Recently, TechCrunch reported that Apple (NASDAQ:AAPL) is preparing to wind down Beats Music. The report cites five sources, each indicating that the company plans to sunset the streaming music service. In a way this makes sense, as having both iTunes Radio and Beats Audio led to a company that was competing with itself for streaming consumers.
The article also reports that engineers from Beats Music have already been moved off the product to other projects at Apple, including iTunes. For analysts, this confirms what many have surmised since the deal was announced: This deal was a way for Apple to bolster its accessories business line and to bring Dr. Dre and Jimmy Iovine on board.
It's important to note though, a report from Re/Code citing Apple's PR rep, was published after the TechCrunch article claiming it is false. Unfortunately, no additional detail was provided, but we can likely assume Apple plans to integrate Beats Music with iTunes that would minimize the focus on Beats Music.
Words, but no action
Tim Cook widely praised Beats Music when the deal was announced by stating that "we love the subscription service that they built, we think it's the first one that really got it right." However, in a subsequent employee memo, Cook appears to have tipped his hand as to his intentions with Beats Audio by saying [emphasis added]:
Both Apple and Beats believe that a great music service requires a strong editorial and curation team, and we will continue to expand what we do in those areas. The addition of Beats will make our incredible iTunes lineup even better, extending the emotional connection our customers have with music.
In addition, it appears that Apple continued to treat Beats Music as a third-party app by not including it on Apple's new iPhone 6 and iPhone 6 Plus iterations. While we don't know how Apple plans to integrate Beats Music into iTunes going forward, anything is better than what has been done so far.
Competing streaming services made no sense
One can't blame Cook for potentially integrating Beats Music instead of using it as a separate entity. Quite frankly, Beats Music never quite fit with Apple's plans. Apple appears to be more interested in using its iTunes Radio as a way to bolster its iTunes Store than as an actual revenue driver in its own right.
Although Apple has a paid, ad-free version of its iTunes radio, the service requires a $25-per-year subscription to iTunes Match -- a service that predated iTunes Radio -- rather than a new fee for the service.
Beats was one of the few music-streaming services that didn't have a free, ad-supported version. For $9.99 a month (or $99.99 a year), users were treated to Beats curated playlists based on mood and location. Its defining feature, "the sentence," allows users to generate a quick playlist by updating four variables: a place, a person, an activity, and music genre.
Still, it appears Beats Music service never caught on in a meaningful way. In May it was revealed that there were a mere 110,000 accounts, and that included a 90-day free promotion. Compared with the other streaming services -- Pandora, Spotify, and iTunes Radio -- that boast users in the 10 million-plus range, you can see how Apple would potentially want to direct its attention elsewhere.
If true, I applaud Apple for integrating Beats Music with iTunes. At best, Beats Music was redundant; at worst, the service was antagonistic for Apple's iTunes Radio product and strategy. It appears Apple acquired some interesting technologies with the Beats Music acquisition, and it will be interesting to see whether they make their way into iTunes Radio.
However, the real reason Apple bought Beats was for its headphone business and to bring Dr. Dre and Jimmy Iovine on board; shutting down Beats Music won't change either of those things.
[Editor's note: Edited original article claiming Beats Music was being completely wound down]
Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Pandora Media. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.