Im ray suarez. Apple with its itunes reshaped the industry and put a few brick and mortar storie stores to the. Creating billions in sales. Since itunes is a story that carries just about everything and never runs out of shelf space. But now the financial sometimes reports apple may be getting ready to do Something Big in response to the rapid rise of streaming. After making white ear buds, apple may be getting ready to wrap beats around your head before jumping into the stream. Reporter apple took a big bite out of the Music Industry with the invention of the ipod andy Tunes Music Store at the turn of the century. It changed the way people bought and listened to music. Itunes is still the largest music seller but for the fires time itunes sales decreased just. 1 but still a decrease. Now there is direct competition for itunes from Online Streaming Services like pandora and spottify. Its a huge growth business. Revenue from Music Subscription Services rose 50 last year to more than 1 billion. Now Online Music Services have 28 million subscribers compared to 8 million in 2008. Apple appears to want to make inloads in the streaming market. On thursday the Financial Times reported apple is preparing to buy beats electronics for 3. 2 billion. Beats was founded by hiphop legend dr. Dre in collaboration with veteran music producer jimmy iovan. The headphones and beats music, an online streaming platform. Platform. Dr. Dre looks in the camera and cubs himself the first billionaire in hiphop right here. If the deal goes through it will be the change in strategy for apple. Steve jobs was known for innovating from within the company, but its not an unusual move. Facebooks purchase of instagram and yahoos acquisition of tumbler are two of many examples. Dr. Dres beats Electronics Headphones struck chords in style and substance, and its not just the listening public that cares about quality. Some artists are worried about the compression of musical sound. Music legend neil young has raised 6 million on kick starter to bring a Better Living experience criticizing the current quality of digital sound as underwater streaming, he hopes that his pono player will bring true audio files to the digital fold. Vinyl may be making a modest comeback, too, but apple put most record collections into the attic for good as it changed the way we get, store and experience music. This reported multi billion dollar deal would be proof that streaming is the new thing. Downloaded songs might go the way of the dodo. Has the new world of devices and new ways to get content on to those devices changed the way you listen to music . Have you dipped your toe or jumped head first into the world of music streaming . The reported purchase of beats electronics by music joined apple is the focus this time by inside story. To understand what is behind the deal we turn to industry insider. The author of the new book the piracy crusade. Paul canter is a music producer, writer and editors and joseph man is technology proje projects reporter for reuter. He is the author of all the rave, the rise and fall of john fannings napster. Is this new for apple, whose more often grown businesses in house than purchased them from outside . Well, sure, its the most theyve ever spent on a single acquisition by a large measure. It seems to indicate a change in strategy. Its hard to imagine steve jobs doing this. Its a change both in their appetite or acquisition generally, and sort of an admission that theyve been ignoring a vie tat part of the market. What does beats get you that apple wasnt able to get itself. I wouldnt say that apple engineers arent capable of anything, theyre an impressive bunch. And the other thing they get is a really good human curated streaming service where they had no take up in their own streaming at all. Well, when joe mentions the high end first, those beats headphones are expensive. Are they worth it . Um, thats debatable. They also have, you know, for as high as beats headphones cost they have a lower cost model as well, which i think retails for Something Like 169. So they definitely have a wide range of products that theyre offering, and i dont think that people have shown they really care what the price is. Theyre obviously going to spend the money on it. Whether its that much better than any other product, you know in that price range you might be able to get something cheap that are sounds better, but as anybody knows with products its all about the marketing behind it, and putting it in front of people. I think when you walk the streets you see the beats by dre headphones on everybody. People like to buy what the other person has. That type of branding has a monetary value. Beats has never been shy putting dr. Dre front and center. Your mom could be buying show tunes on itunes. She isnt buying dr. Dre. Is apple buying into a different head space when it beat buys bes electronic. Whether it be the streaming service, the headphones, thats a valuable audience because its younger, its not to say its kids, but the quote unquote millennial person who is sort of seeing what other people in their age range are doing and maybe are copying it. Apple, you know, audiences, the people who have allegiance to apple as a brand are tending to be a bit older right now than a lot of people who made that brand allegiance to apple that came with about ten years ago when apple refreshed all of its products. They have to acquire something for that cool character. They definitely have it. Its better than other markets in that space. Are there people reacting to news of this deal are talking like downloading is already over, done, peaked. Were still talking about a multi billion dollars industry. Its all together different