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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.

And that's bothered some, seeing in their forecasts an Apple different than the one they've become used to.

Others have stressed one or the other of the pieces Apple's buying as the main reason for the acquisition, citing evidence, for example, of declining music downloads as proof that Cupertino had to get into streaming. Because it is best to be fast, Apple had to pay an outlandish sum for a service with only a quarter-million paying subscribers, just 2.5% of Spotfiy's 10 million.

"For those consumers that use a streaming subscription app, the playlists and music collection can exist on any device," observed Mark Mulligan, a former analyst with Jupiter Research and Forrester, now co-founder of MIDIA Consulting, which specializes in advising firms on media and content issues. "Suddenly, the handcuffs slip off. This is why Apple has to get streaming right in short order. It simply cannot afford to lose swathes of its most valuable device customers at the next handset replacement cycle," Mulligan wrote on his blog Thursday.

Or they touted the cash flow of Beats Electronics, and Apple's stagnating sales in accessories, which could use a shot in the arm that the pricey headphones would provide. If the revenue boost those sales generate get itchy, fickle investors off Apple's back, so much the better.

Others have looked at the deal and seen nothing but negatives, picking each component apart. Beats by Dre headphones are technically crap, they say, even though Beats' account for the majority of the premium-priced over-the-ear market. Beats Music is nothing, they argue, that Apple couldn't have built in its sleep. And Iovine and Dre, well, they'll never fit into the Apple corporate "culture." Dre's woozy, self-congratulatory video that hit YouTube when the story broke earlier in May was all the proof those pundits needed, they said.

The interpretation of the Apple-Beats deal has been incredibly messy, with almost as many interpretations as interpreters.

Not that that's a bad thing. It will likely spawn a much longer media cycle than Apple's usual stories, a boon to Cupertino. With so many available angles, reporters and bloggers have more fodder than the usual — like the introduction of a new iPhone or iPad or Mac — and so it will take longer to exhaust the supply.

But it has been confusing. With so many fishing for answers, the water's become incredibly muddy. Why so little agreement on this move?

"I think, ultimately, the issue was that people thought it had to be about just one thing," said Jan Dawson, chief analyst at Jackdaw, when asked why the analysis of the acquisition remains so tangled. "Some have been insistent that it's about this and not about that, and trying to explain it with one reason. The reality is, that's not the case. It's not about one thing. It's about all three things."

 

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