Beats Music Enters Online Streaming Market - A step in the right direction for Indie Artists.
01/11/14 04:41 PM Filed in: Article
Algorithm for Your Personal Rhythm
Beats Music Enters Online Streaming Market
By BEN SISARIO JAN. 11, 2014
SANTA MONICA, Calif. — Jimmy Iovine, whose career as a recording engineer, producer and music executive stretches from John Lennon to Lady Gaga, was proudly showing off some of his hits one afternoon last month at a boutique recording studio here.
He passed through rooms where Eminem and Gwen Stefani made records and pointed to the console on which Dr. Dre recorded his landmark 1992 album, “The Chronic.” The studio walls were crammed with pictures of Steve Jobs, Bono and other celebrities sampling the bass-heavy Beats by Dr. Dre headphones, which — at up to $450 apiece — have become a billion-dollar success story.
Yet he was most excited to talk about his next project, Beats Music, a subscription streaming service he founded with Dr. Dre that will challenge Spotify, Pandora and Apple’s new iTunes Radio in the battle over how people consume music online. With Trent Reznor of Nine Inch Nails as the service’s chief creative officer, Mr. Iovine — whose skill as an impresario and all-around salesman has few equals in the industry — is betting that Beats Music can solve a problem that most music fans may not realize they have: deciding what to listen to.
“What song comes next,” he said, “is as important as what song is playing now.”
Beats Music, which will arrive in the United States on Jan. 21, is also making the latest salvation pitch for the struggling music industry. With download sales tapering off after a decade of growth, streaming has taken center stage as the most promising new source of revenue. Yet while consumers have flocked to free outlets like YouTube and Pandora, the more lucrative paid services have been slow to catch on, and the low royalty rates paid by these services have stirred resentment among musicians.
Winning this battle won’t be easy. The digital music world is in the midst of a confusing convergence of formats, with downloads, radio and streaming being juggled and combined into whatever hybrid will stick. Beats is joining a market already crowded with competitors, including Google, Sony and Microsoft, with more to come.
“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,” said Ben Arnold, an analyst at the NPD Group, a consumer research firm. “If not, then you’ve got to rely on your brand. There’s something for them there, but it’s tougher.”
As he did with headphones, Mr. Iovine, who is also the chairman of the Universal label group Interscope Geffen A&M, said he believes he can create a huge mainstream business where only a niche one exists today. The strategy for Beats Music is twofold: Be a smooth, entertaining and convincingly human guide to the cluttered universe of digital music, and exploit the power of its headphone brand through aggressive marketing.
That marketing campaign will include a major integration deal with AT&T, regular plugs on “The Ellen DeGeneres Show” and even a Super Bowl ad — a blitz not seen in digital music since the days of Apple’s dancing-silhouette iTunes commercials.
On its surface, Beats Music — which has $60 million in investment behind it and is an affiliate of Beats Electronics, the headphone company — is not radically different from Spotify, Rhapsody or any of the dozens of other music apps already out there. For $10 a month, it offers access to practically all the recorded music under the sun, with playlists galore to keep its customers tuned in. Since it has licensing deals with the same record labels as its competitors, it essentially has the same music, too.
Instead of being a mere utility for music, though, Beats comes across as more a digital playground, or maybe a nightclub. Its interface, built primarily for mobile use, is full of sleek graphics over a jet-black background, and it is organized in four swipe-able panes that each deliver a constant feed of fresh songs in different ways, tailored to each user.
The idea is that bold visual appeal and the expertise of its programmers (or “curators,” in its preferred buzzspeak), in serving up just the right song or playlist, will create excitement among the millions of listeners who have been unseduced — or just confused — by streaming music.
“There’s so much music to hear online, people have become a bit deaf to the choices,” Bono of U2 wrote in an email. “Jimmy believes that Beats-style curation will become the discovery model that the music business is waiting for. I would never bet against him.”
To hear Mr. Iovine and his colleagues tell it, the world of online music is a letdown, full of bland websites, robotic recommendation programs and not enough soul in the machine. Pandora, for example, uses automated musicological analysis to decide what songs to play, and Spotify and others recommend music to users by parsing huge pools of data.
