Apple buys Beats: $3 billion for 1 reason

SHARE Apple buys Beats: $3 billion for 1 reason

The … Beatles? From left: Beats co-founder Jimmy Iovine, Apple CEO Tim Cook, Beats co-founder Dr. Dre and Apple SVP Eddy Cue.

Apple’s purchase of Beats went down almost exactly as the out-of-the-blue reportage predicted it would a few weeks ago. Three billion bucks, give or take, and now Apple owns it all.

Beats’ two most public faces, Dr. Dre and Jimmy Iovine, will join Apple as high-level executives. I’ve read that Dre will continue to produce records on the side. But Iovine is stepping down as the head of Interscope Records and walking away from a profoundly successful and influential 25-year career in the business.

That detail is the key to understanding why Apple was so pleased to write the biggest check the company has ever cut. It’s a most welcome piece of data. I wasn’t alone in wondering just what Beats could offer a company like Apple that would be worth $3 billion.

A thriving community of journalists, analysts and commentators formed in the desert, like Burning Man without quite so many fire-stilt-walkers, to chew this rumor over.

Photo by Andrew Burton/Getty Images

“It’s about Beats headphones,” said the initial articles. “The markup on music accessories is deliciously insane and Beats generates about a billion a year.”

This didn’t make much sense to me. You only need to ride a subway or get a cup of coffee near a college campus to see how popular Beats headphones are. But they look so totally un-Apple that Step One of such an acquisition, I thought, would be to apply a new design philosophy to the line. A new design would come with the risk of driving away the fans of the brand.

Plus, Apple already knows how to design and sell headphones and speakers. Would it cost Apple something less than three billion dollars to develop and establish a new accessory market? I have no access to internal Apple planning documents but I’m guessing … yes?

So scratch that theory. It’s not about the headphones.

It’s about … Apple freshening its brand and reconnecting with The Greatest Generation?

(Tom Brokaw defines “The Greatest Generation” as “those men and women who fought and sacrificed to save the world from fascism, and who then rebuilt it from the ashes.” Marketers define it as “people in their teens and early 20s who have lots of discretionary income, no kids or mortgages to prioritize their spending, and who have yet to form immutable brand-loyalty relationships.”)

I suppose it’s true that Apple is no longer as hip as it once was (and, judging by the fact that I still use words like “hip,” neither am I). A certain amount of the excitement that kids once had about owning their first Apple product has moved toward owning their first Beats.

But there are problems and then there are “problems.” Being fashionable and trendy is something that a damn Kardashian seriously worries about, for God’s sake. Not Tim Cook or the rest of the Apple team.

Even if such an aura were worth $3 billion to Apple, “buying” cool just doesn’t work. This is business, not primitive mythology; you don’t acquire the cool of your enemy by consuming your enemy’s heart. You just become the jerk who killed the cool guy whom everyone liked. The fact that your mouth and neck are now covered with blood and bile won’t helping you get any dates, either.

Onward to Theory Three. Beats has a well-regarded subscription music service! Apple launched iTunes Radio late last year, and response has been underwhelming. Apple might be buying Beats Streaming for the same reasons it bought the precursors to iTunes, GarageBand and iMovie. It’s a fast-forward to having A Working Thing That Apparently We Don’t Really Know How To Build Ourselves.

Mmmmaybe. Subscription music is a non-optional product for a company that makes money from media. CDs and the ripping thereof led my generation to disregard the concept of the “album” and think instead of “playlists.” The next generation grew up buying handfuls of 99 cent tracks instead of complete $16 albums. The current generation is learning that music ownership is expensive, restrictive and unnecessary. Why limit yourself to a handful of music that you’ll probably tire of when a small monthly subscription fee gives you access to all music?

Furthermore, subscriptions are the language of social music appreciation. If all your friends have access to that same library, then sharing a Spotify playlist is easy to start with and then second nature.

I had two problems with the “Apple wants a subscription music service” theory. Again, why wouldn’t they build one themselves? Apple’s never been afraid to buy what they need, true. But its track record for developing brilliant things in-house stands for itself.

Even bundling these three reasons together doesn’t get at the truth of this transaction, I think.

