“Oh Shit, the Forbes list just changed.” The words come from Tyrese Gibson about a minute into a video posted to (and since pulled from) Facebook just a few hours ago. Gibson is talking about Dr. Dre, who stands behind him, arm draped over his shoulder. Dre himself then addresses the camera directly, boasting “The first billionaire in hip-hop, right here.” High spirits (and, be warned, very colorful language) pepper the video thanks to “all the Heinekens” that have evidently been drunk. Celebrations? If you’d just secured a $3.2 billion deal for your company, you’d probably splash out on a case of dutch courage or two, too. Sure, this is still not actual confirmation, but it’s the nearest thing to public acknowledgement of the buyout yet. Why, then, do many still feel like the deal makes no sense?
Apple’s iTunes store and iPod were extremely influential to how we listen to music now. In not at all overstated terms, they almost certainly paved the way for a brand like Beats to even be able to happen. Other parallels aren’t hard to find, either. Many perceive both brands as “premium,” likely as many consider them overpriced/over hyped. They both owe a good amount of their success to strong, charismatic CEOs. Both brands have become icons, badges, labels to be worn, something to be seen with (or without!). Why then, would a company that has the capacity, brand equity and experience in making audio hardware and streaming software want to pay such a huge price ($3.2 billion, reportedly) for something it can already do?
Usually, at this point, the answer would be “users.” That’s really what Facebook was buying when it snapped up WhatsApp for $19 billion. Zuckerberg likely had more developers working on poke than WhatsApp did in its whole office, but the lure of an extra 450 million daily customers was evidently worth the price tag. The question is, what can Beats offer in terms of users? Its headphone sales are undoubtedly strong, and margins are very likely favorable, but enough to merit that $3.2 billion asking price? Unlikely. Especially compared to what it would cost Apple to develop its own extended range of headphones, that would likely overlap in terms of potential customer anyway. As for Beats music? The jury is largely still out on that. It’s certainly got some innovative features, and deals with AT&T etc. will have got people using it, but we still keep coming back to the question: why Beats, why now?
What would a Beats and Apple collaboration even look like, anyway? Rebranded headphones? Unlikely. Co-branded? Probably not. At best, the headphones would remain as they are, it’s Beats music (and perhaps its recent moves with Chevrolet/ Chrysler) that would be higher up the list for absorption into the Apple tree. The fact is, iTunes Radio hasn’t really made the splash that the iTunes music store did a decade or so ago. Apple’s CarPlay is also still in its infancy. Therefore, these two arms of Beats, at first glance, seem the most viable candidates for Apple’s affection. In short, it arguably boils down to Apple buying Beats for a few of its ideas, and a lot of its cool-factor. Something Apple has arguably traded for market penetration over the last decade. Could Apple really do more with Dre’s empire than HTC did (at much less capital expense)? If nothing else, it would spruce up the much-maligned in-box headphones it sells, and prove a rare toe-dip into the world of Android (via Beats music), something it would desperately need to do for true streaming ubiquity.
For all amount of logical reasons why this shouldn’t happen (not least that Apple isn’t known for buying big brands), the noise behind this story is impossible to ignore. The rumors may remain just that right now, but the Financial Times is confident in its sources, and the Wall Street Journal isn’t folding in much skepticism with its reports, either. Not to mention Bloomberg and the New York Times also putting their name to the story. This latest video might not be the outright confirmation that we’re craving, but it is the first comment on it from either of the parties involved. It could also be a hilarious wind-up, an industry whisper that got out of hand, and landed back in Dre’s lap, with him taking full (fun) advantage. After all, if the ink were still wet on a deal, it would still likely be subject to intense terms and conditions, likely involving nondisclosure. But one thing’s for sure, he sure looks happy about something. And we doubt it’s the Heineken.
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What does hip-hop's 'first billionaire' have that Apple wants?
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