When you got a subject and a predicate,
Add it on a dope beat and that’ll make you think.
Some suckaz just tickle me pink to my stomache, cause they don’t flow like this one.
You know what? I won’t hesitate to dis one or two before I’m through. – Dr. Dre, NWA 1988
I haven’t mentioned the Apple-to-buy-Beats headlines for one primary reason. They depress me.
First of all, I am once again disappointed in the vision of Tim Cook to see into the future and skate to where the puck is headed. I personally have for years been explaining to readers that “Apple-branded cloud services, where you can watch any TV episode or listen to any song you’ve downloaded on any mobile Apple device, is the company’s next step in keeping the iPod/iPhone/iPad train rolling. The advantage that Apple has enjoyed with iTunes is beginning to erode, as music services like Pandora and Spotify have been changing consumption habits, with users migrating from single downloads to all-inclusive streaming services.” I wrote that quote more than three years ago.
Steve Jobs was famous for saying one thing and poo-poohing certain business models and then blowing them out of the water if he changed his mind about it later. Well, Steve had long poo-poohed the subscription model like Beats’ and Spotify’s wherein you can download and/or stream any song in their extensive catalog instead of having to purchase songs one at a time like the iTunes model had pioneered back when I first bought Apple more than ten years ago. It was long ago, more than three years ago, really, time to start getting in front of that music subscription model that Spotify has now mastered. Beats? Really? It’s at best a second-rate version of Spotify and at worst a fashion accessory company.
Yes, the Beats headphones, while heavy on bass, are not exactly most audiophile’s dream headphones. They’re an expensive and trendy accessory that will go the way of the boom box fad of the 70s and 80s. Hipsters will treasure some of the older “classic” Beats headphones in a decade or two, but that’s not exactly going to be a billion dollar industry.
The good news is that the $3 billion price tag isn’t really all that much money to Apple shareholders, even if it is, as has been breathlessly reported for days now, the “Largest acquisition in Apple’s history!” Let’s put that number in perspective for you guys – In that same newsletter I linked to above, I wrote, “You better believe that Apple’s $60 billion in cash will be put to use to build out its cloud offerings, in the name of widening its competitive moat. The cloud will allow Apple to couple the ability to consume media anywhere with the Apple hardware cum user experience.”
Apple has indeed invested billions into their cloud technologies in the last three years, and another $3 billion is a rounding error especially when the company has added another $100 billion in cash to the balance sheet since that article and has also paid out many times that amount in dividends in the last three years.
And another way to put that seemingly eye-popping $3 billion price tag on Beats into perspective – Facebook just paid more than six times that amount for a company with barely any employees or revenues called Whatsapp.
I’d rather have the guys at Whatsapp on my team than the Beats founders, Jimmy Iovine and Dr Dre, who are now going to be visionaries at a high-tech company. Uh, they are marketers who smartly got in front of the App Revolution Stock Market Bubble with a music app at the right time while Apple slept without their Steve Jobs “change your mind” approach. Maybe Apple should buy Scutify.com and out apps to hire me next?
Dr. Dre is awesome but neither he nor Maria Carey’s ex, Iovine, are not techies and Apple needs to keep innovating with tech, not celebrity marketers on their payroll.
This acquisition of Beats at this time and place for this kind of money is indeed yet another indicator that we are in my App Revolution Stock Market Bubble, capitalized because it just keeps getting bigger.
I sure wish Apple were spending that money and time on much-needed improved operating systems and mind-blowing features for their gadgets instead of buying a fashion accessory tied to music app company instead.
That said, Apple remains one of my biggest positions since I’d recently built it back up a few months ago and I’m holding that position steady because they still have a lot more going right and are cheap enough that I still like the risk/reward for the next couple years at least in the stock.
I recorded a podcast that further delineates on the topic.