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AT&T (S ATT) is looking to unload Muve Music, the subscription music service it inherited when it acquired Leap Wireless last year, according to a New York Times report. Neither Muve or AT&T wanted to confirm the report to the Times, but a Leap Wireless spokesperson told the paper that it “decided to explore alternative music options to Muve.”
The move was somewhat expected: Muve is closely connected to Cricket, a prepaid wireless carrier operated by Leap, and AT&T has indicated that it plans to reorganize Cricket in the coming months. AT&T also forged an alliance with Beats Music, promoting the service and subsidizing its family plan.
Muve is one of the most successful music subscription services in the U.S., with more than two million paying subscribers by October of 2013. However, its success largely depended on being owned by Cricket, which bundled the costs of the music service into its data plans, essentially turning every smart phone user into a Muve subscriber.
Potential buyers include competing music services like Beats Music, Rhapsody and Rdio, and possibly new market entrants like Amazon. (S AMZN) Any buyer of the service would now face the challenge to convince these users that they should pay $10 a month for a standalone service. Further complicating the issue is Cricket’s focus on low-income subscribers.
Muve Music founder Jeff Toig, who has since left the company, told me back in 2012 that the majority of his subscribers made less than $30,000 a year, and that many paid their mobile bills with prepaid cards. For Muve, that segment of the market was very interesting, because it was largely ignored by competitors like Spotify. But any standalone music service may find it challenging to convert these users into paying customers.
This is hardly the first time a digital music service has changed hands. Spotify competitor Rhapsody acquired a number of competitors over the years, including Yahoo Music and Napster, and Napster itself acquired AOL Music Now and Virgin Music. However, these transactions were often followed by significant churn, and didn’t do a whole lot to stimulate long-term growth.
Then again, faced with a dominant competitor like Spotifty, smaller services may decide to take the bait and spend some good cash on Muve just to give their short-term user numbers a nice little bump.