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Apple buys music star Beats for $3 bn
by Staff Writers
New York (AFP) May 28, 2014


Hachette seeks Amazon terms that 'value' partners
New York (AFP) May 28, 2014 - French publishing giant Hachette said Wednesday it wants to make peace with online retail titan Amazon, but on terms that "value" the role of authors and their publishers.

In the latest response in the weeks-old dispute between the two, Hachette said it would keep up negotiating efforts with Amazon.

"We will spare no effort to resume normal business relations with Amazon -- which has been a great partner for years -- but under terms that value appropriately for the years ahead the author's unique role in creating books, and the publisher's role in editing, marketing, and distributing them," Hachette Book Group said in an email to AFP.

"Once we have reached such an agreement, we will be happy to discuss with Amazon its ideas about compensating authors for the damage its demand for improved terms may have done them, and to pass along any payments it considers appropriate."

Hachette also criticized Amazon for treating literary works as commodities.

"By preventing its customers from connecting with these authors' books, Amazon indicates that it considers books to be like any other consumer good. They are not," the publisher said.

A day earlier, Amazon said it saw little reason for optimism in resolving the dispute, which is believed to be about pricing, and offered to contribute to a fund to compensate authors for lost revenue.

Amazon acknowledged it was maintaining less inventory from Hachette and was no longer taking pre-orders from the publisher, and said the talks were part of the normal discussions with suppliers.

"Negotiating with suppliers for equitable terms and making stocking and assortment decisions based on those terms is one of a bookseller's, or any retailer's, most important jobs," Amazon said.

"When we negotiate with suppliers, we are doing so on behalf of customers. Negotiating for acceptable terms is an essential business practice that is critical to keeping service and value high for customers in the medium and long term."

Noticed tactics include delaying delivery of Hachette books and not discounting works handled by the publisher, and suggesting that readers looking for some Hachette titles might enjoy a book from another author instead.

Amazon maintained that the discord with Hachette affects a small percentage, along the lines of a dozen out of every thousand, of the Kindle-maker's book sales.

A recent New York Times report maintained that the "scorched-earth tactics" arose as Hachette balked at Amazon's demands for better terms in contract negotiations.

Early this month, Hachette confirmed that many of its older titles and a few new releases sold by Amazon were being hit with shipping delays that it attributed to the negotiations with the e-retailer.

Amazon has a reputation for negotiating hard to push down prices for the goods it sells online.

In a turn that may have emboldened Amazon, the US Justice Department triumphed in an e-book anti-trust lawsuit against Apple.

Last year, the judge who found Apple guilty of illegal price-fixing for e-books ordered the tech giant to steer clear of new contracts with publishers that could violate antitrust law.

Apple announced plans Wednesday to buy Beats Music and Beats Electronics in a deal worth $3 billion that gives the US tech giant more clout in the hotly contested music sector.

The move is expected to help Apple, which was a pioneer in online music, ramp up its efforts to counter the successful models of streaming services like Pandora, Spotify and others.

Apple's largest acquisition ever, the deal for the maker of high-end audio equipment and streaming music service calls for Beats co-founders Dr. Dre and Jimmy Iovine to join the California company.

"Music is such an important part of all of our lives and holds a special place within our hearts at Apple," chief executive Tim Cook said in a statement.

"That's why we have kept investing in music and are bringing together these extraordinary teams so we can continue to create the most innovative music products and services in the world."

Bringing Beats into the Apple fold will offer opportunities to weave iTunes Radio service into more devices, and even spread the App Store for mini programs to other products, according to analysts.

Adding Beats will give Apple fresh starpower in music and the ability to get more ad revenues from streaming including mobile.

The deal represents a shift in strategy for Apple, which is known for developing its own products in-house and making only modest acquisitions.

But some analysts say the logic for the tie-up is not entirely clear.

"It's a little confusing to me what Apple is getting out of it," said Bob O'Donnell, analyst and founder of Technalysis Research.

O'Donnell said Beats "appeals to a demographic that is different from some of the typical Apple demographics" and has a streaming music service with "a relatively limited number of customers."

"It doesn't seem a great match unless there are other issues at play," O'Donnell told AFP. "But my guess is that Apple isn't going to spend that much without that being the case."

The analyst said Apple may be able to give a boost to its recently launched iTunes streaming service, or possibly get a foothold in the lucrative market for music accessories.

Mobile music revenues in the US totaled $1.68 billion in 2013, according to the research firm eMarketer, which estimates that figure will increase to $2.52 billion this year.

Ad-supported mobile music revenues topped $1 billion in 2013 and is expected to reach $1.64 billion this year, the research firm said.

Since launching five years ago, Beats has become a popular brand for audio equipment and has attracted the likes of Lady Gaga, Lil Wayne and Nicki Minaj, who have designed their own customized Beats headphones and speakers.

Fashion designers and street artists such as Alexander Wang, Futura and Snarkitecture have collaborated on some products.

The company was founded by Dr. Dre, the popular rap musician, and his producer Iovine.

The deal, which has been rumored for weeks, is subject to regulatory approvals and is expected to be completed later this year, Apple said.

"I've always known in my heart that Beats belonged with Apple," said Iovine.

"The idea when we started the company was inspired by Apple's unmatched ability to marry culture and technology. Apple's deep commitment to music fans, artists, songwriters and the music industry is something special."

The premium headphone market in the United States grew 20 percent last year while sales of wireless speakers more than doubled, according to industry tracker NPD.

Beats was reported to have claimed 60 percent of the billion dollars spent on top-end earphones in the US last year.

soe-rl/mdl

APPLE INC

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