talking about an industry that has stopped growing. I bet there is a thriving eight track following on ebay. Its really a question of what is that growth curve look like. As you pointed out at the top of the show sales were flat last year and theyre down over 12 this year. The wholesale retail buying one song at a time or one album at a time if it ever made sense for consumers in the ipod at the many believed that you will just pay to listen to music after all music you own you can live to forever. Whats different about streami streaming. Young people grew up taking the internet for granted. They know every song recorded, every tv show ever aired, every book published is available to them. They dont have the same drive to Library Content the way we old folks, too. If you think about the soldier desocial dimension we would put our cds on the shelves to signal what kind of people we are. Young people do that by instagram and facebook files. They dont need to have the ownership of the items to reinforce who they are. Were going take a short break. When we come back well talk about the future of streaming and the business model. How does it even work . How do you make money at it . This is inside story. Real reporting that brings you the world. Giving you a real global perspective like no other can. Real reporting from around the world. This is what we do. Al jazeera america. Award winning producer and director Joe Berlinger exposes the truth. Our Current System has gone awry. A Justice System rum by human beings, can run off the rails. Sometimes the system doesnt serve and protect, and the innocent pay the price. What goes wrong . Its a nightmarish alternative reality, sometimes you cant win. An original investigative series. When justice is not for all. The system with joe beringer only on Al Jazeera America the story is not just about the listening, its about the competition in digital delivery of music. I have to admit that im a free loader. I go on to a popular streaming site. Ask for something. Its immediately delivered to me and occasionally ill get a commercial but i have no idea what theyre really advertising except for music that i wouldnt buy, and occasionally the service itself. On the back end my choices are put on a social media site, but i dont understand how anybody makes a living, much less the musician. Well, they are addressing that. Theyre addressing the charge for subscription. That payinthat is paying for so. They pay every fourth music from an independent, and they sell merchandise. They have artist pages where the artist has control over what theyre pushing. I think its fairly effective. Its more effective than selling anything ancillary. The most itunes has done is push a special version of an album but thats not a big money maker. You can do a fair amount with the streaming service. What is that cure ration that people are talking about . Part of the appeal of streaming is that you tell the streaming service what you like and it plays it for you. What is a curated stream . They have genre and these brand alliances. Theyll have teen magazine push out a list of whats new and coming, and theyll have a bona fide expert pick a play list for you. So there are a number of ways that they can do that, and there is more thought that goes into it than just an algorithm that says so many beats per minute. Some people really respond to that. Its like deejays used to be 50, 60 years ago when they thought about what songs they were going to play for. You paul, time and again weve seen how cheap or free undermines the Pricing Power of people who want to defend the price point. Are we going to see that extremely . Is apple buying into a business that eventually is going to put more and more pressure or with stand more and more pressure to be free . Im not sure. The price point for beats is 9. 99 Something Like that. And the spo the price point fory is zero. There is other competing streaming Services Like user and there is a new one every day. Its amazing. Some of them are the free model where you have to listen to ads. Im not quite sure that people are going to want to fork over money. Thats why theyre trying to bake some of these fees into phone subscription i mean phone bills. Thats why spottify recently did the deal the deal with sprint, and beats with at t. They would like to tack this thing on like its your cable bill and youre paying extra for hbo. Converting people to pay for something seems to be quite difficult. They need this to matriculate and become a large pool of money for it to make sense for artis artists. Right now it doesnt, so theyre hoping it grows. I put that to you, this idea that its very tough to use quality to defend price point. Where is the streaming going if there are players in the marketplace who are willing to give you a lot for a little. Sorry to say its becoming a commodity. I think the most telling indication is amazon, theyre going to go integrating a music streaming product into their amazon prime model which for 80 a year allows you to get twoday shipping on all of your products and gives you access to hundreds of thousands of filmed entertainment shows. I think the real differenter is going to be the kinds of features were talking about before, curated play lists. High quality audio. The ability to integrate the service in with your social network. Those are the things that consumers see value in rather than access to music which theyve been able to have for free since napster 15 years ago. There has been in the past an intimacy between those services, these Contact Services and the equipment that you use to play it on. When you watch a deal like this, here theyre going to make a more intimate connection between the machine and the stuff