By the start of this week, I had already concluded that this deal — if it actually went through — was much bigger than any one or even any group of Beats products. Apple’s motivation could only be its vision of where it wanted to be in 2020 and beyond.

The fact that Iovine is committing his own future to Apple as well as Beats’ caused a simple thought to drop cleanly into my head:

“Apple acquiring Beats in 2014 is like the Beatles acquiring Ringo Starr in 1962.”

The acquisition isn’t about a product that Apple wants to sell, or a service that they want to create, or a market that they want to reach. Buying Beats will surely pay off in all three of those categories but I think Apple’s real attraction to this deal is that it makes the entire Apple team stronger and more ambitious.

Just like when John, Paul, and George added Mr. Starkey to the mix, Apple is adding someone who brings a new personality, a new point of view and a new set of passions to the team.

I expect Apple to have a new line of Beats-branded headphones, sure. (And it looks like my early online comments were right: On the same day that Apple announced the acquisition, Beats announced that it was ending its relationship with the firm that had come up with most of its iconic product designs).

It’s also obvious that Apple is investing in the hands-on skills that Iovine can brings to a music store and his ability to make deals with labels. Every profile of Iovine that’s appeared in the last six months refers to his role inside the music industry and his gifts for understanding what music consumers want.

Beats headphones have never impressed me. I think they look tacky. I don’t think they sound better than less-trendy brands that cost a third as much. Even the top-of-the-line $300 Studio cans do weird things to my music that I don’t like. I’d rather stick with my old $70 Sonys.

But! People like that sound. Audio pedants design headphones that are flawless from an engineering point of view, but which fail to please consumer ears. Beats was savvy enough to design products to please the people with the money, not the reviewers with the oscilloscopes and the huge library of test sounds (all on vinyl, presumably).

All of these things that Iovine brings to Apple are obvious, obvious, obvious. And boring. I’m excited about the Beats deal because I’m convinced that Iovine will bring new energy to Apple products and services across the board.

Apple paid $3 billion for the influence that Iovine and the Beats team will have on the iTunes user interface. On the quality of the sound in every Apple product. On the balance between media features and productivity features in upcoming editions of Mac OS. Even on the shapes of future iPhones and the number of USB ports on future MacBooks.

It’ll happen because of Apple’s cohesive culture.

Even critics who aren’t necessarily fans of Ringo’s drumming concur that he was an essential part of the Beatles’ post-1962 success. He was the difference between the group being merely successful and being a full-on phenomenon, between music that was popular and music that was influential, even between a band that’s world-renown and one that can honestly be thought of as part of world history.

Because the Beatles were four people who worked together and toured together constantly. Ringo contributed more than the drum fills of “Hey, Jude” and the vocals of “Yellow Submarine.” He was part of the process of making a Beatles record. John, Paul and George could have hired a different drummer in 1962. The resulting band wouldn’t have been able to do “Sgt. Pepper’s.”

That stuff — the indefinable alchemy of different opinions and drives interacting with each other in a team on a daily basis — is important to Apple. We who follow the company with interest sometimes forget that, and fall into the lazy trap of attributing ideas and changes to specific high-profile individuals. We speak of the flattening of the iOS user interface and attribute it solely to Jony Ive’s influence.

In truth, Apple, more than any other company, acts like a single organism. Many people have influenced a new tentpole product by the time Apple reveals it onstage. It’s not the work of a handful of iconoclastic auteur engineers and designers; every Apple product is the output of a companywide culture.

And now that culture chorus has additional voices. They’re a fresh, strong ones. Way, way too much bass for my tastes, but hey, that’s just my opinion.

Jimmy Iovine will wear an Apple laminated employee ID badge several days a week.

Apple has decided that its collective brain, in its current configuration, was underequipped for the future. This is all about 2020, and 2030, and beyond. A tech company can’t remain relevant unless it’s a cautious curator of its own way of thinking, and of reacting to the world around itself.

That’s my conclusion: Apple bought Beats because the company wanted to improve the company’s ability to think, plan and create.

By buying Beats and adding Iovine to the team, Apple has literally expanded its mind.

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