Beats Music has begun to lift the curtain on its streaming music service, which it says will go live later this month. In a New York Times story this weekend, the company made its case for how it will stand out in an increasingly crowded digital music market that includes the likes of Spotify and Pandora as well as Silicon Valley powerhouses like Apple and Google.
Streaming music services in the U.S. have struggled to find a workable business model. Beats is marketing itself as a tastemaker, but its success may ride on a partnership with the squarest of companies: AT&T, the country’s second-largest wireless provider. Starting Jan. 21, Beats customers can either pay $10 a month directly, or they can pay for the service via their monthly smartphone bill from AT&T.
For AT&T customers with a family plan, the carrier will subsidize subscriptions significantly: Up to five customers can access Beats for $15 per month, total, compared to the $50 they’d pay to buy the service individually. AT&T customers will also get free trials of the service for 30 to 90 days, depending on their plans.
For Beats, this is a mainline to millions of AT&T subscribers, plus a payment model that piggybacks on a monthly bill they’re already paying. That’s important because paid streaming services have had trouble convincing American users to pay, and Beats isn’t offering a free version. Pandora subscriptions cost just $4 per month, and the company says it still doesn’t expect many people to pay. It hopes to make most of its money off ads.
Hitching a music service to a wireless carrier has worked in places like Sweden, where Spotify subscriptions can be included in smartphone plans. There, the percentage of people using paid streaming services are four times as high as those in the U.S., according to industry analyst Mark Mulligan.
Streaming services have reached several similar deals in the U.S., but not with both the subsidies and the scale. Spotify has deals with American carriers to allow people to charge their subscription fees to their wireless accounts, and Sprint markets the service. But the main service there is convenience. Metro PCS has offered discounted Rhapsody subscriptions to its customers, and Cricket Communications included its own streaming service, Muve, into its service plans. Verizon was reportedly in negotiations with Google this summer to bundle its streaming music service into its plans, but nothing has come of it.
Mulligan thinks such deals are the best chance for streaming music in the U.S. He’s skeptical that the AT&T deal will make a huge difference because he thinks it is not discounted deeply enough, but it’s better than anything its competitors can offer. “On the surface of it, this is a good high-profile partnership for Beats,” he says. “These deals are really a shot of adrenaline to the streaming services.”
Of course, it also has to given customers a reason to stay. Like its competitors, Beats will use an algorithm to create playlists. The most novel feature may be Right Now, in which users create playlists by telling the service things like where they are, what they’re doing, and what genre they’re in the mood for. At the same time, the company is playing up the high-profile musicians in the DJ booth. In part, this consists of a timeless pitch in the music business: deriding your competitors’ tastes. If you’re going to have an algorithm pick your music, don’t you want it to be Dr. Dre’s?
