Business Matters: The Beats Era Begins at Mog — Can Lovine and Company Recreate Their Headphone Success?

Beats bought music streaming website, MOG in July

(from Billboard.biz, November 21, 2012) This past July, Beats agreed to purchase MOG, a paid subscription online music service, for less than $10 million. The purchase went for a fraction of MOG’s $3 billion valuation received by its competitor Spotify in its current attempt to raise additional financing. Six months after Beats Electronics acquired MOG, founder and CEO of MOG, David Hyman, stepped down, marking the beginning of the Beats era of the music-subscription service.

Though MOG has low numbers of active users, Beats has spent little effort recruiting new customers after their purchase.  Beats stated plans to eliminate the MOG brand entirely and market an entirely re-branded service that will be tightly integrated with its high-end headphones sometime next year. “Beats bought the technology, not the service that David built on top of that technology,” said an executive of Beats.

Cofounder of Beats, Jimmy Lovine, believes the “reason on-demand subscription services haven’t been able to turn a profit is because they’re poorly marketed.”

Beats, which was founded in 2006 and known for creating a lucrative high-end niche with the headphones business, recruited top hip-hop artists to wear its signature black and red headphones before they even hit store shelves. This marketing technique drove customers craving to be a part of the scene before they hit the shelves.

With the digital music trail littered with disappointments, and a category well outside the company’s core competency, headphones, it is unclear if Lovine and his crew can recreate Beats same mojo with a rebranded and redesigned music streaming service. A Beats executive believes if “history is any guide, consumers will hear a great noise about the service well before it launches.”