• Newsletter Issue #757

    June 2nd, 2014


    Apple couldn’t have orchestrated it better. For some three weeks, the topic of discussion, other than what was expected at the WWDC, was all about the rumor of acquiring a boutique headphone company, Beats Electronics, for over $3 billion. When the deal was finally announced last Wednesday, the purchase price was a little less: $2.6 billion cash, and $400 million in stock. Regardless, you’ll still be able to buy those fancy, or at least expensive Beats headphones in several pretty colors, but they might sound better. The company has been busy updating some models with a more neutral sonic signature that’s no longer quite as bass heavy.

    But the bigger part of this purchase is Beats Music, a streaming on-demand service that favors human over computerized curating, which supposedly delivers a more compelling experience. With Apple muscle behind the service, you wonder how quickly a quarter million subscribers will jump to millions, thus putting Apple in close competition with the likes of Pandora and Spotify. That surely is one of the goals, and iTunes Radio hasn’t quite set the world afire despite having millions of users.

    There are also two new employees who have music industry clout — Jimmy Iovine and Dr. Dre — and that might be the biggest advantage of all. But Apple’s long-range plans are not always obvious, so we’ll have to see how it all works out. But continued brisk sales of Beats headphones will surely pay off the cost of this deal in just a few years. And no, despite the claims of some commentators, I do not expect that the ever-outspoken Iovine will jump ship in a few months. Apple would never have agreed to this deal if it wasn’t a long-term proposition.

    In any case, on the latest episode of  The Tech Night Owl LIVE, commentator Jeff Gamet, Managing Editor for The Mac Observer, discussed the Apple/Beats deal, offered predictions for product intros at the WWDC going beyond iOS 8 and OS 10.10, and his reactions to Microsoft’s Surface 3 tablet/laptop or whatever it is.

    CNET’s Cheapskate blogger, Rick Broida, explained how you can save money with a low-cost wireless carrier, and some of the pitfalls to watch in picking the best service for your needs.

    You’ll also heard from author/columnist Bob “Dr. Mac” LeVitus, who, as a musician, offered his unique viewpoint about Apple’s purchase of Beats Electronics. He also focused on the rumors about the introduction of app technologies for the connected home at the WWDC.

    On this week’s episode of our other radio show, The Paracast: Gene and Chris present wildly outspoken paranormal researcher George Wingfield, who has an extensive background following and investigating such ongoing mysteries as crop circles, cattle mutilations, UFOs, strange disappearances and so on and so forth. In taking about cattle mutilations, he’ll reveal how he once worked as a cowboy in Arizona, and was actually involved in what he regards as mutilation. He’ll also explain how he became a member of the infamous UFO “aviary,” a group of people said to be involved in government disinformation. You’ll also hear his responses to listener questions.

    Now Shipping! The Official Paracast T-Shirt! We’re taking orders direct from our new Official Paracast Store, where you can place your order and pay with a major credit card or PayPal. The shirts come in white, 100% cotton, and feature The Paracast logo on the front. The rear emblem states: “Separating Signal From Noise.” We’ve also added a huge selection of additional special custom-imprinted merchandise for fans of our show.


    There’s something to be said about inserting one word in a headline, “Apple.” Sure the article may be about fruit, but most of you expect it’s about Apple Inc. The upshot is that the story gets more traction regardless of the value of the content, and that’s true even if it contains little more than boneheaded complaints, misleading claims, or outright falsehoods.

    So take a story from a certain national newspaper entitled “Developers still make more money with Apple apps.” That’s true as far as it goes, but instead of actually explaining why the App Store is different from Google Play, and why developers stand to earn more money, the story largely repeats misleading memes about the alleged iOS versus Android “war.”

    Indeed, can you even call it a war or just two companies striving in different ways to be successful in the current marketplace? You know, from reading the article, where the author stands.

    You only have to read the first paragraph to see its direction, that “The Android smartphone platform months ago won the war vs. Apple’s iPhone, dwarfing it in marketshare.”

