1 Acquisition Apple Inc. (AAPL) Doesn’t Want to See: Samsung Buying Pandora Media Inc (P)

Page 1 of 3

When Apple Inc. (NASDAQ:AAPL) first conceived the iPhone, one concept was to use the cumbersome iPod click wheel as the central control of the phone. After using the touchscreen interface that Apple finally decided upon, that idea seems ludicrous. However, it does show how intertwined the iPod and the iPhone have long been.

When the iPhone was first launched, Steve Jobs stood in front of a sign that had three soon-to-be iconic buttons behind him: “iPod, Phone, Internet.” The inclusion of the iPod was just as important as an access point to holding a full-featured and easy-to-use Internet in your hand.

Apple Inc. (NASDAQ:AAPL)Yet the nature of how music is consumed is changing. Streaming services such as Pandora Media Inc (NYSE:P) and Spotify might struggle to become profitable, but they’re more and more popular with users. Apple Inc. (NASDAQ:AAPL) has taken note of the trend and is reportedly working on a Spotify competitor. Yet while Apple works on its homegrown competitor in the space, the cagiest move of all could be Samsung making a move for Pandora Media Inc (NYSE:P). Let’s take a look at the digital music space and see why a Samsung and Pandora tie-up could make sense.

Digital music: Apple’s domain
Apple rode booming iPhone sales to more success in the digital-music world. While gaudy numbers about the billions of apps downloaded began to steal the show at Apple Inc. (NASDAQ:AAPL)’s presentations, its dominance of music continued expanding. Competition over digital-music sales has increased markedly in recent years, with Amazon.com, Inc. (NASDAQ:AMZN) aggressively pricing digital music and building out its cloud player. Likewise, after relying on third-party music services such as Amazon when Android first launched, Google Inc (NASDAQ:GOOG) unveiled Google Music in 2011 to better compete with iTunes as a central music hub.

Yet this increased investment in the digital-music space from competitors hasn’t done much to dent Apple’s dominance. Asymco’s Horace Dediu recently pegged Apple Inc. (NASDAQ:AAPL)’s iTunes as paying out $3.4 billion in digital payments to publishers in 2012 — 60% of industry totals. That’s consistent with past research from NPD, which has shown iTunes maintaing roughly 66% of U.S. digital sales.

With Android now controlling roughly 70% of worldwide smartphone sales, it’d be easy to conclude it’ll begin chipping away at Apple’s music dominance. Yet market-share figures don’t always tell the full tale. Apple Inc. (NASDAQ:AAPL)’s iOS has higher market share in countries like the United States, where legal digital-music sales are much higher. Not only that, but getting the right licensing to sell music globally is a time-consuming affair. Google Music launched as U.S.-only, finally moving to Europe just last November. Apple has a large head-start in setting up global music sales.

Not only that, but Apple Inc. (NASDAQ:AAPL) has a dominant grasp on peripherals such as sound bars and alarm clocks to turn smartphones into music systems. Walk into a Bose store, and you’ll find nearly every piece of audio equipment working in conjunction with an iPod or iPhone.

Music matters beyond music sales
While Apple probably collected roughly a billion in sales for its cut of iTunes music sales last year, that’s never been the value of the service to the company. Instead, the real value has been the value to the overall Apple platform. Users who have large music and media libraries centered on iTunes have a strong reason to stick with new Apple products, whether they be a tablet, phone, or MP3 player. The $4.3 billion in gross revenue Apple collected last year in music sales stacks up nicely against the $118 billion the company collected in iPad, iPhone, and iPod sales in fiscal 2012 alone.

This all matters because music is a key component of mobile-device usage. Research from NPD shows that 56% of smartphone users and 40% of tablet users listened to music on their devices. On smartphones, 39% of listeners play music on a daily basis.

Page 1 of 3
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!