Ian Rogers, the chief executive of Beats Music, argued that these systems inevitably fail because they rely too heavily on computer algorithms and because the people behind them just misunderstand music. He cited one typical, so- obvious-it’s-wrong recommendation as proof of the problem: Paul Simon fan? Check out Art Garfunkel!
“No human being would ever say that,” Mr. Rogers said.
But Beats uses algorithms, too, as part of how it customizes the songs it sends users based on their profiles and listening habits. The difference, Beats executives say, is that their service makes greater use of its editors and guest programmers like Rolling Stone, Rap Radar and Pitchfork, and only recommends the good stuff.
Perhaps its most intriguing feature, Right Now, is a kind of automated listening game devised by Mr. Reznor, who was already on board with the project in 2012, when Beats Electronics paid a reported $14 million for Mog, a struggling subscription service.
He is the service’s main visionary, and his involvement lends credibility to a business that has become plagued by complaints from artists about economic fairness. Unlike Spotify and some other services, Beats will have no free tier; it is available only through paid subscription, which generally means higher royalty rates. (The company declined to specify its rates, but said that it pays all labels equally.)
Seated beside Mr. Iovine in a black hoodie, black T-shirt, shiny black sneakers and jeans, Mr. Reznor described his involvement with the service as the culmination of years of experimentation in his own career in response to the music industry’s tumult.
“What is the next business model?” he asked. “Somebody’s got to crack it. Why not me?”
Using his music as something of a Petri dish for new ways to distribute music, Mr. Reznor tried the mystery-marketing model, the free model and the multiple-price-points model, but came to see them as stunts. Subscription, he decided, was the only plan that made sense in the long run, so Mr. Reznor and his collaborator Rob Sheridan sketched out plans for a new service based around the mobility and intelligence of smartphones.
“My phone knows where I’m at, what I’m up to, what temperature it is,” Mr. Reznor said. “It might even start to recognize locations I visit, patterns of motion. What if music could be collected in little parcels and served up to me effortlessly?”
A byproduct of that concept is Right Now, which in prototype was tantalizingly called “the sentence.” In it, a user generates an ad hoc playlist by completing a musical status update with four variables: a place, an activity, a person and a genre of music. “I’m at the beach & feel like pre-partying with my friends to dance-pop,” for example, yields the Chemical Brothers, Lady Gaga and Janet Jackson. Not bad.
Tested by a reporter at a New Year’s Eve gathering, Beats playlists like “Best of Bossa Nova” and “Downtempo Dinner Party” set the mood well, and Right Now proved an ideal party game. Yet the playlists seemed no better or worse than the well-chosen and witty playlists on the free site Songza, a Pandora competitor that has thousands of playlists but, because of licensing rules, restricts users’ ability to choose specific songs.
Still, the quality or originality of the service may matter less than its promotion, and in that Beats Music has a clear advantage.
AT&T will offer Beats Music subscriptions with monthly smartphone service and promote the bundle heavily. In addition to the $10 individual plan, AT&T will sell a family plan for $15, giving separate Beats accounts to up to five users — a deal that puts Beats far ahead of its competitors, which have never landed such a far-reaching integration with a major American phone carrier.
“Our angle on it was families,” said David Christopher, the chief marketing officer of AT&T Mobility. “We think there’s a big opportunity here to change the way people think about music.”
Target will also promote the service in its stores, and Ms. DeGeneres will feature it on her daytime talk show. These deals point to Beats’ ambition to pursue a broad mainstream audience, including demographics like adult women who historically have not been priority targets for digital music marketers.
“We’re going to show people in the marketing how to use this service, how to be entertained by it and how to be fulfilled by it,” Mr. Iovine said.
In the converging world of digital music apps, everybody competes against everybody, and Beats Music’s success depends as much on luring customers away from competitors as it does on the abundance of free music on the Internet.
