Can Beats Music Change the Tune at AT&T?

AT&T has agreed to subsidize Beats Music in an effort to keep more data subscribers.

Jan 21, 2014 at 11:00AM

AT&T (NYSE:T) wants you to sign up for the new Beats Music streaming service. The new service will compete with Pandora Media (NYSE:P), and AT&T has decided to give it a boost by allowing customers to pay for the premium music streaming service through their regular phone bill. What's more, Family Plan customers will be able to add up to five Beats accounts at a subsidized price of just $15.

AT&T's plans are clear: It wants to increase its subscribers data usage and charge them more for it. It's another ploy to prevent subscribers from moving to unlimited data plans at T-Mobile US (NASDAQ:TMUS) and Sprint (NYSE:S).

Beatsatt
Source: Beats Music.

A big name partner for Beats
Beats Music launches on Tuesday, and will go head to head with Pandora and Spotify in the increasingly crowded streaming music space. Unlike the competitors, however, Beats is only offering a premium option with no ads.

Pandora offers a premium option, Pandora One, which costs just $4 per month or $36 per year compared to Beats and Spotify's prices of $10 per month. The Internet radio leader doesn't expect subscription revenue to make up a huge portion of total revenue, especially since it lifted its listening limit on mobile devices.

For Beats, the deal with AT&T gives it premier access to the wireless carriers 100 million-plus subscribers, which ought to help early adoption. Spotify offers a similar deal wherein wireless carriers can tack on its service to its subscribers' phone bills. The model has proven quite successful in the company's home country, Sweden, and Sprint markets the service in the U.S.

Moreover, AT&T has agreed to subsidize multiple accounts, providing a discount as high as 70% off. Not only does Beats get a strong brand to partner with and a pipeline to 100 million subscribers -- 50 million of which use smartphones -- but AT&T is going to make it less expensive for customers to try the service.

It's like a smartphone subsidy
AT&T is willing to offer such a high subsidy to its subscribers because it makes money selling its tiered data plans. Streaming music is bandwidth intensive, and AT&T figures it can move users of the Beats service to a higher data-cap. Charging for more data is the same reason wireless carriers subsidize smartphones.

The agreement with Beats is AT&T's latest act to counter T-Mobile's and Sprint's unlimited data offer. Although both carriers will throttle the speed down to their 2G networks after a certain limit, neither charges a fee for going over the limit like AT&T does.

T-Mobile and AT&T have both aggressively attacked the smartphone market lately. T-Mobile offered to pay for early termination fees for any carrier earlier this month, while AT&T made a counteroffer to consumers that anyone switching from T-Mobile could get up to $450 in credit for their phone bill. So far, T-Mobile appears to be winning the war, adding nearly 1 million subscribers in the fourth quarter while AT&T is treading water.

Streaming more customers
Although Beats Music is an unproven platform for music streaming, the brand has had tremendous success with its high-end headphones and portable speakers. It has a strong brand identity that AT&T can market to its subscribers. Whether or not it keeps them around, when are there are a plethora of free and premium music streaming options available, is another question.

AT&T plans to offer exclusive free trials of up to 90 days to get people hooked, and longer trials do tend to be more effective than shorter ones. As a result, Beats Music may see a quick uptake in the number of users similar to the sudden popularity of Apple's iTunes Radio when it was first released. Nonetheless, the product will have to live up to the hype. If it does, both Beats and AT&T stand to gain.

More compelling ideas from The Motley Fool
Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Pandora Media. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers