Ever since Apple announced its intention to buy Beats for $US3 billion, observers have been scratching their heads to figure out why the company was so keen on the deal. Beats doesn’t have the best technology, nor does it have a lot of customers subscribing to its music streaming service.
BuzzFeed’s Aylin Zafar has a theory, in this brutal article that alleges managers at Apple who worked on iTunes Radio were deaf to what was actually happening in the music streaming marketplace. Apple’s own iTunes engineers preferred Pandora and Spotify when they listened to music for personal reasons, her sources tell her. Some members of management were so disinterested in competing music services that they didn’t know songs could be played on-demand by Spotify until last year. And song selection on iTunes Radio was cued in part based on users’ purchase history rather than their listening preferences — which explains why iTunes Radio song choices are often so bizarre, compared to Pandora’s surprisingly good guesses at what listeners want.
Lastly, Zafar reports that some people at Apple believed Pandora was a “dead company” because it didn’t generate enough revenue to cover its costs. As Business Insider has noted previously, Pandora can turn a profit any time it wants to and it is becoming less unprofitable over time. Its revenue is growing robustly, and it is likely that the only reason it is not profitable is because the company is investing in future growth — stealing as many listeners for itself as it can.
Apple didn’t comment for the BuzzFeed story, and we don’t expect it to.
Here’s a sample from the BuzzFeed story:
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.
… Apple employees confirmed that management actively ignored iTunes’ streaming competitors, with some managers refusing to open or use Spotify. One source said that as recently “as last year,” some members of management didn’t even know that Spotify was an on-demand streaming service, assuming it was just a radio service.
“The management in particular were pretty much tone-deaf in what Spotify was and that’s why they’re panicking now,” the source said. “They didn’t understand how Spotify worked, which is why they thought iTunes Radio would be a Spotify killer.” Other managers referred to Pandora as a nonthreatening “dead company” because of its lack of revenue.