‘Apple must’ be crazy to buy Beats

Beats Electronics Celebrates The Launch Of Lil Wayne Edition Pro Headphones

It’s funny to see the contrasting approaches to how people report Apple in comparison with Google. News that Apple is set to spend $3.2 billion on Beats attracts ridicule, while reports of Google’s $12 billion acquisition of Motorola Mobility were insanely starry-eyed.

The reason for Apple’s Beats purchase seems clear: streaming music services and the deep industry knowledge of company founder, Jimmy Iovine.

The reasons for purchasing Motorola seemed to consist of Google’s attempt to further its nuclear war against Apple. (And ignore critics of that war forever, please, as with what so many see as its imitation, it was Google, not Apple, that fired the first projectile in that war).

Despite this comparison, many pundits seem unable to think in a positive way about Apple’s acquisition. It as if they forget that Apple (unlike Google) never spends money without a good reason. Take a look at these example headlines that reflect the confusion pundits feel:

All of these people are wrong. Apple clearly sees value in Beats, and the chief slice of value I see in the deal is the industry knowledge and vision of Jimmy Iovine. That intellectual investment may prove invaluable as Apple seeks to resurrect its iTunes brand, and take itself to the forefront not of how people purchase music today, but how they will acquire it tomorrow.

This is a company set to cast some fresh dice into the game.

Part of its gamble here is to invest in nurturing fresh young talent — and an investment in Iovine and Beats makes sense in those terms. After all, in May last year Iovine and Dr. Dre donated $70 million to the University of Southern California to create the USC Jimmy Iovine and Andre Young Academy for Arts, Technology and the Business of Innovation. The goal of the Academy being:

“To shape the future by nurturing the talents, passions, leadership and risk-taking of uniquely qualified students who are motivated to explore and create new art forms, technologies, and business models.”

Pundits don’t have a clue. They can’t see beyond their nose. Ignore them and consider the strength and significance of Apple’s growing brains trust. This is a future-focused investment aimed at creating a media acquisition platform to underpin Apple’s other products for the next decade.

The following video may be informative (as might be news that Beats designer Robert Brunner hired Jony Ive to Apple in the first place).

 

Jonny Evans

Watching Apple since 1999. I don't say what they should do. I say what they might do. They sometimes do.

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2 Responses

  1. filecat13 says:

    That’s a great clip, Jonny. Thanks.

    Oh, the possibilities!

  2. Constable Odo says:

    Gene Munster came out quickly and told his clients to avoid Apple based on the Beats acquisition. He simply flat-out said the deal was bad for Apple and the cost didn’t add up in his head. It was as simple as that. $3.2 billion was too much for Apple to spend on a company maybe worth only $2 billion despite Apple probably takes in $3.2 billion every week. It’s sure not like the risk of AT&T acquiring DirecTV for $45 billion. Munster is an Ivy League senior analyst and can’t fathom anything beyond the raw numbers of a spreadsheet. He figures that Dr. Dre doesn’t have a real doctor’s degree and Beats hardware is crap. I don’t care about that. I’m more interested in the people behind Beats who are capable of making profits and creating content and all the music industry connections that go along with it. To me, that is easily worth $3.2 billion.

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