A recently published Buzzfeed article sheds some light on the circumstances that led to Apple's recent US$3 billion acquisition of Beats Electronics. As the story goes, even Apple engineers working on iTunes preferred using services like Spotify while the higher-ups at Apple were somewhat oblivious to and perhaps dismissive of the service's growing popularity.
Past and current employees in the company with direct knowledge of iTunes and Apple's services Ping and iTunes Radio told BuzzFeed that Apple engineers involved with those products often preferred to use Spotify and Pandora. "Everyone's excuse was it's because we work on iTunes, running and closing the app after every code change," one source said. "But it's really because Spotify has all the free music with a real social platform." In their personal time, sources said, employees used Spotify and Pandora.
The reason offered for Apple's willful disregard of music competitors is one we've heard many times before -- the money coming coming in from the iTunes spigot was flowing, so why mess with the status quo? And in a piece of the story that may very well be hyperbolic, one of Buzfeed's sources relayed that some members of Apple's upper management "...didn't even know that Spotify was an on-demand streaming service", instead assuming it was a radio service à la Pandora.
What's also interesting is the claim that Apple's experiment with Ping ultimately failed because Apple wasn't interested in creating a music network but rather in rolling out a "purchase pusher."
Indeed, Apple's iTunes Radio appears to have been created in a similar vein. Though Eddy Cue recently said that iTunes Radio has tens of millions of listeners, the service has reportedly not resulted in as many song purchases as Apple was hoping. Not helping matters is the service's less-than-stellar UI and a weaker song recommendation engine than Pandora.
Recommendations have been a problem for Apple and iTunes. According to a source familiar with the development of iTunes Radio, Apple thought it could use a consumer's iTunes purchase history to determine what they'd want to listen to on iTunes Radio. Employees agreed that Apple didn't seem to have an interest in how the song collections created by iTunes Radio sounded, or whether they were cohesive. As a result, users trying to create an iTunes station of '90s hip-hop might end up hearing a song more than once, or some random show tunes and country songs, culled from their recent, sporadic purchases.
Nonetheless, and almost comically, Buzfeed's sources claim that some folks within Apple believed "iTunes would be a Spotify killer" while simultaneously dismissing Pandora as a viable threat as well.
In acquiring Beats, Apple presumably intent on pole-vaulting back into the spotlight as a music provider that matters. If Buzzfeed's sources regarding Apple's bizarre obliviousness to Spotify and its lukewarm efforts with iTunes Radio are in fact true, the Beats acquisition increasingly looks like one Apple had to make, if only to bring on board a team that knows the music business inside and out. Over and above that, Apple also gets an on-demand subscription service that, at the very least, is just as good as Spotify.
It remains to be seen how Apple plans to integrate Beats into the Apple ecosystem, but if history is any indication, Apple should focus more on creating a compelling subscription service and less on leveraging Beats solely to increase digital downloads. Having said that, it stands to reason that having Dr. Dre and Jimmy Iovine on board all but ensures Apple won't make the same mistakes it made with Ping and iTunes Radio again.