Beats me: Everyone posits a theory on Apple's $3B deal

Beats acquisition is a Rorschach inkblot test for anyone who follows Apple, asserts analyst

Apple made it official Wednesday that it would acquire Beats Entertainment, but even after weeks of speculation, pundits still refused to reach consensus about whether the deal is smart or not, about what Apple gets, and about what it will do with the new assets.

On top of that, many analysts and long-time Apple observers have continued to use the words "perplexed" and "puzzled," typically anathema to the opinions-on-everything politburo.

"The Beats deal is a little bit of a 'head scratcher' for us," admitted Brian Marshall, an analyst with ISI, in a note to clients after the acquisition was announced.

In itself, that's unusual.

Analysts may read technology's entrails like cuneiform tablet-carrying Sumerian soothsayers -- a tougher task with Apple because the company is more impenetrable than most -- and see different variations of the future. But they usually settle on a thumbs-up or thumbs-down, even if that means two camps. Good. Or not. Likely. Unlikely. Well-spent money. Cash flushed away.

This time there are not just two camps, but scores.

Benedict Evans of the venture capital firm Andreessen Horowitz came up with a memorable description of what was happening. "The Beats deal is a Rorschach Blot: people's reactions slot into their existing view of whether Apple still has 'it.'" Evans said on his blog Wednesday. "If you think Apple's lost it, the Beats deal is confirmation. If you don't, it's ... perplexing."

Analysts continued to try to digest the deal, which has Apple paying $3 billion for Beats Electronics and Beats Music, most of that in cash, a small portion in stock that will vest over time. The acquisition is expected to close later this year.

Beats' co-founders, record executive and producer Jimmy Iovine and rapper Dr. Dre, will become Apple employees reporting to Eddy Cue, who runs the company's Internet software and services division, including iTunes and the App Store.

Interpretations of the deal, its impact and Apple's intelligence remained legion.

"It's the acquisition of the brand more than anything else," said Van Baker of Gartner, in an interview. "They think with Beats they can reach out to a younger, more urban, more hip-hop demographic."

Baker's take leaned toward the "cool" rationale for the deal, that Apple, stumped since Steve Jobs' death, needed an infusion of talent able to define consumer and cultural trends, spot the right moment, make the right move -- someone to reinvigorate the brand, even though Beats will remain a brand separate from Apple's. Many have pegged Iovine as the answer, not as a replacement for Jobs, certainly, but as a tacit Apple admission that its current leadership wasn't up to the challenge.

And that's bothered some, seeing in their forecasts an Apple different than the one they've become used to.

Others have stressed one or the other of the pieces Apple's buying as the main reason for the acquisition, citing evidence, for example, of declining music downloads as proof that Cupertino had to get into streaming. Because it is best to be fast, Apple had to pay an outlandish sum for a service with only a quarter-million paying subscribers, just 2.5% of Spotfiy's 10 million.

"For those consumers that use a streaming subscription app, the playlists and music collection can exist on any device," observed Mark Mulligan, a former analyst with Jupiter Research and Forrester, now co-founder of MIDIA Consulting, which specializes in advising firms on media and content issues. "Suddenly, the handcuffs slip off. This is why Apple has to get streaming right in short order. It simply cannot afford to lose swathes of its most valuable device customers at the next handset replacement cycle," Mulligan wrote on his blog Thursday.

1 2 Page 1
Page 1 of 2
It’s time to break the ChatGPT habit
Shop Tech Products at Amazon