So far Beats Music is available only in the United States. But Beats’ major target is Spotify, which was founded in Sweden in 2008 and is now in 55 markets around the world. Spotify has not announced user numbers in almost a year, but a top executive recently told a private music industry gathering in Los Angeles that it has nine million paying subscribers, including two million in the United States, according to a person who attended. Spotify declined to comment for this article.
Yet Beats believes the potential market for on-demand streaming music is much greater. Mr. Rogers puts it at 50 million in the United States — perhaps 10 times its current size. By comparison, Netflix, with 31 million subscribers, and Sirius XM Radio, with more than 25 million, have found large-scale, profitable businesses by charging for access, ease of use and expertly programmed content.
Some of these features are standard in any digital service. Spotify, for example, which is available in both paid and ad-supported free versions, has plenty of ready-made playlists and recently introduced the ability to follow artists.
Beats Music claims that its versions of these features are better thanks to its team of experts, who program the music and tend to its algorithms to weed out those inhuman howlers. Among its 147 employees are genuine music authorities like Scott Plagenhoef, the former editor of Pitchfork.
In marketing, Mr. Iovine has an enviable track record with Beats by Dr. Dre headphones. As Mr. Iovine describes it, he was infuriated to see a generation of listeners finding music through the cheap ear buds that Apple gave away with iPods, so in 2008 he and Dr. Dre began selling headphones that had power and a hefty price tag.
Through placements in music videos, endorsements from sports stars and exposure whenever Mr. Iovine appeared as a mentor on “American Idol,” Beats headphones quickly became a must-have fashion accessory. The company’s annual sales revenue has also been estimated at $1.5 billion.
When asked about the challenges facing Beats Music, Mr. Iovine said that he has heard doubts like this before.
“When I met Eminem and played him for Dre, everyone said Dre can’t sign a white rapper,” he said. “And some of the smartest people I know told me that no one is going to pay for audio, because they get it for free every time they buy a phone or an MP3 player.”
“But, of course, they will,” he continued. “Who won’t pay for emotion?”
A version of this article appears in print on January 12, 2014, on page AR1 of the New York edition with the headline: Algorithm for Your Personal Rhythm.
Beats Music Enters Online Streaming Market
By BEN SISARIO JAN. 11, 2014
SANTA MONICA, Calif. — Jimmy Iovine, whose career as a recording engineer, producer and music executive stretches from John Lennon to Lady Gaga, was proudly showing off some of his hits one afternoon last month at a boutique recording studio here.
He passed through rooms where Eminem and Gwen Stefani made records and pointed to the console on which Dr. Dre recorded his landmark 1992 album, “The Chronic.” The studio walls were crammed with pictures of Steve Jobs, Bono and other celebrities sampling the bass-heavy Beats by Dr. Dre headphones, which — at up to $450 apiece — have become a billion-dollar success story.
Yet he was most excited to talk about his next project, Beats Music, a subscription streaming service he founded with Dr. Dre that will challenge Spotify, Pandora and Apple’s new iTunes Radio in the battle over how people consume music online. With Trent Reznor of Nine Inch Nails as the service’s chief creative officer, Mr. Iovine — whose skill as an impresario and all-around salesman has few equals in the industry — is betting that Beats Music can solve a problem that most music fans may not realize they have: deciding what to listen to.
“What song comes next,” he said, “is as important as what song is playing now.”
Beats Music, which will arrive in the United States on Jan. 21, is also making the latest salvation pitch for the struggling music industry. With download sales tapering off after a decade of growth, streaming has taken center stage as the most promising new source of revenue. Yet while consumers have flocked to free outlets like YouTube and Pandora, the more lucrative paid services have been slow to catch on, and the low royalty rates paid by these services have stirred resentment among musicians.
Winning this battle won’t be easy. The digital music world is in the midst of a confusing convergence of formats, with downloads, radio and streaming being juggled and combined into whatever hybrid will stick. Beats is joining a market already crowded with competitors, including Google, Sony and Microsoft, with more to come.
