What Apple's U2 Album Launch Means For Apple

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Zack O'Malley Greenburg, Forbes Staff

Love Apple or hate it, there's no denying it's a unique company. Additional proof came at yesterday's product launch event in Cupertino, where Apple unveiled the iPhone 6 and a new smart watch-and managed to secure U2 as a featured act.

The Irish rockers debuted their a new single, "The Miracle (of Joey Ramone)" at the end of the proceedings, part of a deal to release their new album, Songs of Innocence, for free to all iTunes customers. The LP will also be available for Beats Music subscribers, too; after October 14th, it will appear on other streaming services as well as bricks-and-mortar stores.

Apple's brass seemed as thrilled as the legions of U2 fans awaiting new music from the group.

"Wasn't that the most incredible single you ever heard?" said Apple chief Tim Cook after the band's performance. "We would love a whole album of that."

And a whole album is exactly what Apple got. Terms of the deal weren't disclosed, but it's clear that U2 isn't truly giving away its music for free. The band reportedly received a blanket royalty fee for the use of its music as well as a marketing campaign worth as much as $100 million by some estimates.

While that number may well be inflated, it's something Apple can certainly afford, particularly given the gravity of launching an album with U2. For the company and the broader music business, the implications are plentiful, and many won't be known immediately. But for the moment, here are a few important ones:

The iTunes Store as we know it is dying.

You've heard that refrain here before -- and from other outlets as well -- but the fact that Apple gave away U2′s album and streamed it on Beats Music instead of trying to sell it as a download for $4 or $5 gives additional support to that theory. Streaming has already defeated the digital download, and Apple has finally admitted it. Which is probably why...

Apple is doubling down on its investment in Beats Music.

Sure, $3 billion is a large sum for an acquisition, even for a company with more than $100 billion in cash on its balance sheet. But don't expect Apple to stop investing in its investment. The purpose of the U2 album launch may have been primarily to generate buzz for the iPhone 6 and Apple Watch, but there's no doubt that luring consumers to sign up for Beats Music was another key goal. That's part of the reason that...

Apple can become music's most powerful one-stop shop, if it wants.

The U2 rollout shows Apple could lure an A-List act, release an album straight to its download and streaming services, and bypass the major label system altogether. Yes, Universal will release Songs of Innocence in October, but the record company is no longer needed. Apple has Jimmy Iovine, perhaps the shrewdest music executive of his generation, in the fold; it's got digital distribution through Beats Music and iTunes; the increasingly-irrelevant physical product is easy enough to produce independently.

How long before Cook cuts out the middle man entirely and creates Apple Records? Stay tuned, and don't be surprised if Dr. Dre's Detox is eventually released by such an entity. In the meantime, check back tomorrow for the second part of this story: "What U2 And Apple's Album Launch Means For U2."

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This page contains a single entry by Jonathan published on September 10, 2014 5:22 PM.

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