Apple Eating Beats Revisited

Remember when everyone was so confused by the Apple/Beats deal? I do, it was just a year ago (see: above). But now, with the worst kept “One more thing…” secret out of the bag, things have fully come into focus.

To paraphrase what I wrote a year ago:

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 to eventually replace iTunes.

Jimmy Iovine.

A money-making headphone business.

You’ll note that while #1 and #2 got much love on the WWDC stage this week, we heard nothing about #3. Maybe we will later this year, or maybe not. As noted, it was only the third-most important element of the deal. The proverbial cherry on top. #1 and #2 were always the key, and it took just a year for Apple to take advantage of that. (Not stated: the role Trent Reznor has played in all this. And oddly absent in all of this: Dr. Dre.)

So what about the $3 billion price tag? Well, again, $3 billion to Apple isn’t exactly $3 billion to you or me. But it was and remains Apple’s most expensive acquisition ever. Of course, investors just poured another $526 million into Spotify, giving it an $8.5 billion valuation. So… perhaps Beats looks like a deal in that light?

But couldn’t have Apple just built Apple Music on its own? Sure. But it would have meant diverting resources from other things and Apple has been quite busy in the past year. And, again, absent would have been the new musical DNA injection Apple got with Iovine, Reznor, etc. If Apple Music is to be successful, that team and those relationships will be key.

We’ll see how Apple Music plays out. Even before launch, it already has its critics — though, it’s no Tidal. But in terms of the acquisition itself, it’s looking smarter each day for Apple. A deal even.