“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,” said Ben Arnold, an analyst at the NPD Group, a consumer research firm. “If not, then you’ve got to rely on your brand. There’s something for them there, but it’s tougher.”
As he did with headphones, Mr. Iovine, who is also the chairman of the Universal label group Interscope Geffen A&M, said he believes he can create a huge mainstream business where only a niche one exists today. The strategy for Beats Music is twofold: Be a smooth, entertaining and convincingly human guide to the cluttered universe of digital music, and exploit the power of its headphone brand through aggressive marketing.
That marketing campaign will include a major integration deal with AT&T, regular plugs on “The Ellen DeGeneres Show” and even a Super Bowl ad — a blitz not seen in digital music since the days of Apple’s dancing-silhouette iTunes commercials.
On its surface, Beats Music — which has $60 million in investment behind it and is an affiliate of Beats Electronics, the headphone company — is not radically different from Spotify, Rhapsody or any of the dozens of other music apps already out there. For $10 a month, it offers access to practically all the recorded music under the sun, with playlists galore to keep its customers tuned in. Since it has licensing deals with the same record labels as its competitors, it essentially has the same music, too.
Instead of being a mere utility for music, though, Beats comes across as more a digital playground, or maybe a nightclub. Its interface, built primarily for mobile use, is full of sleek graphics over a jet-black background, and it is organized in four swipe-able panes that each deliver a constant feed of fresh songs in different ways, tailored to each user.
The idea is that bold visual appeal and the expertise of its programmers (or “curators,” in its preferred buzzspeak), in serving up just the right song or playlist, will create excitement among the millions of listeners who have been unseduced — or just confused — by streaming music.
“There’s so much music to hear online, people have become a bit deaf to the choices,” Bono of U2 wrote in an email. “Jimmy believes that Beats-style curation will become the discovery model that the music business is waiting for. I would never bet against him.”
To hear Mr. Iovine and his colleagues tell it, the world of online music is a letdown, full of bland websites, robotic recommendation programs and not enough soul in the machine. Pandora, for example, uses automated musicological analysis to decide what songs to play, and Spotify and others recommend music to users by parsing huge pools of data.
Ian Rogers, the chief executive of Beats Music, argued that these systems inevitably fail because they rely too heavily on computer algorithms and because the people behind them just misunderstand music. He cited one typical, so- obvious-it’s-wrong recommendation as proof of the problem: Paul Simon fan? Check out Art Garfunkel!
“No human being would ever say that,” Mr. Rogers said.
But Beats uses algorithms, too, as part of how it customizes the songs it sends users based on their profiles and listening habits. The difference, Beats executives say, is that their service makes greater use of its editors and guest programmers like Rolling Stone, Rap Radar and Pitchfork, and only recommends the good stuff.
Perhaps its most intriguing feature, Right Now, is a kind of automated listening game devised by Mr. Reznor, who was already on board with the project in 2012, when Beats Electronics paid a reported $14 million for Mog, a struggling subscription service.
He is the service’s main visionary, and his involvement lends credibility to a business that has become plagued by complaints from artists about economic fairness. Unlike Spotify and some other services, Beats will have no free tier; it is available only through paid subscription, which generally means higher royalty rates. (The company declined to specify its rates, but said that it pays all labels equally.)
Seated beside Mr. Iovine in a black hoodie, black T-shirt, shiny black sneakers and jeans, Mr. Reznor described his involvement with the service as the culmination of years of experimentation in his own career in response to the music industry’s tumult.
“What is the next business model?” he asked. “Somebody’s got to crack it. Why not me?”
Using his music as something of a Petri dish for new ways to distribute music, Mr. Reznor tried the mystery-marketing model, the free model and the multiple-price-points model, but came to see them as stunts. Subscription, he decided, was the only plan that made sense in the long run, so Mr. Reznor and his collaborator Rob Sheridan sketched out plans for a new service based around the mobility and intelligence of smartphones.
“My phone knows where I’m at, what I’m up to, what temperature it is,” Mr. Reznor said. “It might even start to recognize locations I visit, patterns of motion. What if music could be collected in little parcels and served up to me effortlessly?”
