If you live in an area with a population larger than, say, twelve, you’ve likely run across someone wearing a pair of Beats headphones. And even if you haven’t, you may have stumbled across the marketing campaign, which includes prominent positioning in shows like “American Idol.” These “lifestyle” headphones (which are bass heavy and not all that great sounding) are the brainchild of superstar producer/label honcho Jimmy Iovine and hip-hop maestro Dr. Dre. Although the pair had seemingly been pulling away from recorded music (we’re still waiting for that next Dre record), the Beats brothers — now with the backing of smartphone manufacturer HTC — recently announced the acqusition of streaming music platform MOG, which has been struggling to acquire new subscribers.
MOG is part of a small array of on-demand music services, which provide — for a small fee, say, 10 bucks a month — access to vast catalogs of music that can be played on your computer, mobile devices, tablets and specially-equipped home speaker systems. (Some of these services, such as MOG and Spotify, offer “free” tiers, in which you can listen to music for free on just your computer, provided you don’t mind a few audio ads).
So what does this purchase mean for the nascent streaming music marketplace? On one hand, it’s interesting that two established industry players would double down on a platform that hasn’t exactly taken the listening world by storm. On the other, it can be seen as a way to get in on this delivery platform before the train leaves the station. With Spotify getting so much press (both positive and negative), and Apple slowly inching towards streaming with iOS6 and iCloud, it may be the last best chance to grab a piece of an emerging market.
They also may have gotten a pretty good deal. Although the terms of have not been disclosed, some reports indicate that MOG’s asking price was around 10 million bucks (or a smidgen higher). For well-heeled players like HTC, Iovine, and Dre, this is a bargain.
And let’s face it, even with all the hype, the almighty Spotify has yet to fully penetrate the US music marketplace. Judging from previous successes, the Beats empire, by contrast, is well-positioned to make MOG a marketing juggernaut. How long before we start seeing free subscriptions bundled with the headsets? Or they figure out how to work it into “American Idol?” Which of their celebrity friends will endorse the platform first? Iovine and Dre might see music itself as a soft investment, but the accoutrements — including digital delivery platforms and possible integration with HTC phones— could prove lucrative. Every time someone uses the word “synergy” a baby kitten dies, but in this case, it’s appropriate.
But what, if anything, does this deal mean for musicians? Probably very little. Individual artists have next to no leverage in terms of how they are compensated on services like Spotify and MOG, largely due to how music is licensed in this environment. However, proponents of the streaming model like to suggest that as the market for on-demand listening increases, so too will payouts. On the other hand (that’s three hands, if you’re counting), musician and songwriter payouts are currently not just impossibly small, they are also the opposite of transparent. So, even if these platforms do “scale,” to use a popular econ term, there’s no guarantee that the artist returns will be equitable. This is more of an issue with how copyright law treats certain music uses, but it’s important to consider when we picture what the brave new world of ubiquitous, on-demand music might look like (and whom it rewards).
We at FMC like having the world of music at our fingertips, wherever we go. In fact a lot of us have been among the earliest adopters of these technologies. But as the platforms mature, we want to ensure that creator compensation is part of the picture. If the Beats boys can figure out a way to make this a priority, we say: “rock on.”