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Justifying Beats
One side effect of how long it took to announce the Beats deal is that it gave analysts and pundits plenty of time to come to grips with Apple’s possible rationale. Philip Elmer-DeWitt has a roundup of analyst reactions, but I think M.G. Siegler summed it up best:
Honestly, I’ve been confused as to why others have been so confused by this deal. In buying Beats, Apple gets three key things:
- A music streaming service that can be run fully separate from iTunes, meaning it won’t entirely kill the download business…
- Jimmy Iovine, who has long supported Apple in the music business and was instrumental in helping to get iTunes off the ground in the first place…
- The headphone business, which happens to make quite a bit of money…
The only real argument I see is with the $3 billion price. But $3 billion to you or me is not $3 billion to Apple. Or to any other company, for that matter. Apple makes roughly that amount in profit a month.
This is basically the argument I made after the deal was first rumored: from a strictly business perspective, this deal is eminently justifiable. To my mind the most valid and justifiable criticism is much more difficult to articulate, and has to do with culture and executive focus (which this episode of Exponent gets into).
That said, you can make another positive argument from a similarly intangible position. Note that Beats Music is going to be operated independently from iTunes (which is clearly being disrupted by streaming services, including YouTube); according to Clay Christensen, the best way to respond to disruption is to set up a separate division that is insulated from the main company and its tendency to kill alternative business models in the crib (such as a business model that entails having apps on Android and Windows Phone). Perhaps accidentally, but more likely intentionally, Apple is doing just what the Doctor (of Business Administration) ordered.
Note: After I wrote this I discovered this great article by Michael Vakulenko suggesting that Apple might make Beats into a platform for artists akin to the app store. It’s a fascinating idea, not just for Beats, but also for what it might mean for the App Store, which itself is desperately in need of curation.
The full list of topics covered this week in the Daily Update include:
- Windows 8.1 with Bing
- Hacking and Corporate Responsibility
- Asian Chat App Updates
- Apple’s New iPad Ads (free)
- Intel’s Missed Opportunity (free)
- Rap Genius Fires Co-founder (free)
- Satya Nadella at the Code Conference
- Google’s Self-driving Car Video
- Intel to Work with Rockchip on SoC
- Apple Announces Beats Acquisition
- Beats Music to Stay on Android
- Square Launches Cash Advance Program
- Justifying Beats
- Amazon Prime Streaming Music
- Swipely and Square Follow-up
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