Why Apple Bought Beats For A Casual $3 Billion (Here's A Hint: Spotify)

In weird news of the day, Apple has inked a $3 billion deal with Beats Electronics — also known as Beats by Dr. Dre. The $3 billion acquisition of the headphone brand would be Apple's biggest to date, and feels rather out of character for Apple, a company that has typically shied away from splashing a lot of dollar on acquiring other brands. Steve Jobs's vision was to to build and expand the company from within — so why a $3 billion deal? Well, the answer lies in music streaming, namely Spotify.

The streaming market is one that Apple wants to tap into, but has yet to find a foothold with its current digital music services. Apple's music platform, iTunes, was built on owning individual files rather than accessing a wide network of music, as Spotify provides. The direction of digital music seems to be trending towards the latter, as more and more people leave their iPods behind in favor of streaming.

Another reason Apple is feeling pressure to adapt is its lack of social elements, something else that Spotify excels in. Spotify's messaging, sharing, and app features make iTunes look stale in comparison. Hence, Apple's decision to drop a pretty penny on Beats.

Beats launched its own music streaming service in January for iOS, Android, Windows Phone, and the Web, but don't assume it's a Spotify copycat. "If they are coming at this from a new angle, not just that we want to be the Beats version of Spotify, it’s a great idea," Ben Arnold, an analyst at consumer research firm NPD Group, told The New York Times.

Beats Music uses a distinct algorithm that gives the user a much more customized experience than other streaming services and bases its platform and interface on old-school radio stations. With Nine Inch Nails frontman Trent Reznor as its chief creative officer, legendary music producer Jimmy Iovine and Dr. Dre as chairmen, and music experts like Pitchfork Media editor-in-chief Scott Plagenhoef as curators, Beats Music has some heavy muscle backing the project.

But is that enough for it to overtake streaming giant Spotify? And will it be a game-changer for Apple? Let's play Spotify vs. Beats...

Spotify

  • Spotify offers a Browse and a Discover section, the first showing you an objective selection of new music and genres, and the latter showing you curated selections based on the music you listen to.
  • Users can fill out a profile and follow other users to access their playlists.
  • Messaging allows users to socialize and easily share music.
  • Besides its own messaging and profile features, Spotify maximizes the social aspect of music streaming by allowing users to share what they're listening to on Facebook.
  • A premium subscription for $9.99 a month gives you ad-free streaming, access to albums before they're released, and caching for offline play on mobile, tablet, and desktop devices.
  • A partnership with Last.fm logs all of the songs you listen to on Spotify so that if you don't know what you want to listen to, you can use Last.fm to listen to music curated based on your Spotify choices.

Beats Music

  • Beats Music offers an even more customized experience with its three main sections: The Sentence (see below), Just For You (curated playlists based on the bands and genres you check off when you first sign up), and Highlights (promoted content).
  • Beats' most unique feature is The Sentence, which asks the user to fill in a Mad Lib-style sentence with what activity you want to be doing, where you want to do it, who you want to do it with, and what kind of music you want as a soundtrack. The app then finds the perfect track for you.
  • There are also playlists based on topics like breaking up, celebrating, and barbecuing, each with its own curated set of songs.
  • Beats relies more on human curatorial vision than computer algorithms. The reason? Chief executive Ian Rogers cites pairing Paul Simon and Art Garfunkel together in one playlist. "No human being would ever say that," Rogers told The New York Times .
  • The interface is visually punchier, resembling a nightclub rather than a digital catalogue.
  • A regular subscription costs $9.99 a month, but if you're an AT&T customer, you can get a family plan that gives access to up to five people across 10 devices for $14.99 a month.

Image: Beats