like this right more often than not. I really like how they’ve worked Waze, and after a bump with Instagram, that thing has taken off. I think Spotify would go at least that well. Maybe better.

Spotify also has deals in place that Beats doesn’t yet. They’ll surely get them, but Spotify won’t be toast any more than iTunes toasted Amazon. Quite the contrary. Amazon carved its digital niche out of a world where iTunes was already the big player. There’s room for more than one…but probably not more than two.

I see Pandora getting pinched first…but then again, the “don’t make me think about what song to play next” model still works for a lot of people. That’s why people like Apple and Spotify added that radio-like feature. Even Sirius/XM will let you build customized radio stations in their app.

Still, I haven’t even considered downloading Pandora onto my last couple of phones. I can’t remember the last time it even crossed my mind that it even EXISTED until I started talking about it here.

Google, though? I don’t see how their music business doesn’t suffer the worst of any player here. Even as an Android fanatic with a Chromebook, I can’t imagine anything that would induce me to use ANY Google music services. None.

And for that matter, Amazon has surely been hit hard by Spotify…but nowhere nearly as bad as iTunes. Amazon never had all their eggs in the digital basket, and for Apple, iTunes IS the basket. Which is why this kind of bloodletting at Spotify’s hands was intolerable.

While CDs are unquestionably on the decline, digital ALBUM sales have yet to surpass CD sales! In 2013, CD ALBUM sales held a 57% market share. CD sales are actually falling LESS fast than digital sales, but it looks like the lines will cross this year, and 2014 will be the FIRST year that digital ALBUM sales surpass CDs….even with digital’s current decline.

I keep capitalizing the word ALBUM for obvious reasons…but CD singles were never really a thing, and it’s important to underscore that CDs are nowhere close to as dead as most people think. But it won’t be iTunes SALES that put them down for good. It’ll be the idea of no sales at all.

Again: see Netflix.

Although Netflix also suggests that CDs dying altogether isn’t happening any time soon. Netflix isn’t killing DVD sales yet, and just as Amazon found a way to start a business in the iTunes age, Redbox did just fine coming up in the Netflix age. See? There’s room for two.

Not three. Hence Pandora and Google looking a lot more nervously around the room than Spotify I think.

I was doublechecking a couple of quick numbers for this post, and I found an article from two years ago saying that Spotify had moved into the number 2 slot for record label revenue behind iTunes…and that if the numbers held, Spotify would pass iTunes in 2014! We’ll know by this time next year when the numbers come in, but you better believe that Apple saw this coming….hence talking to Beats for a couple of years already now.

And not that I’m saying that Spotify WILL pass iTunes this year. But it could, and in any case, the numbers are close enough that taking another couple of years before meaningfully fending them off wasn’t an appealing option.

But I couldn’t agree more about the downsides of this for artists, Andrew. Labels are very excited by streaming because the model has no holes. I can’t pass you my Spotify login (or for that matter Netflix) the way I might an MP3, because I’m not going to let you be the log-in to lock me out of one of my devices. LOL And I don’t want your hands on my queue, dammit. LOL

The pattern seems to be continuing: every new platform is an opportunity for labels to make more and artists to make less. I could make the same observation about corporate life in general — record highs on the stock market and exec compensation, while pay is declining for workers whose jobs haven’t been eliminated — but I won’t. LOL

My point is that it’s mistaken to brush aside the Beats music business because it’s not yet a major player on its own — because people who’ve been watching Spotify have seen this shift coming for years. Apple is very definitely one of those people…so to speak…who has seen it coming. It HAD to happen. It’s NETFLIX FOR MUSIC. Buy a few disks as you see fit, but otherwise, it’s more enjoyable for most people NOT to own their media.

The great thing about streaming subscriptions — whether Spotify or Netflix — for content owners is that I might casually pass you an MP3, or loan you a DVD, I’m NEVER going to let you get your hands on my log-in. I don’t want you to lock me out of an account that I’m paying for, and I don’t want your grubby hands on my queue. LOL This is the first time in history that content owners are on the verge of locking down revenue.

Seriously? Borrow my Netflix log-in? Are you on crack? If I log in at your house, I’ll sign out before I even start looking for my car keys.

So today’s young ‘uns are buying less music than ever, LISTENING to more of it than ever, and increasingly, they’re PAYING for it, because the right model is in place.

Except for Apple. Until now.

AND the younger you are, the more likely you are to like big-ass headphones. LOL

Not me, man. I’m all about the open airs (anything but earbuds), but I see EVERYTHING about this deal lining up very nicely for Apple’s future — with an up and running subscription business being one of Apple’s most pressing needs, ESPECIALLY as it looks to its next generation of devotees.

Stopping the bleeding at iTunes, moving every phase of your media business forward FAST in the near term, and setting yourself on the right foundation for the longer-term shifts in media consumption — I’m tellin ya, it won’t be long before this pays off big for Apple, and it’s going to keep paying off for a long time.

[Mitch Ives]

[David Mathis] “Now if they would only come out with iVacuum, would make life easier. “

Oh great… now they’ll buy Dyson…

Mitch Ives
Insight Productions Corp.

“Criticism may not be agreeable, but it is necessary. It fulfills the same function as pain in the human body. It calls attention to an unhealthy state of things.” – Winston Churchill

[Charlie Austin]

[Tim Wilson] “I’m tellin ya, it won’t be long before this pays off big for Apple, and it’s going to keep paying off for a long time.”

I’m with you on this one, though it’s hard to convince some folks I know. All they see is headphones and a rapper. Ah well… if it works, and AAPL climbs back anywhere near the current price territory in a few years after the 7/1 split, someone will be happy. 🙂

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~ My FCPX Babbling blog ~
~”It is a poor craftsman who blames his tools.”~
~”The function you just attempted is not yet implemented”~