Pandora acquires Rdio for $75M in cash

Pandora has agreed to acquire key assets from Rdio, a streaming music service that competes with Spotify and similar products, for roughly $75 million in cash.
That’s more than $50 million less than Rdio raised across six rounds of venture financing, according to Crunchbase. Pandora said in a press release that the final figure might change because it’s subject to “certain purchase price adjustments.”
Pandora will acquire Rdio’s technology and talent but not the operating business — which means the Internet radio company won’t be delving into the on-demand streaming business the moment it acquires the portions of Rdio that interest it.
Instead, the company said it plans to “offer an expanded listening experience by late 2016” depending on its ability to “obtain proper licenses.” Pandora, in other words, will give itself some time to assimilate Rdio before it takes on Spotify. (Rdio said it’s service won’t be affected today, but will offer updates on the status in the near future.)
On an investors call following the announcement, Pandora CEO Brian McAndrews said the company opted to purchase Rdio’s assets rather than building it from scratch because Pandora had already determined that it’s strategy was to eventually offer an on-demand component. As such, buying the assets allow Pandora to move quicker, he added.
The deal is a further sign of consolidation in the music streaming market. Apple spent $3 billion on Beats last year, and is shutting down the Beats Music service at the end of the month. Grooveshark, another streaming service, closed in April.
Yet the streaming music market will remain crowded despite that consolidation. Spotify, Apple Music, Amazon Prime Music, Google Play Music, Deezer, Tidal, and other services will continue to vie for attention in this oversaturated space.
This is the second major acquisition for Pandora in the last few months, with the first being a $450 million purchase of ticketing business Ticketfly. Between Ticketfly and the presumably soon-to-launch on-demand component of Pandora, hopefully it’ll be enough to keep it competitive with the slew of rivals.
Investors, however, don’t seem to be very impressed by the development, as Pandora’s stock is essentially flat slightly in after hours trading.

Facebook debuts streaming-focused ‘music stories,’ with help from Spotify & Apple Music

It’s been a while since the world’s largest social network gave any attention to music, but today it’s making another attempt.
Facebook introduced a new post format today called “music stories” that allows its users to listen to 30-second previews of songs their friends share from Apple Music or Spotify. People who like what they hear will also be able to add the song to their streaming libraries or purchase the track via iTunes.
“We hope by making this experience better, artists will share more, friends will share and engage more, and music will become a better part of the Facebook experience overall,” Facebook director of product Michael Cerda said in a blog post. The feature is currently limited to Facebook’s iPhone app.
These new music stories are limited in their scope. The songs will be streamed via the service from which they were shared. And at least for now, all interactions will be limited to those two services. This means someone who likes a song shared from Spotify is screwed if they prefer Apple Music and vice versa.
There are also many other streaming services — Deezer, Rdio, Pandora, Slacker, 8Tracks, Tidal, and probably a dozen others I can’t remember — that aren’t supported with this feature. I suspect that won’t bother most Facebook users, the majority of whom probably use Spotify or Apple Music, but it’s still likely to irk some.
The feature is reminiscent of Twitter’s #Music service, which tapped Rdio and Spotify to allow its users to listen to music shared by their networks. That service wasn’t long for this world: Twitter reportedly considered pulling the plug on it six months after its debut, and it was shut down in April 2014.
Facebook’s music stories are probably longer for this world. The company hasn’t yet built an entire service around streaming music — it’s just made it easier for people to listen to the songs their friends already share. That’s a far lower commitment to the category than a standalone service like #Music was.
That said, it will be interesting to see how this affects streaming music services that aren’t supported by the new format. How many music stories will Rdio or Tidal users have to see before they sign up for Apple Music? How many songs will Deezer subscribers listen to before jumping ship to Spotify?
If music really is as social as Facebook imagines — and the company is often right about what people are sharing to its network, thanks to the vast amount of data it collects and parses every day — this could make a big difference to people whose friends and family all use a different streaming music service.
Or perhaps it will lumber about without making much difference to most people. If #Music taught us anything, it’s that even though music is a social experience, it’s not necessarily a social networking experience. There’s a difference — Facebook’s about to find out exactly how much that matters.

