If Steve Jobs were alive, then Apple's decision to pay $3.2 billion to buy a company that makes fashionable headphones would not be questioned by anyone. For Apple, $3.2 billion corresponds to three weeks of revenue or one fiftieth of its cash reserves (150 billion)! The fact is that its tactics so far were based on "small" acquisitions of unknown companies, which made specific innovative products (e.g. voice recognition system), which Apple integrated into its "ecosystem". It is also a fact that Jobs himself had declared that he preferred to keep the "ammunition" (see money) "dry" rather than investing in resounding acquisitions. However, blind trust in his instincts would foreshadow a genius move, the next "checkmate" on the chessboard.
But Jobs is no longer here. And the news that his company is buying Beats, owned by 49-year-old former rapper and record producer Dr. Dre (real name Andre Romelle Young) and 61-year-old music industry mogul Jimmy Iovine, who is behind stars like U2 and Lady Gaga, has left puzzled analysts speculating about possible scenarios.
Beats, in six years, has established itself as a brand in the music industry, with a 65% share of the luxury headphone market. Based on technology developed by the small audio company Monster, of the self-made Noel Lee (an excellent scientist with zero entrepreneurial instinct, who assigned all rights and is left out of the current agreement), launched headphones-"headphones" with a modern design in various colors and with the name Dr. Dre as a "flag", and promoted them with marketing for... seminar. Rappers, DJs and celebrities established them as fashion accessories, while the company's demonic founders invented ways to advertise them even indirectly - like at the Olympics, where they handed them out to famous athletes. Experts point out that Beats, which cost up to 400 euros (!), do not justify their price in terms of quality and that people are mainly paying for their brand. The listening experience, with a system for neutralizing external noise and deafening bass, is like having a… club in your ears. But the company managed to have 1.2 billion in revenue per year.
One scenario is that Apple wants to leverage Beats’ fashion-lifestyle-marketing hybrid in a new generation of wearable tech accessories. Another has to do with music distribution. The music market model, which it dominated for 11 years with iTunes, seems to be aging. The turnover from legal downloads is declining – a sign that the public wants to listen to music, but not fill hard drives with thousands of songs. The next situation is streaming: legal subscription services like Spotify, which provide access to millions of songs, with the ability to select and register in preference lists. Beats has already launched its own service, claiming that it is the most sophisticated there is, with algorithms that make… a program for each user, depending on the time, mood or even where they are, for $9.99 a month. Is that where Apple wants to "step" to ensure its dominance in the music market?
The problem with both scenarios is that Apple theoretically doesn’t need a company like Beats – neither in design nor in music streaming technology. So we end up with… the third. Now too big, without its pioneering founder, pressured by competition from Google and Samsung and seemingly in need of the next revolutionary launch, Apple wants to attract fresh “brains”. It recently paid $68 million for the transfer of Angela Ahrendts, the manager who “resurrected” the fashion house Burberry, who took over its commercial part. The demonic Dr. Dre and Jimmy Iovine could become, through the acquisition, its next transfers. And together with Tim Cook and the legendary Johnny Ive, the head of design, they could create the ultimate dream team. We’ll see.
Source: kathimerini.gr
