Ex-Beats executive to step back from daily responsibility at streaming business

By Tripp Mickle and Anne Steele 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 22, 2018).

Apple Inc. is losing the public face of its music operations, just as its streaming service is finding its beat.

Executive Jimmy Iovine will transition into a consulting role in August and step back from daily involvement with the company's streaming-music business, according to people familiar with his plans.

Mr. Iovine is one of the last of a team of prominent music executives Apple gained when it bought Beats Electronics LLC in 2014 for $3 billion. Former Chief Executive Ian Rogers, Beats co-founder Dr. Dre and Nine Inch Nails frontman Trent Reznor, another top Beats executive, have all left or distanced themselves from the company since the Apple deal, people familiar with the business said. Beats President Luke Wood, who oversees the headphones business, remains.

The departures raise questions about the lasting value of Apple's largest deal at the same time its acquisitions strategy is attracting new interest with the planned repatriation of some $250 billion in cash it has held overseas.

While the Beats deal jump-started Apple's music-streaming business and eliminated a competitor, Apple had to revamp the first version of Apple Music because of design problems. Original video programming later pushed by Mr. Iovine also received critical reviews.

Beats's headphones and speaker business has diminished in significance as Apple launches and pushes its own audio products, including AirPods earbuds and HomePod speakers. Beats's share of U.S. Bluetooth headphone sales has declined to 37% from 41% in 2014, according to NPD Group, a market-research firm.

"If you ask the question, 'Did they need Beats?,' the answer is no," said Gene Munster, managing partner at Loup Ventures, a venture-capital firm specializing in tech research. "They didn't need it to get to where they've gone in music, and the existing Beats business has not done well."

Several media outlets in January reported that Mr. Iovine was leaving Apple, but he said publicly he planned to stay.

More recently, Mr. Iovine, a former producer of Stevie Nicks and U2 who founded Interscope Records, has told people close to him that he plans to spend more time with his family while supporting Apple Senior Vice President Eddy Cue, who oversees Apple Music, as needed, the people said.

It isn't unusual for executives to leave after their companies get acquired by a bigger competitor. Many key executives have departed Apple after buyouts, finding it difficult to adapt to the tech giant's well-defined culture and sprawling operation after leading smaller, independent operations.

For Mr. Iovine and his colleagues, transitioning from the edgy culture they established at Beats to an Apple Music culture that is more focused on appealing to the masses was a particular challenge, the people said.

The timing of Mr. Iovine's move, however, is linked to the Apple shares he received in the Beats acquisition, which will fully vest in August, they said.

Apple's music business has been gaining momentum and is poised to overtake rival Spotify Technology SA this year in U.S. paid subscribers. That is mostly because of Apple Music's reach across many of Apple's 1.3 billion devices world-wide -- on which its app is included by default -- rather than the exclusive content agreements delivered through Mr. Iovine's close relationships with artists, according to music-industry executives.

Apple Music's Mr. Cue has leaned on a trio of executives for day-to-day leadership, people familiar with the operation said.

Mr. Iovine has led the Los Angeles music office, regularly holding meetings with Apple Music employees and with artists and entertainment executives such as the Black Eyed Peas member will.i.am and former NBC television executive Ben Silverman, the people said.

But most of Apple Music's operations were left to senior executives Robert Kondrk, who oversees the business of Apple Music and iTunes, and Jeff Robbin, who oversees the product and engineering teams, the people said. The pair assumed a more active role at Apple Music after the streaming service was plagued by design and engineering issues following its launch in 2015. It was redesigned and rereleased a year later.

Mr. Cue now will have to determine whether to continue dividing responsibilities between Messrs. Kondrk and Robbin, elevate one to a more public role, or look externally for someone with music-industry ties to assist with artist relationships, people familiar with the matter said.

While other Apple executives have close ties to the music industry, none has the stature of Mr. Iovine, who after succeeding in rock became a forerunner in hip hop, a genre that has only continued to gain in popularity.

Mr. Iovine's planned departure further distances the Apple Music division from the company's push into video content. The executive had championed Apple's support of documentaries and shows such as "Carpool Karaoke," saying the combination of video and music would create "a fuller experience" that attracted more subscribers.

Apple last year hired Jamie Erlicht and Zack Van Amburg, who oversaw Sony Pictures Television productions such as "Breaking Bad," to lead a different division pushing into original content. They have a $1 billion budget and report to Mr. Cue, who has taken an active role in developing that business.

Write to Tripp Mickle at Tripp.Mickle@wsj.com and Anne Steele at Anne.Steele@wsj.com

 

(END) Dow Jones Newswires

March 22, 2018 02:47 ET (06:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Apple Charts.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Apple Charts.