You can now store 50,000 songs online with Google Play Music

Google just made its Play Music service a bit more appealing, even if you don’t use a Google Android phone. You can now upload 50,000 songs to your Google Play Music account at no charge; the previous limit was 20,000.

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[company]Google[/company] announced the storage boost in a blog post on Wednesday, pointing out that once your tunes are uploaded, you can stream or download them on Android devices, an [company]Apple[/company] iPad or iPhone, a Chromebook or from a computer via the browser. Music tracks can also be streamed through Google’s Chromecast device.

The increased storage is a noticeable jump over what Apple offers with its iTunes Match service. There you get 25,000 track uploads but you have to pay $24.99 a year to get them. And you can’t get at those tunes from anything other than iTunes or an Apple TV, so Android device owners need not apply.

Google Play Music Android Wear main

For a while, I was a fan of iTunes Radio, which is ad-free with an iTunes Match account, but later opted to use Google Play Music. The main reason? The portability. I have one foot firmly in both camps — that is, iOS and Android — and I prefer cross-platform services that work regardless of the device I’m using; including a smartwatch. It helps that Google recently made its Play Music app for iOS universal so that it has a true iPad interface now.

That’s just personal preference on my part though, and [company]Amazon[/company]’s own music storage is a worthy contender in this space too. Which of these (or other) cloud music services are you using to store your albums and why? Maybe you’ll convince me to reconsider my approach.

Apple reportedly integrating Beats streaming into iOS and iTunes

After Beats was purchased in 2014, and even before then, one main question facing Apple is when the company plans to come out with a streaming music service. According to a new report from ace Apple reporter Mark Gurman at 9to5Mac, the company has been working to integrate Beats Music streaming into iOS, iTunes, and Apple TV, ahead of a launch that was planned for March, but now looks more likely to be June.

According to Gurman, Apple has decided to largely ditch the existing Beats Music brand on iPhone and iPad, instead choosing to integrate streaming features into the pre-installed Music app, which plays locally stored music and is still surprisingly popular.

One key feature for the service sounds a lot like an expansion of iTunes Match: Users will be able to upload current Beats or iTunes music libraries with the new service, which will merge those songs with iTunes in the Cloud, and users will be able to choose specific tracks or artists to download onto their iPhone or iPad’s local storage.

Although the new apps will reportedly ditch the black-and-red Beats color scheme, Apple appears poised to continue the Beats focus on human-curated playlists. Gurman also indicated that Apple may continue to try to build a music-focused social network in the Music app — remember that Apple tried and failed to do that before, with its Ping service.

Another surprise: Apple could be building a Beats Music app for Android in-house. There’s an existing Beats Music Android app, but Gurman reported that “Apple engineers are currently working on an Android app for the new Apple-branded service.” Apparently, there’s been a bit of discord stemming from the integration of Beats engineers and Apple engineers and Beats integration has been “not going so well.”

9to5Mac said a source warned them that there could be several employee departures from Apple’s services division in the near future. Remember that Apple’s core cloud infrastructure experts are distributed among teams, rather than in a single division, and pre-installing and promoting a streaming music service on up to 74.5 million iPhones a quarter would appear to require strong cloud infrastructure on the server side.

Apple has a long history in digital music going back to the introduction of iTunes. While only Apple’s board knows if Apple spent $3.2 billion on Beats for its profitable headphones business or its nascent music streaming service, this report appears to indicate that much of the software developed by Beats while it was independent has been ditched for code written by Apple. Beats headphones fit in very well with Apple’s main product lines — they’re complimentary high-margin luxury goods, whereas the Beats Music service might not have anything that Apple couldn’t have done itself, except for playlists curated by Dr. Dre’s friends.

As for pricing the service, Gurman’s report is less certain, but believes that the service could cost $7.99 a month, which would undercut the $9.99 price charge by Spotify, Google Play Music, and Rdio.

