APPLE OWNS $246BN IN CASH.
WHAT’S IT WILLING TO SPEND ON RULING MUSIC?
Apple has enough spare money to buy the entire music business. Just like that.
According to its latest financial results, Apple Inc currently has a fictional-sounding cash position of $246.1bn – 94% of which ($231.3bn) is held outside the US.
Judging by market caps and public valuations, Apple could snap up Vivendi ($23bn), Sony Corp ($38bn), Live Nation ($6bn), Pandora ($3bn) and Spotify ($8bn) for less than a third of its current savings – and still leave change on the table.
One of the few companies Apple couldn’t hypothetically afford for that kind of money is… Apple, whose current market cap ($624bn) makes it worth approximately 7,700% more than Daniel Ek’s IPO-chasing green machine, Spotify.
So what’s Tim Cook going to do with this mountain of money?
That’s a less important question right now than what he’s willing to do with it – especially in the wake of AT&T’s historic $85bn takeover bid for TV and movie content giant Time Warner.
Lest we forget that Apple was itself closely linked with a buyout of HBO owner Time Warner towards the end of last year.
Is it about to make a major content acquisition of its own?
That was the question put to the company’s CEO Tim Cook in Apple’s Q1 earnings call on Tuesday (Jan 31) – and his answer will have set tongues wagging across myriad entertainment industries.
After acknowledging that he was hopeful Donald Trump’s administration may create tax conditions in the US which would make the ‘repatriation’ of Apple’s cash mountain more appealing, Cook said:
“What we would do with [this money], let’s wait and see exactly what it is… [but] we are always looking at acquisitions. We acquired 15 to 20 companies per year for the last four years.
“WE ARE ALWAYS LOOKING AT ACQUISITIONS. WE LOOK FOR COMPANIES OF ALL SIZES.”
TIM COOK, APPLE
“And we look for companies of all sizes – there’s not a size that we would not do based on just the size of it. It’s more about the strategic value of it.”
When you can afford to buy almost everyone, it makes sense to consider the advantages of buying anyone.
Perhaps that’s why Apple has also been recently linked with swooping for $60bn-valued Netflix.
Depending on Cook’s appetite to take on the TV and movie market, that would potentially offer plenty of ‘strategic value’.
So why is this setting pulses racing in the music business?
Because Tim Cook’s openness to consider a major content acquisition comes hand-in-hand with Apple’s increasing focus on its ‘Services’ segment – which includes Apple Music, Apple Pay and the App Store.
Out of the record $78.4bn Apple turned over in the three months to end of December, ‘Services’ generated $7.2bn, or just under 10%.
As growth in iPhone sales starts to slow (+5% in Q1), Apple’s focus is gradually shifting towards Services – and it’s thinking big.
After announcing an 18% year-on-year growth in Services revenue, Tim Cook told investors that “our goal is to double the size of our Services business in the next four years”.
That would mean taking the $23.8bn generated by Apple Music et al in FY2016 and growing it close to $50bn by the end of FY2020.
You don’t have to be a maths whiz to work out Apple Music’s place in this picture.
By the end of 2016, according to MIDiA Research, the Spotify competitor had attracted 20.9m subscribers to its platform.
Although student/family promotions, telco bundles and territorial differences will bring down the average revenue of these subs below the standard $9.99-a-month Apple Music pricetag, we can guess than in the final three months of last year, Apple Music generated somewhere close to $600m.
That’s less than 10% of Apple’s total Services revenues in the period – dwarfed by the App Store, which generated $3bn in December alone.
But to consider Apple Music an also-ran in terms of its parent’s new Services focus would be a mistake.
It may yet prove to be the jewel in the crown.
For one thing, Apple Music is a subscription platform. And Apple is falling stone in love with subscription right now.
“Our Services offerings are driving over 150 million paid customer subscriptions,” Cook told investors, proudly.
“This includes our own services, and third-party content that we offer on our stores.”
He clarified that Apple “participates economically” from these third-party products – a reference to the fact that Apple hoovers up a percentage of App Store subscription cash from the likes of Spotify, in what opponents disparagingly refer to as the ‘App Tax’.
Apple Music, on the other hand, is a first-party cash generator, bringing its parent a much fatter margin than these non-Apple competitors.
