Is Apple's Rumored Acquisition of Beats Important (Good?) News For Filmmakers?

If you want to know which way the business is going today, it’s essential to read Jonathan Taplin, and then head in the opposite direction.

For example, capping a week of whoopsies, on May 9th,  2104 Prof. Taplin decried the (as yet not officially confirmed) acquisition of Beats by Apple as “a panic move.” 

(A complete list of Taplin’s recent social media missteps might also include the professor’s shock that many users often listen to short snippets of songs on Spotify – "OMG! 25% of tunes on Spotify are skipped in the first five seconds," apparently forgetting how many teenagers used to listen to AM car radios – and his sublimely unlettered post about downstream broadband data capacity).

Rather than take on all of Prof. Taplin’s recent bloopers, I’ll limit myself to looking at how this self-described specialist in “the field of digital media entertainment” unloads on the rumored acquisition of Beats by Apple.

OK. If the rumored price is accurate, is Apple overpaying? 


But why? Why would Apple even want Beats?

According to Prof. Taplin: “All this does is muddy the iTunes brand message.”


According to IDC, in less than 6 years Beats has earned a 65 percent share of the headphone market. How? By creating a brand identified with higher-quality music experiences. And in January of this year, Beats launched Beats Music, a subscription-based online music streaming service. 

Is there a consumer market for higher-quality (e.g., lossless) music files? That seems to be (at least in part) the bet that Apple would be making by acquiring a premiere brand for higher-quality 21st century recorded music experiences.

Does Prof. Taplin even consider how buying a stake in such a business might pay off? For example, as lower-quality portable devices have become ubiquitous and fans increasingly want higher-quality music and motion picture experiences – does the head of USC’s Innovation Lab undertake an analysis of why Apple might want to own a dominant high-margin brand? Nope. According to Prof. Taplin “iTunes Radio is already just as good as Beats and probably has more listeners.”

Why does any of this matter to filmmakers?

The shift to online circulation of motion picture content has come at a price. The quality of motion pictures online has not kept pace with the quantity. But does that mean there isn't a reason to think that a better quality experience might become a key factor in the evolving monetization of online motion pictures?

Once everyone has a crude mobile device for watching motion pictures, will innovation stop?

Are the current solutions offered by Apple (e.g., iPhones with earbuds and iTunes) good enough?

If you're really interested in innovation, the idea that a brand associated with mobile technology and quality entertainment experiences has apparently been valued at $3 Billion by the leading company in the new world of media might prompt a bit of thoughtful analysis... maybe even an acknowledgement of why there is this kind of optimism at Apple...

Yes. One explanation is that Apple is behaving hysterically. 

But, when the leading company in consumer entertainment experiences makes a sizable investment that suggests how that company intends to move forward, is the head of an Innovation Lab really contributing much to the dialogue when he labels the move as sheer "panic."

At the very least, shouldn't filmmakers and music professionals expend a little effort analyzing Apple's interest in Beats before dismissing the acquisition?  

(Illustration from Fox Business.)

UPDATE: June 1, 2014  On Wed. May 28th, 2014 the acquisition of Beats by Apple became official: "The deal is expected to close in the fiscal fourth quarter [ending in September 2014]. Apple will pay $2.6 billion in cash and another $400 million in equity." Interestingly, Apple's stock is up over 8.1% in the three weeks since Prof. Taplin criticized the Beats acquisition as a "panic move." This beats (pun intended) the market over the same period (the Dow has held relatively steady, up under 1% since May 9th, 2014). That's tens of billions of dollars of investor support for Apple.  Apple's stock hit a 52-week high on the day the deal was officially announced... and it has risen another 1.44% in the two trading days after the deal became official. With Apple valued at over $520 billion (Enterprise Value as of Friday May 30, 2014), the market has increased the value of Apple in the two days since the deal was officially announced more than twice the cost of the entire Beats deal.

UPDATE: Dec. 1st, 2014   As of Friday Nov. 28th, 2014, Apple's stock is up over 40% since Prof. Taplin criticized the Beats acquisition as a "panic move." The Dow is up under 8% in the same time frame. The Enterprise Value of Apple is now over US$707 billion dollars.

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