Apple Buys Beats: The End of an Era for Apple and Dr. Dre?

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Now that Apple has officially purchased Beats Music and Beats Electronics, we are left to ponder its broader meanings as the man who once rapped about gangbanging and reefer now becomes a high-profile Apple employee. I believe the deal symbolizes the possible end of an era: an end to Apple as an innovative brand, and a farewell to Dr. Dre as a music maker.

The Deal

As reported widely, Apple officially acquired music service Beats Music and Beats Electronics (which makes Beats headphones, speakers and audio software) for a total purchase price of $2.6 billion. As part of the deal, Beats co-founders Jimmy Iovine and Dr. Dre have joined Apple to take on unspecified roles.

The acquisition is widely viewed as Apple playing catch-up to streaming services such as Spotify and Pandora. Apple’s own press release stressed the importance of Beats Music. As a sign of respect for the Beats brand (and lack of belief in its own), Apple will keep the subscription Beats Music intact, alongside Apple’s own iTunes Radio. Beats Music has hardly taken the world by storm as a streaming competitor to Spotify and Pandora since being launched in January 2014. But Apple Insider reports that the service has a strong conversion rate, with the vast majority of tracks being streamed by paying customers. Meantime, iTunes, which relies on a download model, has seen its sales slump as consumers latch on to streaming services. iTunes Radio, Apple’s answer to streaming, has yet to take hold.

Apple Buys into Innovation

When I first heard the rumors of Apple buying Beats weeks ago, I remembered back in 2011 Farhad Manjoo of Fast Company touting Amazon, Apple, Facebook, and Google as the four economic titans fueling the “great tech war,” pitted against each other in a “battle for the future of the digital economy.” Apple emerged as the clear favorite of consumer innovation, reeling off one game-changing product after another. Facebook? Well, Mark Zuckerberg was riding the momentum of a business built off one compelling idea, that as naturally social creatures, human beings would flock to a digital place where we could emulate our offline social behaviors online. But on top of the core innovation of launching Facebook, Zuckerberg’s massive wealth, and Facebook’s phenomenal growth, was built off pedestrian advertising programs and ongoing tweaks to the core product as opposed to anything newsworthy (unless by “newsworthy” we want to count noticeable gaffes such as Beacon).

But that was then. Today Facebook seems to be setting the pace by buying into innovation. And now Apple, having failed to capture our imagination with daring new products in the post-Jobs era, is following Facebook’s lead by doing the same. Earlier this year, Facebook announced the purchase of messenger service WhatsApp for $19 billion, thus acquiring the most popular messaging app for smartphones and a potential rival. Within weeks, Facebook announced another major acquisition, this time shelling out $2 billion for virtual reality firm Oculus. The two acquisitions were but the latest in a long list of examples of Zuckerberg using cash, not innovation from within, to grow.

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Under the Tim Cook era, the Apple brand has gradually lost its luster in the innovation department, with the iPad Mini and iPhone 5 coming across as marginal product enhancements as opposed to the major breakthroughs in design and functionality that once disrupted entire industries. Meantime, Apple has complemented its product enhancements with acquisitions: PrimeSense, an Israeli 3D sensing company, Embark, a mapping company, and now Beats.

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Even during the Steve Jobs glory years, Apple’s innovations were not always homegrown. For instance, Apple’s own GarageBand app was fueled by the acquisition of Nothing Real and Shake, and of course Apple purchased Jobs’s own NeXT Computer. But the acquisitions contributed to in-house innovations, whereas acquisition seems to be Apple’s sole innovation strategy today.

As Maynard Um, a Wells Fargo financial analyst, said in a New York Times article by Brian Chen, “Apple was at the front of that curve, and if that’s the reason for the acquisition, it would lend credence to the view that maybe they’re not ahead of the curve anymore.”

Bob Lefsetz puts it even more bluntly in The Lefsetz Letter: “Tim Cook is creatively bankrupt.”

I hope Um and Lefsetz are both wrong. Or if they’re right, perhaps Tim Cook will start injecting more innovation by selectively bringing aboard talented people who can usher in fresh ideas through collaboration with Apple’s own in-house talent (read: Burberry’s Angela Ahrendts joining Apple). Effective leaders surround themselves with people with skills that complement their own, and maybe with the hiring of rock stars like Angela Ahrendts, Cook is doing just that. For now, Apple has hardly fallen on hard times. It’s a phenomenal brand that remains under a creative transition in the post-Steve Jobs era.

