LeBron James' Big Payday From The Apple-Beats Deal Could Help His Team Land Another NBA Star
Geege Schuman stashed this in Beats
James took a small stake in Beats Electronics during its inception back in 2008, working closely with producers and company cofounders Jimmy Iovine and Dr. Dre to promote the company’s premium headphones.
For context, James is paid $19.1 million a year by the Heat to play basketball. So his Beats deal netted him more money this year than basketball.
The news was buried in a much bigger story about the future of the Heat. They are reportedly interested in signing Carmelo Anthony this summer, one of the most sought-after NBA stars.
To sign Anthony, who is a max contract player, James and the Heat's other stars will have to renegotiate their contracts, potentially taking less money. James' off-court endorsements and investments are doing so well that he might be willing to take less money.
So, in a weird way, Apple's purchase of Beats could lead to the Heat getting Anthony, creating a dynasty in the NBA.
Now that the Heat are being denied their threepeat, their big idea is bringing in Carmelo Anthony?
As someone who is not a Heat fan, I say to them: oh please oh please oh please sign Melo!
Wow - there are A LOT of alternatives to Beats headphones.
But Beats is more than headphone technology, it's part of the ecosystem of streaming music.
Current music copyright laws are complicated and often antiquated. The rules' structure dates back to analog CDs and radio, and they don't make anyone happy. As the music industry moves towards digital, copyright laws are like a leaking bucket that keeps getting patching patched, but really needs to be replaced.
Spotify reported last month that 70 percent of the money it brings in goes right back out into the hands of the major record labels. They are losing less money as their subscription base grows, but most of their consumers are signed up for their free, ad-based service.
Recording artists are crying foul as they watch their royalties dwindle from a few cents per song to a microcent per stream.
Each time a song is purchased on iTunes, an artist gets 7 to 10 cents after royalties are divided up between the record label, publisher, and songwriter. Each time that song is streamed on Spotify, an artist receives between 0.64 cents and 0.8 cents per stream.
That seems like a massive downgrade, but advocates for music streaming are playing the long game. Moving to a model based on music streaming requires a paradigm shift in the way the industry understands its earnings, according to advocates.
The streaming business is in its infancy, said Marks, and once it matures, streams could be in the 100 of millions. Pennies add up quickly. If streaming services can garner enough paying subscribers to tip the scale, there could be enormous revenue promise.
The old model was more like a lake–a significant amount of money from onetime transaction between an artists and a consumer pooled up quickly. But in the streaming model, like its name implies, artists' earnings are ongoing.
Although Dre and Iovine are banking on their reputation among artists and record labels alike to bring credibility to the music streaming business, there isn't much they can do to change how much artists earn. Even with deep industry connections, they will likely still have the pay the same upfront licensing fees to the major record labels that Spotify and the rest have to pay.
But if Dre and Iovine are able to replicate the success of Beats Headphones, they might be able to move the needle on the copyright conversation. Power is in numbers.
In this growing ecosystem of services, a Beats victory is a victory for the entire streaming industry.
"Some people think the service providers are afraid of competition," said Greg Barnes, general counsel and director of government affairs at the Digital Media Association. "It's the exact opposite. We welcome competition. As the ecosystem grows, there are more consumers to begin to question why this ecosystem looks this way."