What is at the core of the Apple-Beats enigma?

Apple is moving to reposition itself at the intersection of desirable technology and aspirational fashion, anticipating a future dominated by wearable technology

Mon, May 19, 2014, 01:00

At the beginning of 2013, Canadian Blackberry maker RIM was being crushed by competition from the iPhone and Android, and was crying out for a change in strategy.

So there was a lot at stake when, at a splashy New York press event at the end of January 2013, then chief executive Thorsten Heins made some big announcements: it was rebranding as Blackberry, it was launching new flagship devices, and finally it was unveiling a new global creative director – Alicia Keys.

Yes, that Alicia Keys, purveyor of piano ballads and winner of many Grammys.

It was at that moment I knew for sure that Blackberry was toast – it was patently obvious that the Keys appointment was a desperate attempt to signal some sort of “relevance”, an effort to assert some sort of “cool”. But cool, it need hardly be said, can’t be bought.

I couldn’t help but be reminded of Alicia Keys: global creative director when I first heard about the rumoured $3.2 billion acquisition of Beats by Apple, especially with suggestions that Beats founders Jimmy Iovine and Dr Dre will be joining Apple as executives.

The news led to record levels of bafflement among the technology commentariat, for a number of reasons.

For one thing, it is entirely out of keeping with Apple’s history of acquisitions – they usually spend modestly for specific technologies and talent that then become subsumed into the company. Their previous record acquisition was way back in 1996 when the beleaguered company splashed out $400 million to purchase NeXT and bring Steve Jobs back to the company he founded.

Widespread confusion
But most of the confusion is because it is utterly unclear what exactly Apple boss Tim Cook is splashing out $3.2 billion for – is it the notoriously overpriced headphone brand, the young and not very successful Beats streaming music service, or the human capital in Iovine and Dre?

Some have been quick to draw parallels between Apple’s high-priced products and Beats’ high-priced cans, but Apple’s devices are the best-designed and best-made in their class, while Beats headphones are arguably most famous for not being very good at all. In fact they are a sort of Veblen good, in that they ostentatiously signal a Beats owner is willing to waste a lot of money as an exercise in affiliation and status signalling.

As for the music streaming service, it seems any acquisition would require a renegotiation of licenses with the record labels, rather undermining the point of buying it. And in any case, it’s unclear to me what exactly is stopping Apple from properly developing their iTunes Radio into a Spotify-like streaming service.

Big personalities
And finally there is the talent. Dr Dre is more experienced at this stuff than Alicia Keys, admittedly, but unlikely to have too much responsibility thrust his way once he gets a title at Cupertino.

Iovine, on the other hand, is one of these well-connected music industry impresarios, hugely influential and notoriously canny. He was also a friend of Steve Jobs, apparently, so he at least has some first-hand awareness of Apple’s culture – as a result, most of the speculation around the deal focuses on what Iovine will bring to the executive table.

Perhaps the thinking becomes clear when seen in conjunction with the hiring of former Burberry chief executive Angela Ahrendts to lead Apple’s retail efforts. Harking to the “Beats as a Veblen good” observation, suddenly a certain pattern emerges, stocking senior management with executives whose experience is in cultivating fashionable brands rather than technology products.

In that light, it’s possible to see this acquisition as part of Apple’s move to reposition itself at the intersection of desirable technology and aspirational fashion, anticipating a future in which wearable technology becomes the dominant computing platform.

As the ever-astute Ben Thompson put it, is Apple reinventing itself as “the sort of company that seeks to transcend computing, demoting technology to an essential ingredient of an aspirational brand”?

This deal is fascinating because it marks the first definitively post-Jobs move by Tim Cook. Since the founder’s premature death in 2011, Cook has done an excellent job of sustaining the company he left without ever offering a convincing vision for the future.

This move marks an abrupt change of direction, and in a direction that is hard to parse. It raises concerns, however, because it signals a sharp departure from Apple’s culture of laser-like focus on doing a few things well, and that culture has served it exceptionally well since the NeXT acquisition nearly 20 years ago. Maybe it needs to make such a transition, and maybe Cook will prove to have the long-term vision to go along with his operational expertise, but at this stage I can’t help but feel there’s more reason for scepticism rather than confidence.

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