A byproduct of that concept is Right Now, which in prototype was tantalizingly called “the sentence.” In it, a user generates an ad hoc playlist by completing a musical status update with four variables: a place, an activity, a person and a genre of music. “I’m at the beach & feel like pre-partying with my friends to dance-pop,” for example, yields the Chemical Brothers, Lady Gaga and Janet Jackson. Not bad.
Tested by a reporter at a New Year’s Eve gathering, Beats playlists like “Best of Bossa Nova” and “Downtempo Dinner Party” set the mood well, and Right Now proved an ideal party game. Yet the playlists seemed no better or worse than the well-chosen and witty playlists on the free site Songza, a Pandora competitor that has thousands of playlists but, because of licensing rules, restricts users’ ability to choose specific songs.
Still, the quality or originality of the service may matter less than its promotion, and in that Beats Music has a clear advantage.
AT&T will offer Beats Music subscriptions with monthly smartphone service and promote the bundle heavily. In addition to the $10 individual plan, AT&T will sell a family plan for $15, giving separate Beats accounts to up to five users — a deal that puts Beats far ahead of its competitors, which have never landed such a far-reaching integration with a major American phone carrier.
“Our angle on it was families,” said David Christopher, the chief marketing officer of AT&T Mobility. “We think there’s a big opportunity here to change the way people think about music.”
Target will also promote the service in its stores, and Ms. DeGeneres will feature it on her daytime talk show. These deals point to Beats’ ambition to pursue a broad mainstream audience, including demographics like adult women who historically have not been priority targets for digital music marketers.
“We’re going to show people in the marketing how to use this service, how to be entertained by it and how to be fulfilled by it,” Mr. Iovine said.
In the converging world of digital music apps, everybody competes against everybody, and Beats Music’s success depends as much on luring customers away from competitors as it does on the abundance of free music on the Internet.
So far Beats Music is available only in the United States. But Beats’ major target is Spotify, which was founded in Sweden in 2008 and is now in 55 markets around the world. Spotify has not announced user numbers in almost a year, but a top executive recently told a private music industry gathering in Los Angeles that it has nine million paying subscribers, including two million in the United States, according to a person who attended. Spotify declined to comment for this article.
Yet Beats believes the potential market for on-demand streaming music is much greater. Mr. Rogers puts it at 50 million in the United States — perhaps 10 times its current size. By comparison, Netflix, with 31 million subscribers, and Sirius XM Radio, with more than 25 million, have found large-scale, profitable businesses by charging for access, ease of use and expertly programmed content.
Some of these features are standard in any digital service. Spotify, for example, which is available in both paid and ad-supported free versions, has plenty of ready-made playlists and recently introduced the ability to follow artists.
Beats Music claims that its versions of these features are better thanks to its team of experts, who program the music and tend to its algorithms to weed out those inhuman howlers. Among its 147 employees are genuine music authorities like Scott Plagenhoef, the former editor of Pitchfork.
In marketing, Mr. Iovine has an enviable track record with Beats by Dr. Dre headphones. As Mr. Iovine describes it, he was infuriated to see a generation of listeners finding music through the cheap ear buds that Apple gave away with iPods, so in 2008 he and Dr. Dre began selling headphones that had power and a hefty price tag.
Through placements in music videos, endorsements from sports stars and exposure whenever Mr. Iovine appeared as a mentor on “American Idol,” Beats headphones quickly became a must-have fashion accessory. The company’s annual sales revenue has also been estimated at $1.5 billion.
When asked about the challenges facing Beats Music, Mr. Iovine said that he has heard doubts like this before.
“When I met Eminem and played him for Dre, everyone said Dre can’t sign a white rapper,” he said. “And some of the smartest people I know told me that no one is going to pay for audio, because they get it for free every time they buy a phone or an MP3 player.”
“But, of course, they will,” he continued. “Who won’t pay for emotion?”
A version of this article appears in print on January 12, 2014, on page AR1 of the New York edition with the headline: Algorithm for Your Personal Rhythm.
