gradual descent while they're up 1,000 feet in the sky. it's found on the john hancock center. thanks for watching al jazeera america. i'm morgan radford. inside stor"inside story" is cot >> it's been widely reported that apple home of itones is preparing to buy beats electronics for $3 billion. why would the company who revolutionized the music industry with the $0.99 download buy the head phone company.

i'm ray suarez. apple with its itunes reshaped the industry and put a few brick and mortar storie stores to the. creating billions in sales. since itunes is a story that carries just about everything and never runs out of shelf space. but now the financial sometimes reports apple may be getting ready to do something big in response to the rapid rise of streaming. after making white ear buds, apple may be getting ready to wrap beats around your head before jumping into the stream. >> reporter: apple took a big bite out of the music industry with the invention of the i pod andy tunes music store at the turn of the century. it changed the way people bought

and listened to music. itunes is still the largest music seller but for the fires time itunes sales decreased just .1% but still a decrease. now there is direct competition for itunes from online streaming services like pandora and spottify. it's a huge growth business. revenue from music subscription services rose 50% last year to more than $1 billion. now online music services have 28 million subscribers compared to 8 million in 2008. apple appears to want to make inloads in the streaming market. on thursday the financial times reported apple is preparing to buy beats electronics for $3.2 billion. beats was founded by hip-hop legend dr. dre in collaboration with veteran music producer

jimmy iovan. the headphones and beats music, an online streaming platform. platform. dr. dre looks in the camera and cubs himself the first billionaire in hip-hop right here. if the deal goes through it will be the change in strategy for apple. steve jobs was known for innovating from within the company, but it's not an unusual move. facebook's purchase of instagram and yahoo's acquisition of tumbler are two of many examples. dr. dre's beats electronics headphones struck chords in style and substance, and it's not just the listening public

that cares about quality. some artists are worried about the compression of musical sound. music legend neil young has raised $6 million on kick starter to bring a better living experience criticizing the current quality of digital sound as underwater streaming, he hopes that his pono player will bring true audio files to the digital fold. vinyl may be making a modest comeback, too, but apple put most record collections into the attic for good as it changed the way we get, store and experience music. this reported multi billion dollar deal would be proof that streaming is the new thing. downloaded songs might go the way of the dodo. >> has the new world of devices and new ways to get content on to those devices changed the way you listen to music?

have you dipped your toe or jumped head first into the world of music streaming? the reported purchase of beats electronics by music joined apple is the focus this time by inside story. to understand what is behind the deal we turn to industry insider. the author of the new book "the piracy crusade." paul can'ter is a music producer, writer and editors and joseph man is technology proje projects reporter for reuter. he is the author of all the rave, the rise and fall of john fannings napster. is this new for apple, whose more often grown businesses in house than purchased them from outside? >> well, sure, it's the most

they've ever spent on a single acquisition by a large measure. it seems to indicate a change in strategy. it's hard to imagine steve jobs doing this. it's a change both in their appetite or acquisition generally, and sort of an admission that they've been ignoring a vie tat part of the market. >> what does beats get you that apple wasn't able to get itself. >> i wouldn't say that apple engineers aren't capable of anything, they're an impressive bunch. and the other thing they get is a really good human curated streaming service where they had no take up in their own streaming at all.

>> well, when joe mentions the high end first, those beats headphones are expensive. are they worth it? >> um, that's debatable. they also have, you know, for as high as beats headphones cost they have a lower cost model as well, which i think retails for something like $169. so they definitely have a wide range of products that they're offering, and i don't think that people have shown they really care what the price is. they're obviously going to spend the money on it. whether it's that much better than any other product, you know in that price range you might be able to get something cheap that are sounds better, but as anybody knows with products it's all about the marketing behind it, and putting it in front of people. i think when you walk the streets you see

the beats by dre headphones on everybody. people like to buy what the other person has. >> that type of branding has a monetary value. beats has never been shy putting dr. dre front and center. your mom could be buying show tunes on itunes. she isn't buying dr. dre. is apple buying into a different head space when it beats buys beats electronic. >> whether it be the streaming service, the headphones, that's a valuable audience because it's younger, it's not to say its kids, but the quote/unquote