Whither Dr. Dre?

Meantime, Dr. Dre getting in bed with Apple may very well signal his transformation from artist to music mogul.

Dre has come along way since he helped introduced American music fans to the rough, brutally violent gangsta rap genre during his days with NWA in the early 1990s. Through his own music recordings, production work, and business operations, he’s created a legacy of a hybrid artist and music mogul. He helped popularize (and shape) the music of huge hip-hop stars such as Eminem and Snoop Dogg through his studio collaborations, and in the 1990s, he released two stunning albums of his own material, The Chronic and The Chronic 2001. If his music was frequently X-rated, it was also innovative, powerful, and critically acclaimed. But in the 2000s, he released not a single album’s worth of music although he was said to be working on the long-awaited Detox, which has yet to materialize. Instead he focused on production, collaborating frequently with his alter ego Eminem, 50 Cent, and a slew of other artists.

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But his biggest production occurred in 2008 with the rollout of Beats by Dr. Dre headphones, a high-end, expensive product that made headphones sexy. With his focus shifting toward building the Beats brand with co-founder Jimmy Iovine, his production work diminished. Detox has become rap’s answer to Guns ‘n Roses’s Chinese Democracy: forever in production, never released. Rappers such as Game question whether Detox will ever be released, partly because Dre’s business ventures have interfered with his artistic focus.

Jermaine Dupri, hip-hop producer and CEO of So So Def Records, commented to me, “No, there will be no album. Apple and iTunes suck, so they need Jimmy [Iovine] and Dre worse than you know.”

And now Dr. Dre has become a hired hand, reporting to Apple’s Eddy Cue, in charge of Internet Services at Apple. (What happens to Trent Reznor, Beats’s chief creative director and a musical genius in his own right, is unclear.) If the role is largely ceremonial — which would not be a first in the marriage between branding and music — in fact Dre may be freed up to spend more time creating music. (I just want to see how Apple brass will react if Dr. ever releases a follow-up to songs such as “F***k You” and “B***h N***as,” both of which typified the vulgar sound of The Chronic 2001.) But since Beats will continue to operate as its own brand, it’s easy to see Dre focused on the business end.

The question is whether art and commerce can co-exist in Dr. Dre’s future. It was music, not headphones, that made Dr. Dre. (Can you honestly say you became a Dre fan because of headphones?) For now, instead of disturbing and shaking up our world with groundbreaking music, Dre is bragging about becoming hip-hop’s first billionaire.  Congratulations, Dre. Now give us some music to brag about.

 

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3 Responses to Apple Buys Beats: The End of an Era for Apple and Dr. Dre?

  1. John Hensler says:

    I can\’t comment on Dre, but I\’m not convinced that Apple\’s grand days of innovation are behind them. We should know much more about the validity of my opinion on Monday, after the keynote presentation at Apple\’s annual developer conference. One of the more intriguing points about that week-long event is that the title of many events on the schedule – workshops, etc. – have unannounced titles. Apple says that titles and descriptions of these events will be revealed *after* the keynote on Monday.

    Of some 235 workshops at the conference, around 118 have redacted titles. That\’s very unusual, and might indicate that Monday\’s keynote might be more than just previewing iOS 8. Should be fun to watch.

    • ddeal says:

      Thanks for commenting, John. I am not convinced those grand days of innovation are behind Apple, either. But the past few years have been underwhelming enough to raise the question. We\’ve become so accustomed to Apple unleashing waves of innovation that even raising the question seems like a black mark against Apple. Even pondering the end of a golden era of innovation at Apple would have been unthinkable during the Steve Jobs era. Indeed it will be interesting to see what happens at the annual developer conference. Even then, I\’ll want to reserve judgment until after consumers have responded with their wallets (should Apple launch a new product or upgrade). It some time before we could assess whether iTunes Radio was taking hold, for instance. Bottom line: I\’m an Apple loyalist and want the company to regain its mojo.

  2. Pingback: Will the Truth Set Dr. Dre Free? | Superhype

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