Apple’s acquisition of Beats and Google’s buyout of Songza signifies both companies’ intention to enter the modern music industry. The popularity of music streaming services has boomed over the last couple of years, demonstrating the shift from CD’s and paid downloads, to curated playlists and the need to provide music on demand.
In 2013, revenues from streaming and subscription services leapt 51.3 percent globally, valuing the industry at $1 billion for the first time. It’s estimated that more than 28 million people worldwide now pay for a music subscription, up from 20 million in 2012 and just 8 million in 2010. Not to be left behind, major tech players are taking action. But which company (Apple or Google), made the better deal?
Here’s a breakdown of the two acquisitions:
|
Apple’s Acquisition of Beats |
Google’s Acquisition of Songza |
| Paid $3 billion, with only $500,000 going to Beats Music and rest going to Beats Electronics. | Paid $39 million, with entire payment going to music (Songza does not have an electronics division) |
| Net value of music division: $461 million | Net value of music division: $39 million |
| Most value comes from exclusive licensing deals for Beats Music | Value comes from Songza product itself, not licensing deals |
| Although there is an option to get curated playlists, Beats mainly focuses on computer-selected lists and user-generated lists | Songza provides users with playlists that are hand-selected by music critics and DJs |
| Apple also acquires two big names: Dr. Dre (musician) and Jimmy Iovine (industry trend expert) | Google acquires one big name: Elias Roman (CEO of Songza) |
| Product will not integrate with other Apple products (iTunes possible exception) | Product may integrate with Google Now to create playlists based on the weather and surrounding environment of the user |
| Product uses traditional advertising methods and paid subscription model | Product uses corporate sponsorship of playlists to enhance mobile user experience |
From a financial standpoint, Apple seems to have made the better deal because it purchased several services, including the Beats Music service, while Google only acquired Songza as a lone entity. However, Songza’s ability to integrate with other Google services, and its reliance on corporate sponsorship, may help it edge ahead in the music streaming war. What do you think?