that goes out on the machine but maybe theyre going to a gasoline and car model. There is no ford gas or g. M. Gas. There is just gas that makes everybodys car run. Which is apple going to choose . I dont think the gasoline and car model makes sense in this context because you cant copyright gasoline. But as long as there is copyright around music and software were going to see people locked in the universes. It will be a long period of time before were able to escape from the apple o orbit, google orbit and be agnostic consumers. The reason why we develop emotional relationships with these devices and apple has been master of doing this. Making us feel like a phone is something that should be kept under your pillow while you sleep all night rather than something that is charged in an outlet. That emotional power is victory of strong design and marketing. I think beats has brought that to a whole new audience that apple has had trouble reaching in the past. As a kid who had a transitionter radio under his pillow that metaphor makes sense to me. When we come back well look at the issue of quality, and lets not forget those headphones. This is inside story. Stay with us. R welcome back to inside story. Im ray suarez. You download or stream your music, you play it on your device of choice, how does it sound . Is it as good as vinyl was . Whats more important, the easy access or the sound itself . Do you care . Lets talk more about the reported apple deal to buy beats electronics and what it means to the living experience. Welcome to our guests. Do people care about the sound as much as you wish they did . No, unfortunately they dont. The sound quality issue is erased to the bottom, unfortunately. You know, a guy like dr. Dre probably would spend a week mixing a record whereas these days nobody is going to spend that much time on it. To mix it down to a compressed mp3 file that will be further compressed to a streaming file. To get these things into your ear bud or what have you over a wireless network, all sorts of things have to happen to it to shrink, and it doesnt sound as good. That change has put a lot of music engineers, a lot of Recording Studios out of business. These days you can make a recording in your house that can be broadcast all over the world. 67 like it is in media, you can take a shot with your cell phone and before you know it, its at 100 different television networks. Does anybody care about the quality that have photograph or video . No, its the same thing with music. So is neil young on to something by kick starting a project bringing new sound quality it in this new brave world . I think there is a market for it. There has always been an elite class of audiophiles, those will be the people who buy the pono products. Currently im captive to three gig bites on my cell cl phone. I cant be downloading high quality onto it. There is going to be the issue of what fits on your device, and as producers create music that is meant to be heard streaming and it doesnt make sense if you listen to it on heavy vinyl with a great wifi. There is also a hardware part of this deal with the significant product line that beats has in living devices both ones that are portable and fit on your head, but also ones that are for the home. Thats right. Theyre going to do more of those things. As great as apple is at certain things it took them a long time to get ear buds that would fit comfortblcomfortbly in your ear. Now we have terrific headphones, i presume theyll say that. Apple makes a lot of money on the accessories that go with an iphone. Cases, other things, but of course the apps. If you could get one in a hundred iphone customers to pick up the beats head phone at the same time, thats a lot of people. Thats a lot of money. Do i if im being smart associate the apple brands to beats. When i go to my Electronics Retailer i see beats products for various types of listening. Now that apple is going to own it, do i stick an apple somewhere on that device . Thats a good question. I dont know. You could argue it either way. It might be beats for a while. Well see how that goes. If it doesnt grow enough, they may put an apple on it . Its two fine brands. Well, cantor, youre selling music, what is the best outcome for this. What is best for the musician and living public . I mean for the public you would like to see things b beits twofold. You would like to see things be as cheap as possible for them the cheaper it is, the more people you can reach. If you made everybody pay to watch a youtube video, would you rather each 50 million or 500,000 . Making it cheap and accessible to people is important. I dont like beats model of making people pay for it. I think asking for 10 in order to get access to curated play list isnot necessarily something i think is smart. I think if they made that free it would be better and the incentives to make people pay for it. For beats, jimmy is a businessman. Hes not going to let anything go too cheaply. For the music producer you cant defile it too much. Make it as cheap as possible for the listener. The listener doesnt want to pay for thing. And the songwriter and the prowe producer, they dont want to give anything away. They have to meet in the middle. The deal has not been made by a final price a announce. Thanks for being with us. In washington, im ray suarez. Things where we have to recognize that we are complicit. I am only talking about the negatives here because i think we have far too comfort addicted his perform applications on screen have made him one of hollywoods most respected act orders. Oscar freedom . I think the press needs to have absolutely freedom. The whole culture needs to
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