The Real Reason Apple Bought Beats: Addiction
Beats is not about headphones or a cool service with licensing deals. Beats is all about one-to-one connection of a brand and subscription service that feeds a person's soul. Apple's acquisition of Beats Electronics is more about the acquisition of a kindred spirit than a new line of business. Sure, the executives from both companies walk entirely differently, but their cores are similar.
May 30, 2014 6:49 AM PT
I get the sense that a good many Apple enthusiasts are confused by its acquisition of Beats Electronics. Sure, many are nodding their heads, saying that Beats is good for Apple and makes total sense. The headphones are selling well. With 250,000 paying subscribers, the Beats Music service is taking off fast, and it can only be elevated by Apple's global brand and infrastructure.
However, there's an undercurrent of concern, too -- a bit of head-scratching and scrambling to make sense of what this really means for Apple's future. After all, couldn't Apple have built everything that Beats offers, all by itself? (On the surface, yes.)
Does Apple really need to buy "cool" these days? (No.) More worrisome, is Apple becoming one of those big companies that starts buying other companies just to keep the parent conglomerate growing and expanding in order to confuse Wall Street and make lackluster executives feel like they're actually doing something important? (I sure hope not.)
So why Beats? Why now? What the heck is going on here? Is Apple going to start buying companies in order to attract new management talent, like Jimmy Iovine and Dr. Dre? After all, it's hard to make a traditional "hire" of an industry-leading professional with deep industry business connections. A simple hire seems like a step down, especially to pros who are running their own companies. A big acquisition, though, makes landing an Iovine or Dre possible.
Despite making sense on paper, the whole Beats acquisition still seems so anti-Apple that it's just damn unsettling.
Finally, though -- just now -- I get it. Let me share. Maybe you'll agree.
Good but Not Insanely Great Products
At first, I got hung up on the headphones, because the Beats headphones are popular -- but not insanely great. Apple used to shoot for both -- to make a product that was insanely great and make it popular through fantastic marketing. As near as I can tell, audiophiles and music lovers who appreciate fidelity pretty much shrug their shoulders at the Beats line of headphones and speakers. Why would Apple buy something that wasn't better than what it could produce on its own?
This is an issue I've been struggling with. Like most of the tech press, I tried to shrug it off with the notion that the fledgling Beats Music subscription business is the key. That Apple is willing to buy the mediocre "products" in order to get the backend subscription deals with music labels, so as to offer something it doesn't yet have itself.
Forget the scraggly trees, right? Just buy the whole damn forest.
However, Apple is a very thoughtful company. It moves with intent. If Apple poured US$3 billion into its own subscription service, it easily could launch a great new service, if not a whole new sub-brand. So what gives?
A Closer Look at Headphones
Despite popular belief, Apple is not a fashion company. Apple produces products that become fashionable -- not because of how they look, but because of how they make customers feel. When you hold an Apple device in your hand -- iPod, iPhone, iPad, MacBook -- the quality and care is obvious. Even the iPhone 5c is incredibly solid and well-made.
Combine the hardware with the software, which delivers constant positive interactions with the user, and you've got a device that becomes an extension of a person's personality -- in a sense, an element of fashion. Still, Apple didn't set out to be cool -- Apple set out to build great products that, because of their greatness, became cool. As a consequence, Apple became cool, too.
Beats seems to come from a radically different place -- it started with an attempt to create a product that was cool and fashionable -- one that people wanted because it was cool.
That seems anti-Apple.
There's something wrong with this simple explanation, though. It's not deep enough. It's flat and condescending -- not only to Jimmy Iovine and Dr. Dre, but also to the consumers who shelled out for mediocre-plus headphones in cool shiny colors.
So what's going on? Music is about emotion. It creates and modifies moods. It's profoundly biological. What Beats did was build and create a new cue -- a sign of sorts -- in color, format, and logo -- that reminds a person to listen to music and enjoy it, to put on their Beats headphones with intent.
Then the visceral experience of the music reinforces the distinctive design in such a way that users get more joy out of listening to music through their Beats headphones than through other, more generic-looking headphones. Cost and quality become secondary to the repeated experience created by using Beats headphones.
In short, Beats headphones represent a constant reminder to enjoy your music.
This achievement is a big deal. It's not a fad. It's a connection between a product and life enjoyment -- and when the joy is absent, it's a form of addictive self-medication.
I'm not kidding.
Most of us manipulate our energy and moods with a wide variety of tactics and substances -- coffee, alcohol, chocolate, hot showers, exercise, potato chips, drugs. Over the ear headphones (that youngsters will wear in public) create a suddenly immersive music experience. They shield you from the outside world and focus attention on the experience between your ears -- in a way that Apple's iconic white earbuds simply cannot replicate. Earbuds deliver sound, but they don't have the size and shape to trigger a deep physical and emotional signal that focuses your experience the way that large headphones do.
The very act of placing a large set of headphones over your ears creates a cocoon of sound and experience that both shields you from the rigors of the outside world and takes you somewhere else.
Does Tim Cook know this? Maybe. Does Apple? Maybe. I wouldn't be surprised. The most coveted products are always less about fashion than they are about emotion -- the dirty little secret of addiction. (After Flappy Bird -- which nobody accused of being cool -- you would think the connection between product, experience, and addiction would be more thoroughly discussed.)
Enter the Beats Subscription Service
Apple could seek to create its own line of headphones to attempt to create this same sort of buying and using experience. But Apple doesn't have the secret ingredient in high-grade musical addiction anymore -- the connection of mood with device and content.
Beats connects the device (headphones) with the content through its curated streaming music service. The customers trust their moment to the Beats Music curated list. Then, each time a user creates an awesome playlist by connecting current music needs to the service itself -- and is rewarded with a blast of music-delivered emotion -- a reinforced feedback loop is created. Talk about customer loyalty. Talk about viral world-of-mouth marketing. Talk about shared moments hanging out with friends.
Pre-built playlists in iTunes do not invite this sort of surprised customer delight. Apples iTunes Genius just doesn't cut it. And iTunes Radio? The feeling is more akin to tolerating the stream than being connected to it.
Beats is not about headphones or a cool service with licensing deals. Beats is all about one-to-one connection of a brand and subscription service that feeds a person's soul -- and it does it with a profitable product.
I've got to believe that Apple recognized something here that is profoundly different than all the other companies that Apple could have bought.
Like Nest, for example. Nest users appreciate their smart thermostats, no doubt, but do they have a visceral addiction and appreciation for the thermostat? I doubt it. Google buying Nest is a practical way to build a home-based world of Internet-connected things. Facebook buying Oculus VR or WhatsApp is more simply about a big brand expanding its reach. Microsoft buying Nokia is a desperate attempt to wedge open the mobile device door before it slams shut forever. All these acquisitions are about acquiring very simple, tactical products.
Beats is not simple or particularly tactical.
What finally settles it for me is the realization that the acquisition of Beats Electronics is more about the acquisition of a kindred spirit than a new line of business. Sure, the executives from both companies walk entirely differently, but their cores remain similar -- they understand that customers are about experience, and companies that feed a fantastic experience are those who win.
That's worth repeating: Companies that feed a fantastic experience are those who win.
Because the collision of products and services with deep customer experience is such a rare quality, I don't think similar acquisitions are going to happen often at Apple. So yeah, the Beats acquisition is a big deal. Letting the service work with Android and Windows Phone customers is a big deal. But shifting tectonic plates in Cupertino? Not so much after all.