Pandora and Sirius XM Survive Beats of Burden

Beats Music gets off to an uninspiring start.

Rick Munarriz
Rick Munarriz
Apr 22, 2014 at 1:30PM
Consumer Goods

Beats Music was a late arrival to the streaming music scene, and it's paying the price. Billboard is reporting that the celebrity-backed premium platform that launched in January isn't doing so well three months after the buzz has died down.

Backed by musical celebrities Dr. Dre, producer Jimmy Iovine, and Nine Inch Nails' Trent Reznor, the streaming service hasn't been as successful as the parent company's Beats headphones. Despite springing for a flashy Super Bowl commercial and a bundling deal with AT&T, the once ambitious platform that relies more on celebrity-curated playlists than Pandora's (NYSE:P) algorithmic mastery to foster music discovery isn't attracting a lot of paying customers.

Beats tells Billboard that "millions of people" are trying out the service, exceeding internal projections, but label sources estimate that the number of folks sticking around to pay $10 a month for the platform number only in the "low six figures."

We're just 100 days in, but "low six figures" is not a good sign given Beats' pedigree, the hype that it was starting to build since late last year, and the strong marketing push earlier this year. If that wasn't enough, the game-changing deal with AT&T's "family" plan, where as many as five log-ins across 10 different devices can stream at the same time for just $15 a month, should've drawn a crowd. It didn't, and it leads one to wonder if Spotify will be any more successful through a similar deal that it will reportedly announce next week through a different wireless carrier. 

Pandora gets criticized for attracting freeloaders, but at least 3.3 million of its 75.3 million active listeners are paying customers. Spotify has millions of premium accounts. Sirius XM Radio (NASDAQ:SIRI) closed out 2013 with more than 21 million self-paying subscribers.

Beats Music had to know that it wasn't going to be easy. It was diving into an entrenched market where several players already had millions of paying customers apiece. Music celebrities on board, well-reviewed interfaces, and unique situational playlists just aren't enough.

"When you're this ambitious you can also crash just as hard," I wrote three months ago. "Beats Music won't survive as a niche service. It has too many name-dropping connections to settle for less. It will either be a hit out of the gate or be shuttered within a year or two if it's not one of the leading platforms."

It's still on the clock, and there's certainly time -- and money -- to go through a reinvention or two before time truly runs out. For now, it seems as if Pandora, Spotify, and Sirius XM can sleep easier, but we definitely can't write off Beats Music just yet.