AT&T is teaming up with Beats Music to offer subscription-based music streaming that will take on Spotify.

Beats Music hopes to make what has been a money-losing category as hip and profitable as its gear.

The offer, a good deal if even two people use it, is an attempt to bring down the cost of music for families that pay AT&T for cellphone service. It’s part of Beats’ major launch strategy since its headphone maker parent, Beats Electronics, bought streaming service MOG in 2012.

Beats Music works on the MOG platform, though the look and emphasis on human-curated playlists and recommendations is different.

With plans to add future promotional tie-ins with the popular headphone line, Beats Music would compete with services like Spotify, Rhapsody and Rdio.

Founders Jimmy Iovine and Dr. Dre will offer a $9.99-a- month product combining hand-curated tunes with technology that chooses music based on users’ tastes and moods. To challenge industry leader Spotify, Beats Music forged partnerships with AT&T. and Target Corp., and signed Ellen Degeneres to promote the service on her show, said Chief Executive Officer Ian Rogers.

“It’s a business model that requires scale,” Rogers said in an interview. “You need millions of subs for the business to work. By definition, there will only be a few players.”

The challenge will be to gain enough subscribers to turn a profit. Spotify, with more than 24 million worldwide users, has converted just 6 million into paying subscribers — far below the 38 million of Netflix, the online video service, for example. Beats Music is also competing with online options that include Pandora Media Inc. radio and Apple Inc.’s ITunes Radio.

“Our collaboration with Beats Music is solving two major industry challenges. Beats Music is focused on delivering a different music service with personalized curation from real industry experts and AT&T is focused on breaking the affordability barrier that currently exists for families in subscription and downloaded music. Everyone in the family loves music,” said David Christopher, AT&T Mobility’s chief marketing officer.

“AT&T developed an innovative offer that lets each member of the family enjoy unlimited downloads of the music they love, as well as access to all that is unique about Beats Music – all at breakthrough value on a premium wireless network.”

Music-streaming services need 5 million to 10 million paying customers to profit after paying licensing fees to rights holders, according to Roger Entner, an analyst with Recon Analytics in Boston.

No Freebies

Unlike others, Beats Music has no plans to offer a free, ad-supported option, Rogers said. Instead, the company plans to achieve scale through deals with wireless carrier AT&T and Target, the Minneapolis-based retailer.

AT&T will offer a 30-day trial of individual Beats Music subscriptions, as well as an exclusive family plan for $14.99 that starts with 90 days free, covering as many as five users and 10 devices. Once the trial ends, the cost is included in customers’ wireless bill, Christopher said in an interview with Bloomberg.

“We can change the game with subscription music services marketed through carriers,” Christopher said.

Target will provide 30-day free trials to customers who buy some electronics and entertainment items the week of Jan. 26, said Erin Conroy, a spokeswoman.

Beats Music applications will become available in the U.S. on Jan. 21 online and for mobile devices running Apple Inc.’s iOS, Google Inc.’s Android and Microsoft Corp. software, according to the Santa Monica, California-based company. The service begins Jan. 24 on AT&T, Christopher said.

AT&T Plan

AT&T offered this breakdown on the plan:

  • “Family-friendly. AT&T wireless customers on a multiline account can get music how they want, when they want, at a fantastic price.
  • “Unlimited streaming and downloads. AT&T customers with Beats Music get unlimited access to curated music (both streaming and downloaded for offline listening) of the songs, albums and playlists they love to hear, no matter where they are. Five family members can each get their own personal music, on their own personal devices, and create their own playlists. They can continue to access those songs, albums and playlists for as long as they are subscribed to the Beats Music service.
  • “Human-curated content for the ultimate personalization. In addition to the best personalization technology, Beats Music is unique because human experts curate hand-picked songs while streaming to deliver just the right tune at just the right time. Imagine having your playlist created by the top music experts based on your mood or specific moment. Until now, streaming services haven’t delivered this level of personalization with a human touch.”

Mobile Phones

While the number of paying streaming-music customers stood at 29 million last year, the market is projected to reach 191 million worldwide by the 2019, according to ABI Research. The cost of rights, overhead and technology mean services need large numbers of users to be viable.

“No one’s cracked the nut in terms of how to make money,” said Rich Karpinski, a senior analyst with Yankee Group. “Subscription music makes a ton of sense, but it’s a big land change for consumers in terms of understanding advantages to paying for it.”

Spotify, the Stockholm-based streaming leader, has lost $200 million since its founding in 2006, according to an October estimate from PrivCo, a researcher that follows closely held companies.

As with Spotify, Beats Music will allow subscribers to search and play music, as well as create and share playlists. Users can save unlimited tracks on mobile devices and computers, accessible as long as the subscription is current.

Celebrity Friends

Iovine, the record producer and music executive, and Dr. Dre, the rap star born Andre Young, marshaled their celebrity friends to position headphones from Beats Electronics as something more than run-of-the-mill audio gear.

With bass-thumping sound technology and a prominent circular design, the company attracted young consumers willing to pay $299 for the latest in hip, gaining a 65 percent share of the headphone market, according to researcher IDC. Dre and Iovine expanded into computers made by Hewlett-Packard Co., automotive sound systems and smartphones created by HTC Corp., which took a stake in Beats Electronics that it later sold back to the company.

To parlay their brand position into streaming, Iovine and Dr. Dre plan a major marketing campaign to highlight how the service differs from others. Beats Music will run an ad in the Super Bowl, the New York Post reported. A 30-second spot during the Feb. 2 telecast on Fox costs an average of $4 million, according to Kantar Media.

“Beats is not only a billion-dollar headphone company but a brand that means premium audio,” Rogers said. “It’s not about delivering more tracks. We want to start to answer the question of, what should I listen to?”

The partnership with Dallas-based AT&T may lead to additional partnerships in which artists sponsor mobile streaming of their latest tracks, eliminating concerns over exceeding monthly data plans, Yankee Group’s Karpinski said.

“You can be really creative in how you present music and create a way in which both sides, the carrier and the service, can attract and retain customers,” Karpinski said.