millennial person who is sort of seeing what other people in their age range are doing and maybe are copying it. apple, you know, audiences, the people who have allegiance to apple as a brand are tending to be a bit older right now than a lot of people who made that brand allegiance to apple that came with about ten years ago when apple refreshed all of its products. they have to acquire something for that cool character. they definitely have it. it's better than other markets in that space. >> are there people reacting to news of this deal are talking like downloading is already over, done, peaked. we're still talking about a multi billion dollars industry. >> it's all together different

talking about an industry that has stopped growing. i bet there is a thriving eight track following on ebay. it's really a question of what is that growth curve look like. as you pointed out at the top of the show sales were flat last year and they're down over 12% this year. the wholesale retail buying one song at a time or one album at a time if it ever made sense for consumers in the i pod at the sam ipod >> many believed that you will just pay to listen to music after all music you own you can live to forever. what's different about streaming

streaming. >> young people grew up taking the internet for granted. they know every song recorded, every tv show ever aired, every book published is available to them. they don't have the same drive to library content the way we old folks, too. if you think about the soldier de--social dimension we would put our cds on the shelves to signal what kind of people we are. young people do that by instagram and facebook files. they don't need to have the ownership of the items to reinforce who they are. >> we're going take a short break. when we come back we'll talk about the future of streaming and the business model. how does it even work? how do you make money at it? this is inside story. >> on the next talk to al jazeera

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>> the story is not just about the listening, it's about the competition in digital delivery of music. i have to admit that i'm a free loader. i go on to a popular streaming site. ask for something. it's immediately delivered to me and occasionally i'll get a commercial but i have no idea what they're really advertising except for music that i wouldn't

buy, and occasionally the service itself. on the back end my choices are put on a social media site, but i don't understand how anybody makes a living, much less the musician. >> well, they are addressing that . they're addressing the charge for subscription. that payinthat is paying for so. they pay every fourth music from an independent, and they sell merchandise. they have artist pages where the artist has control over what they're pushing. i think it's fairly effective.

it's more effective than selling anything ancillary. the most itunes has done is push a special version of an maker. you can do a fair amount with the streaming service. >> what is that cure ration that people are talking about? part of the appeal of streaming is that you tell the streaming service what you like and it plays it for you. what is a curated stream? >> they have genre and these brand alliances. they'll have teen magazine push out a list of what's new and coming, and they'll have a bona fide expert pick a play list for you. so there are a number of ways that they can do that, and there is more thought that goes into it than just an algorithm that

says so many beats per minute. some people really respond to that. it's like deejays used to be 50, 60 years ago when they thought about what songs they were going to play for. >> you paul, time and again we've seen how cheap or free undermines the pricing power of people who want to defend the price point. are we going to see that extremely? is apple buying into a business that eventually is going to put more and more pressure or with stand more and more pressure to be free? >> i'm not sure. the price point for beats is $9.99 something like that. and the spo the price point fory is zero. there is other competing streaming services like user and

there is a new one every day. it's amazing. some of them are the free model where you have to listen to ads. i'm not quite sure that people are going to want to fork over money. that's why they're trying to bake some of these fees into phone subscription i mean phone bills. that's why spottify recently did the deal the deal with sprint, and beats with at&t. they would like to tack this thing on like it's your cable bill and you're paying extra for hbo. converting people to pay for something seems to be quite difficult. they need this to matriculate and become a large pool of money for it to make sense for artis artists. right now it doesn't, so they're hoping it grows.

>> i put that to you, this idea that it's very tough to use quality to defend price point. where is the streaming going if there are players in the marketplace who are willing to give you a lot for a little. >> sorry to say it's becoming a commodity. i think the most telling indication is amazon, they're going to go integrating a music streaming product into their amazon prime model which for $80 a year allows you to get two-day shipping on all of your products and gives you access to hundreds of thousands of filmed entertainment shows. i think the real differenter is going to be the kinds of features we're talking about before, curated play lists. high quality audio. the ability to integrate the service in with your social network. those are the things that consumers see value in rather than access to music which they've been able to have for free since

napster 15 years ago. >> there has been in the past an intimacy between those services, these contact services and the equipment that you use to play it on. when you watch a deal like this, here they're going to make a more intimate connection between the machine and the stuff that goes out on the machine but maybe they're going to a gasoline and car model. there is no ford gas or g.m. gas. there is just gas that makes everybody's car run. which is apple going to choose? >> i don't think the gasoline and car model makes sense in this context because you can't copyright gasoline. but as long as there is copyright around music and software we're going to see people locked in the universes. it will be a long period of time before we're able to escape from

