Daniel Hruska Beats Electronics is a well-known manufacturer of headphones. Similar to Apple, they are able to sell their products to the masses at a relatively higher price than their competitors. This makes it a good candidate for finding a suitable business model for selling music on a subscription basis. CEO Jimmy Iovine has been trying to do this for about a decade, but only recently is he getting at least some response.
His good position in the biggest label in the world - Universal Music Group - can be recorded in the note. Of course, this fact doesn't necessarily mean Iovine's success. Iovine and his team haven't fleshed out any details yet, but he was more than happy to talk about the history of his current endeavor. He immediately admitted his interest in music subscriptions even before he started selling headphones. At the same time, he thinks he can create a better service than Spotify, Rhapsody, MOG, Deezer and other competitors.
How it all started
I always felt that our content was really valuable. At the same time, I was able to help technically focused companies differentiate themselves, but they saw the situation completely differently. The one man who could sense his opportunity was Steve Jobs. How else.
I once had a meeting with Les Vadasz (a member of Intel management). I was still running Intescope back then. He was a nice person, he really listened to me and said: “We could help you. You know, Jimmy, everything you say is nice, but no business lasts forever.”
I was totally out of it. I called the head of Universal at the time, Doug Morris, and said, “We're screwed. They don't want to cooperate at all. They are not at all interested in cutting their share of our pie. They're happy where they are.” From that moment on, I knew the entire music industry was headed for the abyss. We need a subscription. I have not abandoned this idea until today.
In 2002 or 2003, Doug asked me to go to Apple and talk to Steve. I did so and we immediately hit it off. We became close friends. We came up with some great marketing moves together - 50 Cent, Bono, Jagger and other iPod related stuff. We really did a lot together.
However, I always tried to push the subscription idea to Steve. Of course he didn't like her at first. Luke Wood (co-founder of Beats) tried to convince him for three years. For a moment he looked as if year, then again that ne … He didn't want to pay the record companies too much. Apparently he felt that the subscription wouldn't work and eventually got rid of it. I wonder what Eddy Cue has to say about this, I have an appointment with him shortly. I think Steve was inwardly sympathetic to my proposal. Unfortunately, the subscription was not economically feasible because the labels demanded too much money.
Tech companies and music subscriptions don't go together
I was shocked at how petrified consumer electronics manufacturers are. I also learned this – you can create Facebook, you can create Twitter, or you can easily create YouTube. Once you get them up and running, they take on a life of their own, as their content consists of user data. Just maintain them. Music content subscriptions need something more. You have to build it completely and constantly develop it.
Why they will be different at Beats
Other music subscription companies lack the selection and offering of the right content. Although they claim the opposite, it is not so. We, as a music label, did this. There are roughly 150 white rappers in the US, we've got one for you. We believe that the right music offering is a combination of human factors and mathematics. And it is also about either or.
Right now someone offers you 12 million songs, you give them your credit card and they just say "good luck". But you need some help choosing the music. I will offer you a kind of guide. You don't have to use it, but you'll know it's there. And if you decide to use it, you'll find that it can be relied upon.
Why manufacturing is good practice
Once Steve called me like this: “There is something in you and you should be happy about it. You're the only software guy who could successfully make a piece of hardware too.” That means the two of us were the ones who could solve the subscription music content problem. In the end, we are more successful in this than in hardware. Do you know why it's even called hardware? Because it is terribly difficult to make it.
