On Thursday night, it was reported that Apple was in talks to buy Beats Electronics (which makes headphones and has a streaming music service) for $US3.2 billion.
That prompted, like many deals do, an explosion of analysis and punditry about why Apple is doing this, and whether it’s a good move.
Over at NYMag, Kevin Roose said he was underwhelmed by the whole thing, writing “I’m finding it hard to get worked up about the reports that Apple is preparing to buy Beats the Dr. Dre — founded line of expensive headphones.”
His argument is that it’s simple and straightforward. Apple is buying a maker of high-margin headphones, and there’s not much more to it than that, and that all the pundit hyperventilating about what it all means is silly.
But Kevin’s wrong. If an M&A deal ever warranted a lot of heated discussion, it’s this one.
Here’s just a few reasons why:
1) Apple is the largest market cap company in the world. That alone makes any deal it does worth thinking about.
2) Apple doesn’t do a lot of acquisitions. It’s kind of famous for that. And this would be its biggest by far.
3) This acquisition is all about music, and buying one of the hottest companies in music.
4) Apple is the company it is today, in large part, because it reinvented the music industry with the iPod and iTunes.
5) Now the model that Apple helped develop is getting old. Sales of digital downloads have actually begun to decline.
6) Kurt Vonnegut said that the existence of music is the best evidence we have for the existence of God. So how the world gets and listens to music is intrinsically a big deal. (Even if you think Vonnegut was overstating it, you have to agree that listening to music can be a profoundly emotional experience.)
7) If the acquisition goes through, both Jimmy Iovine and Dr Dre are reportedly going to become senior Apple employees. That suggests this is about a lot more than just getting a high-margin product.
8) Dr. Dre’s story is obviously an incredible one. We used to watch his videos on MTV. Now he’s on the verge of becoming preposterously wealthy through selling his company and having a role at Apple. How can someone not be excited about that?
9) Apple buying Beats has ramifications for other companies in the world of music, such as Spotify, which is itself revolutionizing how people consume music.
Bottom line: The world’s biggest company, that revolutionised the way we get music (which is arguably proof of the existence of God) is making its biggest ever acquisition to keep itself relevant in that arena, while in the process completing an incredible story for one of the most famous artists of the last three decades. There’s nothing not interesting about that.
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