Jimmy Iovine, the legendary music executive who helped create Apple Music, thinks streaming has a margins problem

AP

Jimmy Iovine.

• Renowned music executive Jimmy Iovine says the streaming business's biggest problem is scale.
• Iovine, who cofounded headphone company Beats with rapper Dr. Dre and helped create Apple Music, was speaking to the New York Times about music, tech, politics and more in an interview published Monday.
• The 66-year-old, who left Apple in 2018, also touched on his relationship with the late Steve Jobs.
• Visit Business Insider's homepage for more stories.

Record producer Jimmy Iovine has given an extensive interview to the New York Times and threw out an interesting nugget: he thinks music streaming has a margins problem.

Speaking to the New York Times on Monday, the 66-year-old music-industry veteran was asked what he thought the streaming industry's "biggest problem on the horizon" was.

He said: "Margin. It doesn't scale. At Netflix, the more subscribers you have, the less your costs are. In streaming music, the costs follow you.

According to a report by the IFPI, the global recorded music market generated $19.1 billion in revenues in 2018, of which 46.8% was revenue that came from music streaming. What's more, 2018's streaming revenue was 34 percent higher than the streaming revenue generated in 2017.

Yet, Iovine noted, this doesn't make streaming services any cheaper to offer.

"And the streaming music services are utilities - they're all the same," he said. "Look at what's working in video. Disney has nothing but original stuff. Netflix has tons of original stuff. But the music streaming services are all the same, and that's a problem."

"What happens when something is commoditized is that it becomes a war of price," he continued. "If you can get the exact same thing next door cheaper, somebody is going to enter this game and just lower the price. Spotify's trying with podcasts. Who knows? Maybe that will work."

Iovine is a long-time music producer who worked with the likes of John Lennon and Bruce Springsteen. He cofounded headphone company Beats with rapper Dr Dre, and the pair sold the firm to Apple for $3 billion in 2014. Beats became integral to the fledgling Apple Music streaming service.

Iovine touched on a range of other topics, including his spell at Apple and his relationship with the late Steve Jobs while he was building up Interscope, the record label he cofounded in 1990.

Justin Sullivan / Staff / Getty Images

Iovine said Steve Jobs would advise him on how to produce hardware while sitting at a Greek restaurant.

"I met a bunch of people in tech," he told the New York Times. "I met Steve Jobs and Eddy Cue from Apple. And I said, "Oh, this is where the party is. We need to incorporate this thinking into Interscope."

"Steve Jobs used to sit with me at this Greek restaurant and draw out what I needed to do to make hardware. He'd say, "Here's distribution, here's manufacturing," and he'd be drawing on this paper with a Sharpie. And I'd go, "Oh, [expletive]."

Despite spending time working with Apple, Iovine was positive about its major rival in streaming.

"Let me just say, what [Spotify cofounder] Daniel Ek has done with Spotify is extraordinary," he said. "I knew who he did those original [music label] deals with. Those were impossible deals, and they're suffering from that now. All the streaming companies are.

"But he's done an incredible job."

Read the New York Times interview here.

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