What Apple's Hiring of Zane Lowe Signals for the Company's Music Strategy
Apple's hiring of BBC Radio 1 host Zane Lowe could mark a huge shift in programming strategy for Beats Music and iTunes Radio. A move away from nameless programming toward programming featuring brand-name personalities would give Apple's streaming products the mainstream appeal they need.
Lowe was short on specifics in an interview with The Guardian. "I want to be able to bring that human experience, that we all had growing up with record stores, but actually make it something you can listen to in a world where you're left to your own devices," he said. One thing that's known is Lowe will work in Los Angeles, the location of Beats Music (located in Culver City, specifically) rather than the Apple headquarters in Cupertino.
Although vague, Lowe's statement echoed those of Beats co-founder Jimmy Iovine when he discussed the streaming service's approach to delivering music to customers. "There's an ocean of music out there," Iovine said at a technology conference in February 2013, one of many expressions of disappointment with streaming services listening experience. "And there's absolutely no curation for it."
Apple is getting Lowe's name recognition, strength as a radio presenter and extensive experience interviewing musicians. His hiring could -- and probably should -- be the first step in increasing the starpower of the content for Beats Music and iTunes Radio (or whatever these services will be called in the future).
You could be forgiven for thinking Apple could effectively rely solely on its hardware and software. Apple has a unique and powerful combination of hardware the attendant operating systems (Mac OS X and iOS) alongside its digital music services. The hardware and operating systems create a distribution system for the streaming services. Partnerships with auto manufacturers extend Apple's reach to a natural environment for audio services. Apple also has 800 million credit cards on file, although not all of them have or will be used to purchase or access music.
But Lowe's hiring helps Apple address a problem: The Beats Music approach hasn't made an impression on consumers. From the user's perspective, Beats Music's various programmers, who were chosen for their keen knowledge of specific genres, are no different than the nameless, faceless playlist curators at Spotify, Deezer, Rhapsody and other streaming services. Beats Music takes the most "human" approach of all streaming services, employing a cadre of programmers that create playlists for particular tastes. Beats Music does not hide the identities of these editors -- they are named in numerous articles and can be found on LinkedIn -- but the service does hide their identities within its application.
Apple also needs well-known personalities to help drive adoption. The precedent? SiriusXM Satellite Radio.
Like Apple, SiriusXM has a powerful combination of assets; satellite technology and a distribution network of automobile manufacturers, used car sellers and original equipment manufacturers. This has allowed SiriusXM to reach consumers where they most enjoy listening to radio. Nearly 3 in 4 people surveyed prefer to listen to some form of radio in the car, according to the Edison Research/Triton Digital "The Infinite Dial 2014" report. Content is also a key. SiriusXM offers not just music channels but a range of talk radio, sports and news programming.
SiriusXM also has personalities. Big names help drive people to the service, keep them listening and keep them subscribing. The most well-known personality at SiriusXM is Howard Stern, whose current contract, which expires this year, is believed to pay $80 million a year (his previous contract paid him $100 million a year in cash and stock).
Aside from Stern, SiriusXM has a collection of radio stations built on brand names: Pearl Jam Radio, E Street Radio featuring the music of Bruce Springsteen, Underground Garage with Little Steven, the Jimmy Buffet-themed Radio Margaritaville and Tiësto's Club Life Radio. Even the stations with brand names have DJs people can become familiar with over time.
This combination of platform, distribution, content and personalities has worked wonders for SiriusXM. According to its 2014 earnings release, the company's average revenue per user, or ARPU, was $12.48 last year. It finished the year with 27.3 million subscribers (22.5 million were self-pay subscribers and 4.8 million were paid promotional subscribers for which the company receives a payment from the car manufacturer), revenues of $4.18 billion and net income of $493 million.
Exactly how Apple will utilize Lowe is mere speculation at this point. One can reasonably speculate that Lowe will do more than create playlists. He could record segments and interview artists. Yes, talking on a music streaming service. Apple's acquisition of podcast aggregator Swell is evidence the company already wants to incorporate spoken word to its on-demand streaming services. He could create a live music station that streams music 24/7. On-demand services haven't swayed from their missions of providing personalized music, but they should consider integrating live radio stations into their on-demand offerings. He could bring new programming and excitement to iTunes Radio.
Lowe could be the first of many hires. Apple seems to recognizes that big names will be required to make its streaming services successful. And if the hiring spree turns into an arms race, with companies bidding up the price for DJs and other personalities, Apple is one of just a few companies with the proper resources. Thus, taking the SiriusXM approach to hiring personalities could create great music services while crowding out smaller competitors.
The value of Stern is instructive here. Stern helped Sirius -- this was before the merger with XM Radio -- exceed its projected subscriber acquisition. By 2010, Stern was responsible for between $312 million and $390 million of SiriusXM's annual revenue, according to one estimate. That contract cost SiriusXM $500 million over 5 years, but Stern was worth it. The question now is how much top talent is worth to Apple.
Lowe could be the first hire of many. Apple apparently recognizes the value of brand names in programming, and there are numerous personalities and artist partnerships worth pursuing. If Apple is thinking big, it should consider hiring the likes of Ryan Seacrest for its music programs and Ira Glass, of "This American Life," for its podcast efforts. And if the hiring spree turns into an arms race, with companies bidding up the price for DJs and other personalities, Apple is one of a few companies with enough resources to remain standing.