 

 

Five questions about HTC’s role in the Beats lawsuit

On Tuesday, Monster, the first manufacturer of Beats headphones, filed a civil complaint in California court alleging that Beats essentially swindled Monster when the two companies split in 2011.

It’s no surprise that [company]Monster[/company] and its CEO Noel Lee are suing Beats. It’s been clear that the separation wasn’t amicable since at least 2013. And Beats Electronics ended up being worth a lot — Apple paid around $2.5 billion for the company in May, plus another $500 million for the Beats Music streaming service.

Monster’s case may turn on the actions of another smartphone maker — [company]HTC[/company], which is mentioned 162 times in the complaint. Monster claims that the mechanism that allowed Beats to allegedly steal its intellectual property, suppliers and clients was based on a “change of control” provision in the original Monster-Beats deal which was triggered by HTC buying a majority stake in Beats in September 2011.

Monster says HTC purchased its $309 million stake in Beats for the sole reason of releasing Beats from its contract with Monster, a claim that on the surface appears to be backed up the odd saga of HTC divesting from Beats in 2012 (when Beats bought back a 25 percent share) and 2013 (when the Carlyle Group effectively bought the remaining HTC stake for $265 million).

HTC is named as a defendant along with Beats Electronics, its founders Dr. Dre and Jimmy Iovine, and Beats board member Paul Wachter.

If HTC helped Beats wrest a $3 billion business from its initial hardware partner, it raises a lot of questions.

Did HTC know it was helping Beats ditch Monster?

Monster alleges it did know, saying that HTC entered into its “sham” partnership with Beats “driven by greed” and with “full knowledge of the fraud.” Monster’s main evidence is remarks made by HTC board member David Yoffee this past summer.

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But a large part of Monster’s case is based on Beats having a pattern of ripping its partners off by taking their ideas and poaching their employees. From the complaint:

This is not the first time Iovine, Dre, and others have engaged in this course of
conduct. These misdeeds are not isolated transgressions; rather, they exemplify a pattern and
practice… (a) lure entrepreneurs, musicians, and electronic product developers with promises of growing a business as partners; (b) then extract the intellectual property, production, and supply mechanisms that underlie the venture and that create value

The complaint says that Beats did the same thing to its first design partner, Pentagram, and first manufacturing partner, Jibe Audio. Could Beats have treated HTC in the same way?

Still, the actual recorded financial transactions are odd. Why would HTC sell back half of its Beats stake only a year after the original partnership was announced — and only a month after the official close of the deal — while Beats was still growing so quickly?

It’s also possible that the HTC-Beats deal was initially struck in good faith, and eventually fell apart due to trouble integrating the two corporate cultures as well the timing: HTC took a stake in Beats at the beginning of HTC’s three-year decline.

If HTC was in on the deal, what did it stand to gain?

[company]HTC[/company] profited from holding part of [company]Beats[/company] for a little while. Though HTC reportedly turned a small loss when it sold half of its stake in Beats back to the company in 2012, it made $85 million when it sold its remaining stake in 2013. The company has had a very difficult past few years, and that $85 million helped it dodge quarterly losses.

Few commercially important products came out of the partnership. A few HTC phones — like the HTC Rezound — came with Beats branding, but the Beats contribution to those devices was mostly “audio tuning,” or a fancy equalizer. Some HTC handsets came with Beats-branded earbuds, but even those were quickly dropped.

At the time, Om Malik wrote that the initial deal looked like an attempt for HTC to buy cool:

It is paying $300 million for coolness and a brand, though it is not very clear how it allows the company to overcome problems that are much bigger than a few cool adverts can paper over.

Even if HTC was trying to buy cool, it didn’t do a great job. Beats-endorsing celebrities like Lady Gaga and LeBron James showed up at HTC launch events, but the Beats halo never rubbed off on HTC in a commercially meaningful way.

Another possibility is that HTC was going to be the partner for Iovine’s planned streaming service. Did Iovine mislead HTC about that partnership? Or was it really in the works, but then something prevented it from taking off?

Was HTC CEO Peter Chou involved?

