Apple's high-profile acquisition of Beats Music has brought the tech giant's future in the streaming and recommendation music business into sharp focus. As the company begins to incorporate the Beats team and products under the Apple umbrella, new information from two Apple sources suggests that, ahead of the Beats deal, the iTunes team was plagued by shortsighted management who ignored competitors while engineers used other streaming products rather than Apple's.
Past and current employees in the company with direct knowledge of iTunes and Apple's services Ping and iTunes Radio told BuzzFeed that Apple engineers involved with those products often preferred to use Spotify and Pandora. "Everyone's excuse was it's because we work on iTunes, running and closing the app after every code change," one source said. "But it's really because Spotify has all the free music with a real social platform." In their personal time, sources said, employees used Spotify and Pandora.
When it launched in 2003, iTunes revolutionized the digital music industry by offering songs and albums à la carte. But it's been largely criticized in recent years as it has struggled to compete with newer streaming services. In 2010 the company launched Ping, a now-defunct social networking and recommendation music service, and just last year entered the streaming market with iTunes Radio, which has received mixed reviews.
Ping, sources agreed, was designed to prompt users to click and buy songs, rather than to facilitate the sharing of playlists or discussion. "When Steve Jobs announced Ping everyone was really excited for a music network," one source said. "But the biggest reason why Ping failed was because Apple was not interested in making a network — they were interested in making a purchase pusher." Ping was quietly shut down in 2012.
Like Ping, the development of iTunes Radio suffered from a shortsighted strategy, sources said. "Pandora is an awesome radio that blows iTunes Radio out of the water. Seriously, iTunes Radio sucks and it sucks because of Apple's arrogance," one former, mid-level employee said. "I was floored by the decision-making skills by management over and over again."
Apple employees confirmed that management actively ignored iTunes' streaming competitors, with some managers refusing to open or use Spotify. One source said that as recently "as last year," some members of management didn't even know that Spotify was an on-demand streaming service, assuming it was just a radio service.
"The management in particular were pretty much tone-deaf in what Spotify was and that's why they're panicking now," the source said. "They didn't understand how Spotify worked, which is why they thought iTunes Radio would be a Spotify killer." Other managers referred to Pandora as a nonthreatening "dead company" because of its lack of revenue.
Recommendations have been a problem for Apple and iTunes. According to a source familiar with the development of iTunes Radio, Apple thought it could use a consumer's iTunes purchase history to determine what they'd want to listen to on iTunes Radio. Employees agreed that Apple didn't seem to have an interest in how the song collections created by iTunes Radio sounded, or whether they were cohesive. As a result, users trying to create an iTunes station of '90s hip-hop might end up hearing a song more than once, or some random show tunes and country songs, culled from their recent, sporadic purchases.
In May, Apple SVP Eddy Cue claimed that free, ad-supported iTunes Radio has 40 million listeners, while Beats co-founder Jimmy Iovine said that at four months old, Beats Music has 250,000 subscribers. Spotify claims to have 40 million active listeners, and has signed up 10 million paid subscribers.
Apple has rarely looked outside for help, and when news of the Beats purchase broke, many wondered why they'd do so now. But after years of what employees called arrogant indifference to streaming, it seems that with Beats, Apple will be gaining a much-needed human touch, as well as a deep understanding of the music industry from the likes of Dr. Dre and Trent Reznor, and particularly charismatic deal-maker Jimmy Iovine.
"They're having trouble capturing the younger generation," the former employee said. "The Apple coolness is kind of fading away." Apple's commitment to taste has historically been considered its biggest strength. Will a renewed focus on that asset, with help from the cool guys at Beats, be enough for iTunes to challenge Spotify?
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A request for comment from Apple was not immediately returned.