Apple is reportedly making a move into mobile content that could impact AT&T’s foray into streaming music. The iPhone maker is expected to pay $3.2 billion for the Beats premium headphones and streaming music service. It’s a smart move for Apple, since Beats headphones target the same high-end consumers that tend to buy iPhones, and the $10/month music service is succeeding where Apple’s free iTunes Radio is not.
One big reason for the success of Beats’ streaming service is its partnership with AT&T. AT&T offers its customers a free trial of Beats Music, which converts to a subscription after 3 months. The Beats subscription is billed through AT&T’s charging policy and shows up on the customer’s phone bill.
“Most of Beats subscribers now come from AT&T,” said Rajeev Chand, managing director and head of research at Rutberg and Company, adding that he believes Beats currently has roughly 200,000 subscribers. Chand thinks there is a decent chance that Apple will retain the AT&T relationship if it buys Beats. “Apple and AT&T have a longstanding relationship as AT&T was the first to launch iPhone, so that would speak to Apple retaining the AT&T relationship but perhaps extending it to other operators and platforms,” he said.
Apple could try to tweak the Beats/AT&T deal to favor iPhone users on the AT&T network. From early access to new music to preferential pricing, there are many ways Apple could favor iPhone users.
On the other hand, Apple could try to make Beats available “over-the-top,” through an app pre-loaded on iPhones, effectively cutting AT&T and other operators out of the picture. Tying Beats to hardware was an unsuccessful strategy for HTC, but HTC owned a stake in Beats before the launch of the streaming service, when Beats was focused on audio quality rather than content.
If Beats abandons the carrier partnership model, it will open a door for its competitors here. Already Spotify has partnered with Sprint, and some have speculated that if Apple buys Beats, Spotify will become an acquisition target as well.
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Apple purchase of Beats could impact AT&T
