For a couple of weeks, rumors have swirled that Beats Electronics, the headphone maker, will acquire MOG, a music subscription service similar to Spotify (except without all the users). While Jimmy Iovine, the chairman of Interscope Geffen A&M Records and a Beats co-founder, declines to confirm the rumors, he’s clearly ready to try his hand at the music subscription game.
“We are looking at this area,” Iovine says. “Right now, subscription music online is culturally inadequate. It needs feel. It needs culture. What Apple (AAPL) has in the downloading world is very, very good. But subscription has an enormous hole in it, and it’s not satisfying right now.”
The smartphone maker HTC (2498:TT) owns 51 percent of Beats, thanks to a $300 million deal last year, and could lend some financial and hardware heft to an online music service. Exactly what would set such a service apart from competitors remains a mystery. “I can’t show the magic trick,” Iovine says. “But right now the services are utilities. We only see things in a complete thought.”
Totally clear, right? Iovine contends that music subscription services have been lackluster and as a result, failed to pull in the hundreds of millions of consumers needed to make them a real cash cow for the recording industry and technology companies.
He’s tried before to balance the wants and needs of the record industry with those of the technology crowd, which sometimes pursues strategies that aren’t exactly, uh, legal. In 2004, Iovine joined Carly Fiorina, then-chief executive officer of Hewlett-Packard (HPQ), on stage at the Consumer Electronics Show in Las Vegas to deliver a screed against pirating music. This was back in the days when HP resold Apple’s iPod and vowed to distinguish its own devices by having the strongest digital rights management technology of any hardware company. That strategy didn’t exactly win it lots of new customers.
These days, though, Android smartphone makers such as HTC are desperate for services that can help set their hardware apart. Peter Chou, CEO at HTC, is “a great, great cat” who “believes that we know how to harness popular culture,” Iovine says. “And also execute on how to make the experience so it’s good for the record industry and the artists and the cellphone industry.”
HTC would like nothing better than to use Iovine’s magic trick to restore some of its luster and take back market share from Samsung (005930:KS) and Apple.