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Beats me: Everyone posits a theory on Apple's $3B deal

Gregg Keizer | June 2, 2014
Apple made it official Wednesday that it would acquire Beats Entertainment, but even after weeks of speculation, pundits still can't decide whether the deal is a smart move.

Apple made it official Wednesday that it would acquire Beats Entertainment, but even after weeks of speculation, pundits still refused to reach consensus about whether the deal is smart or not, about what Apple gets, and about what it will do with the new assets.

On top of that, many analysts and long-time Apple observers have continued to use the words "perplexed" and "puzzled," typically anathema to the opinions-on-everything politburo.

"The Beats deal is a little bit of a 'head scratcher' for us," admitted Brian Marshall, an analyst with ISI, in a note to clients after the acquisition was announced.

In itself, that's unusual.

Analysts may read technology's entrails like cuneiform tablet-carrying Sumerian soothsayers — a tougher task with Apple because the company is more impenetrable than most — and see different variations of the future. But they usually settle on a thumbs-up or thumbs-down, even if that means two camps. Good. Or not. Likely. Unlikely. Well-spent money. Cash flushed away.

This time there are not just two camps, but scores.

Benedict Evans of the venture capital firm Andreessen Horowitz came up with a memorable description of what was happening. "The Beats deal is a Rorschach Blot: people's reactions slot into their existing view of whether Apple still has 'it.'" Evans said on his blog Wednesday. "If you think Apple's lost it, the Beats deal is confirmation. If you don't, it's ... perplexing."

Analysts continued to try to digest the deal, which has Apple paying $3 billion for Beats Electronics and Beats Music, most of that in cash, a small portion in stock that will vest over time. The acquisition is expected to close later this year.

Beats' co-founders, record executive and producer Jimmy Iovine and rapper Dr. Dre, will become Apple employees reporting to Eddy Cue, who runs the company's Internet software and services division, including iTunes and the App Store.

Interpretations of the deal, its impact and Apple's intelligence remained legion.

"It's the acquisition of the brand more than anything else," said Van Baker of Gartner, in an interview. "They think with Beats they can reach out to a younger, more urban, more hip-hop demographic."

Baker's take leaned toward the "cool" rationale for the deal, that Apple, stumped since Steve Jobs' death, needed an infusion of talent able to define consumer and cultural trends, spot the right moment, make the right move — someone to reinvigorate the brand, even though Beats will remain a brand separate from Apple's. Many have pegged Iovine as the answer, not as a replacement for Jobs, certainly, but as a tacit Apple admission that its current leadership wasn't up to the challenge.

 

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