If you believe Twitter, the news that Apple is probably buying the headphone maker Beats by Dre for a tidy $3.2 billion is the worst kind of sacrilege. Steve Jobs is spinning in his grave, or better yet, clawing his way back from the great beyond to smack Tim Cook around the head. Jobs, we are told, would never buy someone’s else’s innovation. Oh, and didn’t you know, Beats headphones suck.
One is reminded of Jobs’ famous recruitment call to arms to Pespico executive John Sculley, “Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?” For Apple’s outraged critics, Beats headphones are the new sugared water, a marketing scam that has conned kids into buying bad technology. Where’s the legendary Apple vision?
Yep, there’s a whole lot of crotchetiness going around. Business Insider’s Jay Yarow warns that the purchase goes “against Apple’s soul.” Even Apple blogger John Gruber, who can generally be counted on to look favorably on all things that emanate from Cupertino, is confused.
Let’s note, first, that the vast majority of people who are unhappy about the deal are not in the demographic that purchases Beats by Dre (pretty much every other seventh grader in the country). There’s a generation gap here that may or not be influenced by people who don’t listen to a whole lot of hip-hop stations on Pandora. But the importance of that demographic should not be underestimated. Apple is a consumer electronics company that is able to charge a premium for its products in part because they are perceived as cool. It is crucial for Apple’s continued profitability that young people regard Apple as hip. No matter what one thinks about the sound quality of Beats headphones, there is little question that kids today consider them an essential fashion accessory. Apple, like it or not, is in the fashion business.
And really, how hard would it be for Apple to make all the complaints about quality just go away by applying its legendary technical prowess to upgrading the next version of Beats by Dre? In the meantime, the company has already secured a pipeline directly into the head of a generation that, no joke, will determine the future of both the music and technology business. Just a guess, but I’m thinking Steve Jobs might approve.
But there’s also another way to look at this. In mid-2014, the first reaction one has when hearing that a tech company is spending billions of dollars to buy another company is to think: oh no, here we go again, more proof that the tech-bubble apocalypse is imminent. But let’s look at the numbers. Apple is spending $3.2 billion to buy a company that is believed to already be generating more than a billion dollars a year in revenue. Compared to other recent headline purchases — Facebook’s purchase of VR headgear maker Oculus Rift, for example, a company that generates no revenue and has no immediate prospects to do so — scooping up Beats by Dre is a fantastic deal.
Even in the midst of all the grumbling, the tech media has offered a gazillion reasons why Apple wants to purchase Beats by Dre. It’s a way to get into the streaming music business and confront the mortal threat of Spotify to iTunes. It’s a wearable technology play. It’s a mega “aqui-hire” designed to bring music biz titan and Beats co-founder Jimmy Iovine into the Apple fold.
But it doesn’t have to be that complicated. Apple is buying a money-making machine that has its hooks into the youth market. I can’t imagine anything more synergistic with Apple’s current identity.