HTC Rezound Launch Event

It’s hard to imagine a company taking a $300 million stake in another company without the CEO signing off. The complaint details emails from Iovine to Monster saying:

a. “I don’t know what to say. I’m meeting with peter the ceo of htc what doI say to him???? (sic)”
b. “I’m in Taiwan (sic) met with peter ceo of htc…this is me talking we have to get this deal done Friday if we don’t it all could unravel” (sic)

If HTC was never really a strategic partner to Beats, as Monster claims, what did Iovine discuss with Chou? At the time, Iovine told the Los Angeles Times that Beats was “going to be in business with HTC and they’re going to help us and we’re going to help them in every way they can.”

Making things more complicated is that one of the driving forces behind the deal, Matthew Costello, at the time was both HTC’s COO and on the Beats board. Costello is now the COO of Beats.

When did Apple enter the picture?

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One of Monster CEO Lee’s main claims is that Beats leadership told him there was no “liquidity event” on the horizon at the same time as [company]Apple[/company] was doing due diligence in order to purchase the company.

Iovine has said that the deal was in the works as early as 2012, and Apple SVP Eddy Cue has also said the purchase was years in the making.

Did anyone at HTC know about the potential Apple sale? If it did know, why would it sell back its stake for a return a fraction the size that it would have received if had held through when Apple purchased Beats Electronics for $2.5 billion? It’s possible that Apple wouldn’t touch Beats as long as HTC held a stake.

What’s next?

Beats launched a streaming service in early 2014, and it’s expected to form the core of a new Apple-backed music streaming service. The majority of Beats’ current headphone lineup owes little to the first-generation Monster versions — and in my opinion, display clearly superior build and sound quality. A Beats executive told me in 2014 that the company has spent a lot of time revamping its lineup and removing leftover design elements from its Monster-era headphones.

A Beats spokesperson declined to comment for this story. Requests for comment from Apple and HTC have not been returned. The lawsuit does not specify a specific dollar amount that Monster is seeking.

2014 was another bad year for music sales

Remember iTunes? Digital music downloads may not be dead yet, but the format is quickly following the CD in its decline. New numbers from Nielsen show that digital album sales in the U.S. declined by 9 percent in 2014, to 106.5 million, down from 117.6 in 2013. Including CDs, album sales even fell 11 percent. Digital song sales are also down 11 percent, with iTunes & Co. selling 1.1 billion tracks, down from 1.26 billion in 2013. But there’s also good news for the music biz: On-demand streaming was up 54 percent over 2013, with 164 billion songs streamed throughout the year.

Spotify’s new promotion: three months of music for just a buck

Still on the fence about music subscription services? Spotify would like to change your mind with some deep discounts: Three months of Spotify’s ad-free premium tier will cost new subscribers just $0.99, it announced Friday.

Spotify’s regular premium tier fee is $9.99 per month, but the service usually gives new users a one-month free trial. Under the new plan, this means that by signing up now they can save $19 over the course of their first three months. For Spotify, it means that users are starting to pay from the very first day, which could mean that they are less likely to cancel later on.

But there is also another side to this: Users who sign up for a free trial can’t be counted as paying users until the second month of their premium membership, whereas getting users to pay $1 for 90 days turns them into paying subscribers from day one. That looks better on paper, especially if Spotify was trying to raise more money, or if the company was trying to get itself in shape for an IPO.

Music streamer Deezer gets talkative with Stitcher buy

The French Spotify competitor Deezer, which recently launched in the U.S., has bought the on-demand internet radio and podcast service Stitcher. There’s no public price tag on the deal and, according to the Stitcher blog post on Friday, the acquisition wouldn’t affect its existing services. “You will still be able to use Stitcher the way you always have – on mobile phones, tablets, and in cars,” the San Francisco-based team wrote. Speaking of cars, Stitcher’s 35,000+ shows can be found in more than 50 models, it said in the post. Deezer has around 16 million monthly listeners, versus Spotify’s 40 million active users, but Deezer has greater reach, being available in 180 countries to Spotify’s 58.

The era of the playlist

Streaming services today increasingly are looking to personalized playlists to differentiate themselves and maintain user engagement.