the apple o orbit, google orbit and be agnostic consumers. the reason why we develop emotional relationships with these devices and apple has been master of doing this. making us feel like a phone is something that should be kept under your pillow while you sleep all night rather than something that is charged in an out let. that emotional power is victory of strong design and marketing. i think beats has brought that to a whole new audience that apple has had trouble reaching in the past. >> as a kid who had a transitionter radio under his pillow that metaphor makes sense to me. when we come back we'll look at the issue of quality, and let's not forget those headphones. this is "inside story." stay with us.

america mobile app, available for your apple and android mobile device. download it now >> welcome back to inside story. i'm ray suarez . you download or stream your music, you play it on your sound? is it as good as vinyl was? what's more important, the easy access or the sound itself? do you care? let's talk more about the

reported apple deal to buy beats electronics and what it means to the living experience. welcome to our guests. >> do people care about the sound as much as you wish they did? >> no, unfortunately they don't. the sound quality issue is erased to the bottom, unfortunately. you know, a guy like dr. dre probably would spend a week mixing a record whereas these days nobody is going to spend that much time on it. to mix it down to a compressed mp3 file that will be further compressed to a streaming file.

to get these things into your ear bud or what have you over a wireless network, all sorts of things have to happen to it to shrink, and it doesn't sound as good. that change has put a lot of music engineers, a lot of recording studios out of business. these days you can make a recording in your house that can be broadcast all over the world. 67 like it is in media, you can take a shot with your cell phone and before you know it, it's at 100 different television networks. does anybody care about the quality that have photograph or video? no, it's the same thing with music. >> so is neil young on to something by kick starting a project bringing new sound quality it in this new brave world? >> i think there is a market for it.

there has always been an elite class of audio philes, those will be the people who buy the pono products. currently i'm captive to three gig bites on my cell cell phone. i can't be downloading high quality onto it. there is going to be the issue of what fits on your device, and as producers create music that is meant to be heard streaming and it doesn't make sense if you listen to it on heavy vinyl with a great wi-fi. >> there is also a hardware part of this deal with the significant product line that beats has in living devices both ones that are portable and fit on your head, but also ones that are for the home

. >> that's right. they're going to do more of those things. as great as apple is at certain things it took them a long time to get ear buds that would fit comfortblcomfortbly in your ear. now we have terrific headphones, i presume they'll say that. apple makes a lot of money on the accessories that go with an iphone. cases, other things, but of course the apps. if you could get one in a hundred iphone customers to pick up the beats head phone at the same time, that's a lot of people. that's a lot of money. >> do i if i'm being smart associate the apple brands to beats. when i go to my electronics retailer i see beats products for various types of listening. now that apple is going to own it, do i stick an apple somewhere on that device? >> that's a good question. i don't know.

you could argue it either way. it might be beats for a while. we'll see how that goes. if it doesn't grow enough, they may put an apple on it? it's two fine brands. >> well, cantor, you're selling music, what is the best outcome for this. what is best for the musician and living public? >> i mean for the public you would like to see things b be--it's two-fold. you would like to see things be as cheap as possible for them the cheaper it is, the more people you can reach. if you made everybody pay to watch a youtube video, would you rather each 50 million or 500,000? making it cheap and accessible to people is important. i don't like beats model of making people pay for it. i think asking for $10 in order

to get access to curated play list is --not necessarily something i think is smart. i think if they made that free it would be better and the incentives to make people pay for it. for beats, jimmy is a businessman. he's not going to let anything go too cheaply. for the music producer you can't defile it too much. make it as cheap as possible for the listener. the listener doesn't want to pay for thing. and the songwriter and the prow the producer, they don't want to give anything away. they have to meet in the middle. >> the deal has not been made by a final price a announce. thanks for being with us. in washington, i'm ray suarez.

a nigerian military dismisses criticism it failed to act over boko haram after michelle obama calls for the release. >> in these girls, barack and i see our own daughters. we see their hopes and their dreams, and we can only imagine the anguish their parents are feeling right now. welcome to al jazeera live from doha. also coming up on the program, jacob zuma leads the anc to victory in the east