    The marketshare statement is true as far as it goes, but does it truly represent a victory or just a hollow achievement that really doesn’t enrich many companies, and that includes Google?

    As most of you know, Apple isn’t actually engaged in a war of dominance with Android. iPhones only compete in the high-end of the segment, where Apple does actually does better in sales and profits. If you define the marketplace with context, you’ll see what I mean.

    In contrast, most of those Android smartphones are cheap junk, underpowered and glorified feature phones sold in huge quantities for little or no profit. As with the PC market, Apple doesn’t sell gear at or near cost. So when you also consider profits, Apple remains number one, far ahead of Samsung, which is the current global leader in mobile handsets.

    Samsung would no doubt love to achieve larger sales off big-profit Galaxy smartphones. But even the latest and greatest Galaxy S5 isn’t doing so great according to published reports. In recent quarters, profits have been flat.

    But it’s not that the article totally avoids the truth, which is that “Research firm App Annie says Google surpassed Apple in downloads in 2013 but that developers generate two times more in revenue on iOS than Android.”

    There’s little effort to explain why “the value of the user is still higher in iOS.” One key reason is that iOS apps are carefully curated, which means you stand a better chance of installing something that actually does what it’s supposed to do. The lineup isn’t polluted with cheap knock-offs and ringtones.

    When it comes to apps that are available on both platforms, the iOS version is often better because developers are free to use the latest and greatest features. They can depend on the fact that, with a new OS release, most users with compatible hardware will upgrade within a few months. In contrast, the Android landscape is littered with severe fragmentation. If you buy a cheap handset, you will be saddled with an older OS that will never be upgraded. Underpowered hardware means that apps may well deliver poor performance, assuming they work at all.

    The article goes on to discuss Face-book’s $19 billion acquisition of WhatsApp and other recent app purchases to, I suppose, demonstrate the potential for developers. But these deals are extremely rare, and they are thus irrelevant to the average developer who merely wants to build a product line that has the potential to generate a consistent income that’s sufficient to pay bills.

    Even then, many developers shouldn’t quite their day jobs. It’s rare that ongoing income is enough to fund a full-time business, unless the software company has a full lineup of apps. Sure, there are a few that make it into a Top 100 list, and create instant millionaires, but that’s not a given.

    Still, an iOS developer has a better chance to succeed. With Android, the environment is filled with free junk, and the tens of millions of customers who bought cheap gear may not be inclined, or able to afford, to pay for an app. That’s hardly a customer to depend on to pay the bills. So why do you think iOS attracts better quality apps that generate higher incomes?

    But when it comes to online pundits who want to create false impressions to satisfy a preconception, facts don’t matter. They may want to believe that iOS is toast because of Android’s market share, and they cannot see the nuances. Apple continues to make high profits, and many mobile handset makers are barely surviving. Why do you think Google was forced to sell Motorola Mobility to Lenovo for a fraction of what they paid for it?


    First, let’s look at the difference between Beats Music or Spotify and iTunes Radio or Pandora. The first two, and competing subscription services, are on-demand. That means you can actually select individual songs to play and even download from libraries of up to 20 million songs. The last two are essentially online radio stations, which means they offer playlists intended to match your preferences, with songs chosen based on computer algorithms. So it’s all about streaming and not downloading.

    If you’re picky, you’ll probably prefer the on-demand scheme, which offers unlimited downloads of your selected songs. If you’re more casual about your musical tastes, and typically keep your radio on in the background, the radio streaming services may be your cup of tee. Disclaimer: Both my radio shows are featured on another streaming radio service, TuneIn.

    Let me tell you that I’ve given iTunes Radio a try, but haven’t quite taken to it. Here’s one reason: I chose The Beatles Radio as my first playlist. While you’d expect most of the selections to feature the Fab Four and their solo recordings, that’s not exactly true. You also get a healthy, and not always wanted selection of Beatle covers, the tunes song by other artists, plus songs by artists close to the Beatles, such as Eric Clapton and Billy Preston. There are also artists who influenced the Beatles, such as Chuck Berry and Little Richard.

