My first reaction to the news that Apple may be about to make its biggest ever purchase by scooping up Dr Dre’s Beats headphones business was… why?
For the previously sensible Tim Cook to go on a spree, splashing out billions on a fashion brand like a hiphop artist ordering up Cristal champagne in a club, seems out of character.
Look back at the list of Apple’s recent acquisitions and they could not be more different from Beats. They are mostly small technology businesses, acquired both for the brains of their staff and for the capabilities they might bring to new Apple products.
And with the exception of Siri, the software firm bought to power Apple’s voice-activated digital assistant, you never hear the names of its purchases after they disappear into the Cupertino campus. Look across the range of Apple products and everything is branded with that familiar logo.
But Beats is surely most valuable as a brand – and many dedicated audiophiles will tell you that behind that “b” logo, the quality of its headphones leaves much to be desired. So it would be bizarre to spend $3bn only to plaster an Apple symbol over the headphones.
But it probably isn’t the headphones or the brand that are the main attraction to Apple – it is the need to bolster its music offering. Beats Music, launched in the US earlier this year, is a streaming service which looks as though it might pose the first serious threat to Spotify.
For a decade Apple’s iPod and iTunes made it the biggest player in digital music – but that was in the download era. Now all the growth in music industry revenue is coming from streaming services – and despite the recent launch of iTunes Radio, the company looks behind the pace on this.
The analyst-turned-venture capitalist Benedict Evans tweeted an interesting chart this morning of Google searches for iTunes, Beats and Spotify in the US. iTunes is way ahead but the trend has turned lower, with Spotify and Beats both heading higher.
So if this deal goes through, expect a much more comprehensive subscription music streaming service from Apple, although the music labels may want to revise the terms of their licensing deal with Beats. That could pose a threat to Spotify, which may regret not raising funds via a share sale earlier – or might now find itself a target for acquisition.
Apple – as ever – is saying absolutely nothing, but one man isn’t keeping quiet. In a video posted on Facebook, Dre celebrates loudly and swearily about becoming a member of “the billionaire’s boy club”. “The Forbes List just changed… they need to update the Forbes list.”
Whether that message was approved by the Apple PR team is not clear, but if hip hop’s first billionaire does join Silicon Valley’s most secretive business, the clash of cultures is going to provide endless entertainment.
