Apple has done something very out of character with its recent acquisition of Beats Electronics.
It’s keeping the company’s streaming music service on Apple’s biggest iPhone competitor — Android.
Apple CEO Tim Cook shared this news with The Financial Times, saying that “it’s all about the music.”
On stage at Re/code’s inaugural conference, Apple’s senior vice president of internet software and services Eddy Cue also said Apple would keep Beats Music on Android.
This may not sound significant to some, but it marks a shift in perspective at Apple. The company has traditionally discontinued Android apps from the companies it had acquired.
When Apple acquired navigation apps HopStop and Embark, for example, they disappeared from the Google Play Store. Existing HopStop Android users then recieved a prompt saying that the app was no longer supported by the platform.
Beats Music seems to be the exception.
iTunes in trouble
Apple seems to be betting on Beats Music to keep up with the growing number of competing music services such as Pandora, Spotify, and Rdio among others. iTunes has been losing revenue to these rivals, as Morgan Stanley’s Katy Huberty noted.
Huberty’s data illustrated how iTunes has become less valuable to Apple over the past several years. The average amount an iTunes consumer spends in Apple’s music store has decreased by 24% year-over-year, and a larger portion of Apple’s revenue is coming from the App Store as opposed to iTunes.
In Q1 2013, 68% of Apple’s online services revenue came from iTunes while the App Store accounted for 32%. Now, in Q1 2014 those numbers have shifted. The App Store accounted for 57% of Apple’s online services revenue while iTunes generated 43%. In Q1 2015, the App Store is expected to pull in 56% of the company’s online services revenue while iTunes would account for 44%.
Although it seems strange for Apple to keep Beats Music alive on its most threatening rival platform, it may have a great reason for doing so. After the company brought iTunes to Windows in October 2003, iTunes and iPod sales soared.
Before iTunes launched on Windows, Apple had only sold 1 million iPods since the first model launched two years before. But within six months of iTunes on Windows, Apple quickly sold another 1 million iPods.
That in itself proves that opening its music products to other platforms can be very beneficial to Apple.
Apple’s Trojan horse
If Apple does plan to build Beats into its own Spotify competitor, there’s a lot to be learned from expanding into Android.
“You could think of this perhaps as being a very convenient Trojan horse for Apple products to get into the Android community,” Carl D. Howe, vice president of research and data sciences at Yankee Group, said to Business Insider.
By keeping Beats Music on Android, Apple would be able to examine user interest on a wider scale across both Android and iOS device owners.
“They will be looking very carefully at whether or not people like it or hate it,” Howe said. “It’s a great way to do an experiment and see if there’s business to be made from Android users.”
If Apple does decide that Android is a lucrative platform, there’s a possibility we’ll see Apple’s own apps appear in Google Play as well. It’s still a long shot, but it’s not an unreasonable idea. Apple CEO Tim Cook has said that he’s not completely opposed to the concept of porting apps to its largest competitor in the mobile space.
“We have no religious issue with doing that,” Cook said on stage at last year’s D11 conference. “If we thought it would make sense for us to do that, we would do that.”
In March, Billboard also reported that Apple ws considering bringing iTunes to Android. It’s unclear exactly how Beats Music will benefit Apple in the long term, but it could potentially help Apple in the same way iTunes for Windows did in the early 2000s.
“It’s an experiment now,” Howe said. “But it could turn into something big.”
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