Are HTC and Beats readying a streaming music service to take on Spotify?

Beats by Dre Audio Iovine HTC Following HTC’s $300 million partnership with Beats Audio, rumors abound that the phone maker is preparing a new streaming music service to compete with the likes of Spotify. Sources tell that Jimmy Iovine, chairman of Interscope Geffen A&M Records, and a co-owner of Beats Audio, has been working closely with HTC to develop the service. After Beats Audio’s less-than-harmonious split from former partner Monster, the company is said to be looking to expand aggressively in the mobile world, and HTC, by acquiring a substantial interest in the headphone maker, is looking more and more like the chosen partner.

Losing steam

HTC has long been a peculiar and potentially disruptive force in the mobile world. An early adopter of Android, the phone maker has been customizing and enhancing user experience with its Sense UI ever since the days of Windows Mobile. Its television commercials aptly play to the emotional experience inherent to the modern mobile phone — objects we use intimately and carry with us day in and day out — and it has keenly crafted an image of itself as a lifestyle company, clearly taking a page from the Book of Jobs.

Which is all the more disappointing now that the Taiwanese company has hit a rough patch. Earnings were down more than 50 percent compared to just one year ago. Profits fell 26 percent in the last three months of 2011 alone — a startling and precipitous decline. Apple scored a major patent infringement judgment in December that will bar certain HTC phones from being sold in the US, and its 4G LTE phones have been riddled with issues such as poor battery life, prompting the CFO to assure consumers that in 2012, “using these LTE phones won’t mean having a compromise.”

Reviews for the first HTC phones featuring new Beats tech have been less than stellar, and so far the audio technology only works with HTC’s own music player — not the Android Market’s abundant third-party music apps. The announcement of a streaming service, however, could tie HTC’s entire line of phones and upcoming tablets together under the umbrella of a music player that travels with you wherever you go. Beats by Dre headphones have become a raving success, thanks in large part to their stylish design, and Beats branding, along with a killer music service, could potentially help HTC revive its fortunes.

The beat goes on

Not to say that Beats Audio isn’t getting something out of a potential deal as well (apart from the large infusion of cash): Iovine, a singular persona in the music business, is in the unique position to draw record companies into a deal with another streaming service to rival Spotify. HTC, with its established mobile presence and lifestyle ambitions, is the perfect partner. As Iovine alluded last year in an interview with the The Los Angeles Times, “Music on the cellphone should sound and feel great and we don’t want you to just download bad-sounding MP3s and play them on bad-sounding $3 earbuds. Why spend hundreds of dollars on a phone or a tablet and listen to music out of $3 earbuds? It just doesn’t add up.”

The fact remains that a new streaming service will live and die by the licensing deals it can manage with major record labels. Spotify’s success owes in large part to the massive trove of new and old music available through that service — if anyone can compete on this level, it’s Jimmy Iovine. With literally the entire catalogue of Interscope Geffen A&M music at his disposal, and a name brand (and wildly popular) audio product to lead the marketing campaign, HTC may have hitched itself to a winning horse. Like Monster before it, HTC may simply be the conduit for another Beats revolution. Although pricing for the rumored service is still unknown, we expect HTC will make an announcement during the upcoming Mobile World Congress in Barcelona at the end of February. 

Image Credit: LA Times/Getty Images