Beats by Dre

Nothin’ but a B thing

Blog

May 11, 2014

The grape-vine, or should I say the ‘apple-vine’ has been over-flowing this week with the latest rumor that Apple is about to spend over 3 billion dollars to acquire Beats Electronics, the high-end headphones corporation co-founded by rapper Dr. Dre. Whilst Apple’s purchase of Beats will be the most expensive acquisition that Apple has made to date by far–if the purchase finalizes, many die-hard apple fans, and mere observers, like myself, have pondered does Apple buying Beats makes sense?

Apple’s history has been to purchase small companies with new technology that Apple then integrates into its existing or future product. One prime example was Siri and, once acquired, these new patents were absorbed almost entirely into Apple’s operation, ceasing to exist as any kind of separate, distinct entity afterwards.

But Beats is different. Beats is not a technology company. Beats Electronics is a high-end maker of headphones, earphones, speakers and accessories. It’s been an established name since its first pair of headphones launched into the market in 2008 and it has one of rap’s best-known producers as its figurehead. It’s a huge brand, and for Apple to buy it for its technology and then kill it off just doesn’t feel right.

So what assets does Beats have that motivates Apple to pay more than seven times over the odds than they have ever paid for a company? Simple claims Apple’s CEO Tim Cook, ‘the culture of the two companies is compatible’. Many ‘Apples’ may disagree, but indeed the culture seems to fit…at least on the surface for their undeniable love to the music.

Apple has been involved with music since Steve Jobs introduced the first iPod and Dr. Dre was originally involved with that project. Dre’s business partner, Iovine was one of the first to suggest that record companies back Apple’s iTunes project and Dr Dre, himself, a popular rapper with a sharp eye for discovering the likes of Eminem and 50 Cent, endorsed iTunes during Steve Jobs’ presentation of it.

Secondly, if Apple finalizes a purchase of Beats, Dr. Dre and Jimmy Iovine will, in their roles at Apple, be able to bring the artists’ vision to iTunes—along with their extensive contacts in the music industry. Apple has been rumored to be overhauling iTunes to better compete with services like Spotify.

Thirdly and most importantly, Beats Electronics is profitable. Revenue for Beats last year was $1.2 billion and it is in a good position to grow further with Apple’s backing. Some may argue that Apple and Beats is somewhat integrated already with Apple currently selling many of Beats’ products in Apple stores.

Despite all the favourable reasons for Apple to acquire Beats, for me, it simply comes down to image. The more I think about the deal between Apple and Beats, I am confident that Apple is, without ambiguity, purchasing Beats for its image. Something which is quite out of character for Apple, where understated, minimalist design, not the ‘look-at-me’ bling of Beats’ red cables and bright colours, has always ruled.

Apple has thrived on exuding its own brand of mercurial cool – one that says “we know best” with such crystal clarity that it convinces you that they really, really do know best. For Apple to think it needs to shell out billions on Beats in order to boost its street cred is unbelievable- and actually a sign that the company is, for the first time, in danger of becoming out of touch with its own brand. Beats are the go –to – brand for footballers and c-list celebrities, the collaboration between the two seems as ‘icky’ and schmaltzy as Samsung securing Snoop Dog next.

I mean, does anyone who is genuinely cool, really want a Beats Audio logo emblazoned on the back of their iPhone? No Diggity!