Yet Apple Music’s special value to Tim Cook and his investors goes much further than this.
It’s the strategic test-bed for an original content strategy; one which Cook hopes will turbocharge Services’ growth over the next half-decade – and which may consequently draw a bountiful chunk of that $246bn from his grasp.
“WE HAVE PUT OUR TOE IN THE WATER DOING SOME ORIGINAL CONTENT FOR APPLE MUSIC, AND THAT WILL BE ROLLING OUT THROUGH THE YEAR.”
“In terms of original content, we have put our toe in the water with doing some original content for Apple Music, and that will be rolling out through the year,” said Cook, in response to a direct question over whether Apple could use its massive cash reserves to buy more entertainment copyrights.
“We are learning from that, and we’ll go from there.”
Cook added: “Obviously, with our toe in the water, we’re learning a lot about the original content business and thinking about ways that we could play at it.”
MBW hears from very senior sources that last year, Apple directly offered to match one pop superstar’s major label advance if he spurned a traditional record company deal, and instead committed his new album exclusively to Apple’s platforms.
Perhaps wisely, he stuck with convention and said no.
Meanwhile, people tend to forget that Vivendi swatted away an $8.5bn acquisition offer for Universal Music Group from SoftBank in 2013 – before Credit Suisse valued the company at €10bn a year later.
For the record, that figure amounts to just 5% of Apple’s current cash haul.
We’re not saying that Tim Cook will definitely be looking at major-scale music copyright as an acquisition target.
But when you’ve got more than $200bn lying around, ‘playing at it’ tends to mean something drastically different than it does even to the music industry’s established giants.
Interesting times ahead.
We are very excited to announce our brand spanking new edition of The Music Blog Directory 2017!
This 11th Edition of The Music Blog Directory 2017 is your comprehensive guide to over 3,000 Music Blogs from across the globe spanning every musical genre from Indie, Pop, Alternative, Rock, Electronic, Americana, Country, Hip Hop, Folk, House, RnB, EDM, Rap, Experimental, Metal, Jazz, etc
The musical landscape has changed dramatically over the past few years and Music Blogs are becoming the new A&R scouts, scouring the internet and the music scene in search of the next Buzz Band.
The Music Blog Directory is the most comprehensive and up to date list of every Music Blog that you need to get your music heard! This is the only tool that you need to discover and connect with these influential music bloggers
The 11th Edition of The Music Blog Directory features
- Over 3,000 of the Top Music Blogs from around the world,
- Over 4,500 email addresses for the bloggers and their contributing writers,
- Over 4,000 bloggers names
- The Music Blog Directory now includes every blog that feeds into The Hype Machine.
- A full description including what styles of music the blog focuses on,
- Twitter Contact
Would you like a Free Sample of The Music Blog Directory?
Reply to this email with Free Sample in the subject line!
The Music Blog Directory is available in Excel or Database Format for $149
or PDF Format for $99
We are delighted to announce the 7th Edition of The Indie Radio Directory 2017!
Our minions have been toiling away to bring you the most updated and freshest The Indie Radio Directory available anywhere!
We have spent hours going through each email in every single one of the 1,500 emails in The Indie Radio Directory to make sure they are all up to date and working! This Third Edition now includes 20 brand new Radio Stations for you to submit your music to.
The Indie Radio Directory is your gateway to over 500 most influential commercial specialty, non commercial college and public radio stations in North America.
A carefully curated directory of the key Program Directors, Music Directors and DJ’s across the country who support new music and help break new bands!
Radio plays a crucial role in introducing new music to a wide audience and is still one of the key stepping stones to a successful career in music. The Indie Radio Directory is a must have resource for getting your music heard.
The 6th Edition of The Indie Radio Directory features
* Over 500 Influential Radio Stations
* Name of the Station
* Names of the Program Director, Music Director, and relevant DJ’s
* All Corresponding Email Addresses – Over 1,500 Emails
* Now Includes All Radio Stations Tracked by FMQB
* Now Includes All Alternative & Triple A Radio Stations Tracked by Mediabase
* Phone Number
* Social Media Contact
* Station Format
* Station Category
* Station Mailing Address
Would you like a Free Sample of The Indie Radio Directory?
Reply to this email with Free Sample in the subject line!
The Indie Radio Directory is available in Excel or Database Format for $129