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Spotify Vs. Beats Music: Which Should Apple Acquire?

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Apple (NASDAQ: AAPL) was expected to announce that it had acquired Beats Electronics for $3.2 billion this week, but that deal was reportedly put on hold.

The unconfirmed merger is now expected to be announced during the week of May 19. That just happens to be the same week that Microsoft will hold a press conference, which could provide the first glimpse of the company's Surface Mini.

Apple's timing is likely coincidental. But it should make for an interesting week as investors wait to see what transpires.

Related: Spotify Vs. Pandora Vs. Google Music Vs. iTunes Radio Vs. Xbox Music

Since the deal is not set in stone, it is always possible that Apple will back out and move in another direction.

"They could acquire Spotify," ABG Sundal Collier analyst Per Lindberg told Benzinga. "But Spotify is, as you know, a competitor to Apple and to many other firms, so the culture would fit there but would probably be less than amicable."

Amicability hasn't stopped corporations from merging before, and it's unlikely to stop Apple from doing so here. But is Spotify any better than Beats?

User Base

This is an unfair comparison, but it goes without saying that Spotify is the leader in this regard. No other on-demand music service comes close.

Spotify currently has 24 million active users. More than six million (25 percent) of those users pay $10 a month for Spotify Premium.

Beats has not released the official subscriber data for its music service, which does not currently have a free option. On March 20, 2014, the service (which launched in January) reportedly had more than 525,000 subscribers. A leaked document contradicts that number, suggesting that (as of May 10) Beats Music had only 110,000 subscribers.

Related: 5 Companies Apple Could Buy Instead Of Beats

Product Catalogue

Spotify is only a music service. If Apple wants a company with more diversity, it might want to stick with the current (unconfirmed) plan to buy Beats Electronics.

In addition to its new music service, Beats produces roughly two dozen different music products, including headphones, ear buds and portable speakers. The company's audio technology can also be found within HTC smartphones, Hewlett-Packard computers and luxury automobiles from Chrysler.

Brand Name

The old, Steve Jobs Apple wouldn't have purchased a company for its brand name. The new, Tim Cook Apple might.

If it does, Beats Electronics might have the stronger name in the eyes of young consumers.

Between the celebrity promotions, music video promos and TV/movie product placement, Beats' headphones are everywhere. Consumers cannot escape them.

Beats also gave its music service a big push with a national ad campaign.

Spotify, by comparison, is nowhere to be seen. Music lovers know it by name, but Pandora is still a much stronger brand. Thus, if brand matters to Apple, the company is likely to choose Beats over Spotify.

Price

Apple can take Beats home for $3.2 billion. Spotify would cost a little bit more now that the company has been valued at more than $4 billion.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Posted-In: ABG Sundal Collier Apple BeatsAnalyst Color Rumors M&A Analyst Ratings Tech Best of Benzinga

 

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