    But that’s not what I wanted, and the other Beatles options offered by iTunes Radio were no more suited for my tastes. Unfortunately, unlike other canned playlists, there’s no option to specify the tunes you don’t want to hear, so you’re stuck with the choices made by Apple’s computerized algorithms for better or worse. Worse, you are limited to skipping up to six songs per hour, which may be an artifact of the licensing terms, but it hardly benefits the customer.

    iTunes Radio, though, is free if you can tolerate some advertising. If you subscribe to the $25 iTunes Match service, where you can store up to 25,000 songs in the cloud, there are no ads. Pandora’s alternative is $3.99 per month, or $36 per year, to ditch the ads.

    In contrast, after the free trial period, on-demand services require a monthly payment. The standard Beats Music deal is $10 per month after a 14-day free trial. As an AT&T subscriber, however, I opted for the Family plan that offers a 90 day free trial, after which it’s $14.99 per month and supports up to five users and 10 devices on your wireless account. You can also choose an individual plan for $9.99 per month after a 30-day trial, supporting up to three devices.

    But remember that, when or if your subscription expires, even if you miss a payment, your downloads are history. That’s the huge difference between owning and subscribing, and Steve Jobs often said people really want to own music. But that’s not exactly happening nowadays, as sales of digital music are flat, while the streaming services are growing.

    Of all the radio and on-demand services, the Beats Music advantage is that it has an estimated 200 curators, consisting of musicians and DJs, to supplement the computers. So you supposedly get a more accurate reflection of your musical tastes.

    Beats supports iOS, Android and Windows. There is no Mac app as yet, although you can simply access your music from your browser. As the closing date of the Apple/Beats deal approaches however, you should expect to see iTunes integration, or perhaps a separate app for your Mac. However, Apple has indicated that support for other platforms will remain, which essentially means Beats Music will become the very first Apple app on Android.

    The Beats app interface is not as simple or as elegant as Apple’s, and that, too, is likely to change as Jonathan Ive and crew have their way. Meantime, the initial setup process, involving the selection of your favored musical genres, seems simple enough. But my Beatles choices were not filled, because their catalog is not yet on Beats; only the solo studio recordings from Paul and Ringo were readily available when I ran the search tool. That, however, should change once the Apple deal is done.

    Meantime, I was pleased to be able to select individual tracks and albums from the selections available, and even the canned playlists seemed more in tune with my tastes. Despite being terribly overplayed over the years, I enjoyed reacquainting myself with Fleetwood Mac’s best-selling “Rumours” from start to finish. Unlike many albums, there wasn’t a clunker in the bunch.

    Over time, Beats Music genuinely appears to learn your tastes, conveying the feeling that there’s actually some intelligence behind the scenes that respects the user. iTunes Radio, for all intents and purposes, is brain-dead in comparison.

    Beats Music audio quality appeared comparable to iTunes Radio on my iMac, which has Bose speakers, and on my Kia’s audio system. Apple offers 256K AAC, whereas Beats is pegged at 320K MP3.  Still, I have plenty of time to decide whether to continue to use the service after the trial period is over. It’s very possible I’ll downgrade to the individual service unless Mrs. Steinberg wants it on her iPhone.

    For now, Beats Music has a mere 250,000 members according to the current claim. But when Apple’s marketing muscle enters the picture, you can expect that number to swell real fast. Even the publicity surrounding Apple’s purchase may cause membership to soar. Indeed, it’s very possible Apple can overwhelm the competition in the marketplace. While both Pandora and Spotify tout 10 million customers, the real question mark is whether these businesses can sustain themselves when the venture capital runs out. Apple, in contrast, can just break even and be satisfied, since the real profits come from hardware sales, and that will soon include Beats headphones.


    The Tech Night Owl Newsletter is a weekly information service of Making The Impossible, Inc.

    Publisher/Editor: Gene Steinberg
    Managing Editor: Grayson Steinberg
    Marketing and Public Relations: Barbara Kaplan
    Worldwide Licensing: Sharon Jarvis

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