My thoughts on why Apple’s acquisition of Beats By Dre is a winner

Here’s my response to someone who posted their disapproval of Apple’s pending acquisition of Beats By Dre and Beats Music on the New York Tech Meetup list.
In it, I reference the fact that on the street, this news is going to travel far and fast. Every young person wearing Beats By Dre headphones is going to look up to Dr. Dre for his billion dollar and ask – how can I get there too? This exit will inspire generations of young people to continue to push the envelope and get into tech and music. That’s a good thing.
Here’s what I said:
As a music industry professional for 30-years, I am going to say that I completely disagree with you. This is a slick move by Apple.
1. Apple already has a deal with AT&T, who recently had done a deal with Beats Music and is now positioning itself to offload Muve in favor of a full Beats Music integration. If they replicate the Muve model, which Cricket Wireless perfected, it would be to bundle Beats Music with every iPhone, putting Apple squarely in the lead in streaming music overnight and pushing Spotify and Rdio further away from the ability to jump onto an integrated hardware platform.
2. Beats By Dre headphones do not have to be top quality for you or I to enjoy them. They are a fashion statement for a new generation who tired of ever worse quality by listening to MP3 with ear buds. No one likes the ear buds, which is why Beats By Dre, Skull and other designer headphone manufacturers come in. Even Sennheiser, Sony and AKG can’t compete in that consumer space. Winner: Beats By Dre and Apple, who have sold Beats By Dre headphones in all of their stores for a year or so anyway. But Beats By Dre is more than just headphones – it’s an iconic brand led by the West Coast version of P. Diddy. When you buy Beats By Dre and Beats Music, you’re buying Jimmy Iovine and Dr. Dre, two of the most influential record industry executives in the business today.
3. No one has said this yet, but making Dr. Dre a billionaire is good business in terms of diversity. Escalating Dre to Billionaire status will be word on the streets everywhere. If you never lived the street life, which I had when I was younger, you won’t understand the dynamics of the natural reaction to this news. Everyone on the street will get hyped Dre got paid. It will go a long way, reaching some young people who will work hard to emulate that success story.
4. Apple knows downloads are starting to decline and its Apple Radio service is struggling. Putting the radio service together with Beats Music and pushing that out through its ecosystem instantly gives it a foothold in streaming music for years to come. Now, they have to go to the automobile. And, who’s to say they don’t innovate the headphone and make it into a battery powered device with wi-fi to stream music directly through the headset, bypassing the phone entirely. Stranger things have happened.
5. While artists may decry payments for streaming, the more heavy players get into streaming, the better for artists wallets. This deal will give more natural access to music streaming on the iPhone through an AT&T bundled partnership than any other service could ever dream of. The only thing that could rival it is if Verizon bought Spotify. Even then, Spotify is cool and all, but it doesn’t have Dre. That’s the difference. Dre has fans on the street. What he does is emulated by young people we call trendsetters. They may not have the money that translates to power, but they have street cred and rep, which transforms brands from wishful thinking into household names.
Everyone loves to pile on to these things when they happen, looking at Beats as half-ass to Apple quality, when, in fact you see Beats By Dre everywhere. They are as ubiquitous as the iPod was. And, they’ve attained knock-off status. Once the Chinese starting knocking something off, you know you got a hit.

 

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