Sorry, But Apple Buying Spotify Makes No Sense

Spotify, the streaming music service, has denied that it’s talking to Apple about an acquisition, as TechCrunch had reported yesterday. Late last night, CNET reported that “Spotify’s spokesman Jim Butcher said acquisitions discussions with Apple have never taken place.”

For the sake of argument, let’s assume the truth is somewhere in the middle: That Apple has considered buying Spotify, has maybe even gotten a free look — Apple gets a free look at anyone — and that the companies are not currently negotiating a deal.

In reality, it actually makes no sense for Apple to acquire Spotify, unless it can be had for very cheap.

Yesterday, when we first read TechCrunch’s report, we briefly argued that it did make some sense for Apple to buy Spotify, given Spotify’s popularity in Europe (the only place it is available) and given Apple’s lousy attempts so far at “cloud”-based music.

But after sleeping on it, and some sense talked into us by MediaMemo’s Peter Kafka, we now think that it makes no sense for Apple to buy Spotify, unless it is incredibly cheap.

Why not? Because Apple typically buys startups for three reasons, none of which likely applies here:

  • Talent. This is why Apple acquired Lala, another streaming service, last year. But Spotify would likely cost too much to be a talent-only deal. For Spotify to agree to sell itself as a talent deal, it would have had to have given up. And it doesn’t seem like Spotify has given up yet. Plus, it’s likely worth more to other potential acquirers who would want more of its business — say, a company like Vodafone, or Nokia, or Google.
  • Technology or infrastructure. Spotify is cool, but there isn’t anything about it that Apple couldn’t build. And Spotify does not have the user base to justify keeping it around — if Apple were to buy it, it would surely shut it down.
  • Intellectual property or business deals. Spotify has good streaming terms with the record labels for Europe, but as Arrington noted himself, they would go away if Spotify changed hands. So Apple wouldn’t be getting anything here, either.

We can think of plenty of reasons for Spotify to want the world to think that Apple is interested in it — that’s a great way to get Google to overpay for it, for example. But it does not make sense for Apple to buy Spotify now. Unless, as we’ve said, it can be had for a very cheap price, which does not seem likely.

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