Apple/Beats -- My Bloomberg TV Panel -- VIDEO

Apple/Beats broke big on Wednesday.  On Thursday, I was a guest on Bloomberg TV with other Bloomberg editors discussing the deal -- and its overall rational and price-tag.  I agreed on some points, but disagreed with many of them.  Check it out here:

Apple & Beats FINALLY Make Beautiful Music Together - Here’s Why (& Why $3 Billion)

Finally, the music industry’s worst-kept secret -- the Apple/Beats $3 Billion mega-deal -- is official!  (Note -- previously we anticipated $3.2 billion, but now the deal is reported to be $2.6 billion cash and $400 million in Apple stock.)  And, in a surprising twist (to me), legendary music exec Jimmy Iovine is joining Apple full-time -- and Dr. Dre is joining Apple too (to work with long-time Apple music head Eddy Cue).

What took so long?  While I don’t know for sure, a good bet is that securing the requisite consents from the labels to transfer Beats’ music licenses to Apple was a big part of it.  I have been in that position before in M&A -- and it is not a great position to be in.  The one whose consent is required -- here, the labels -- hold all the cards.

So, here we are.  Why Beats?  Why Now?  And, why $3 Billion?

Here’s why.

Top 10 reasons Apple is buying Beats --

(1) Apple needs to make a bold move -- it’s been quiet for too long;

(2) Music has always been core to its DNA -- near-and-dear to Steve Jobs in every respect, especially marketing his products;

(3) Apple needs to get into the on-demand music streaming business; downloads are declining, subscriptions are on the rise.  Yes, Apple has its own Pandora-like service -- but it doesn’t have its own Spotify-like service;

(4) Beats and Apple are simpatico in many many ways -- the perfect marriage -- share the same DNA;

(5) Beats, unlike Spotify -- but VERY much like Apple -- is a hardware-first company; music services (like new Beats Music) are a Trojan Horse to drive more hardware sales of headphones and other hardware products (remember, Beats drove about $1.2 billion in revenues last year, all of which were hardware-driven); Apple markets music and media to drive more hardware sales -- THAT’s its business model (music is the means to an end);

(6) Beats and Apple are both artist-focused and have deep ties to the artist community; contrast this to Spotify which bills itself as a technology-first company; it’s just a different way to think about the world;

(7) As a result, Beats and Apple executives know each other well -- very well -- so there is a significant comfort factor here;

(8) In fact, Apple and Beats have been partners for a long time -- Apple features Beats products in its retail stores;

(9) Why?  Both Apple and Beats products share the “cool” factor; both make and sell premium products that represent more than the hardware itself -- they represent a lifestyle; they are aspirational; consumers are invested in those brands;

(10) Both share significant partnerships with AT&T; Beats Music just recently launched with AT&T as its primary distribution partner; Apple -- a few years back -- launched its game-changing iPhone with AT&T as its primary distribution partner.

That’s all well and good.  But how can the $3 billion price-tag be justified?  Here are 6 reasons how -

(1) Beats already generates between $1-$1.5 billion annually -- and that’s before any revenues by the just-launched Beats Music; so, the multiple on revenues is a fraction of those used to justify the vast majority of tech deals that are widely applauded;

(2) Beats is reported to be growing its revenues at a rapid clip (30% year-over-year, I believe); and Apple -- with its massive marketing budgets and global retail reach -- can only accelerate the growth of those numbers; by my math, that means that this deal likely will pay for itself in the not-too-distant future; compare that reality to the fuzzy math used to rationalize many (most?) of the deals you typically read about;

(3) Beats is an extremely valuable brand -- just ask the kids; some of you will say (I have heard this a lot in the last few days) that Beats headphones aren’t worthy of Apple, but to that I say “the numbers don’t lie.”  Bottom line -- Beats is doing something right.  Consumers -- and especially the coveted Gens Y and Z -- are devouring Beats products.  Beats is the cool kid on the block, plain and simple.  So Apple would be the beneficiary of this newly-constituted cool;

(4) Beats just launched its compelling on-demand streaming business Beats Music and, oh yes, Apple needs to be in that Spotify-like game (but isn’t ... yet); Beats built it -- now Apple will buy it -- and immediately be a force in a world it hasn’t yet known due to its legacy control of the overall digital download market (a market that is declining rapidly as on demand subscriptions a la Beats Music and Spotify rapidly ascend);

(5) Beats -- founded by Dre and legend Jimmy Iovine -- are widely hailed by the artist community for being all about real musicians and creative authenticity; their relationships with musicians run deep; they are trusted.  Apple -- on its own -- is still viewed by many in the music industry with suspicion as a result of the virtual monopoly Apple has held on digital music retail for the past decade;  so long as Dre and Jimmy are on board with the deal -- and stay on with Apple (which they will, albeit with great independence) -- then some of that respect and trust will carry over to Apple (and that is exceedingly important in this brave new world of music subscriptions where all players in the eco-system face challenging financials); and

(6) Many other factors here that can be used to justify the $3 billion price-tag, including the fact that Beats would accelerate Apple’s entrance into the lucrative wearables and “in the car” markets; and, of course, Apple needed to pay up in order to derail Beats’ bee-line to an inevitably highly successful IPO.

As I wrote previously, maybe this $3 billion price-tag isn’t so confounding after all.

I can hear boardroom doors now closing frenetically as we speak -- at Spotify, Pandora, Samsung and numerous others -- as they plot their own responsive strategic salvos.

Happy Birthday Manatt Digital Media -- Our First Year ... And The Long-Awaited Promise of “Convergence” ...

Today we celebrate the first anniversary of our launch of MDM (Manatt Digital Media).  And, what a year it’s been.  Yes, I am proud of our accomplishments in Year 1 (click here or see the full press release below).  But, even more exciting to me is the passion of those on the MDM team.  For MDM’ers, it’s not just a job.  That’s why we blog at 4 am.  That’s why we finalize pitches at 2 am.  That’s why we enthusiastically make business introductions and connections.  That’s why we host Digital Media Meetups in LA, NYC, and SF.  That’s why we invest our own cold hard cash in innovative startups like DanceOn, MovieLaLa, Ninja Metrics, Trailerpop, Adomic, StrikeAd, Vadio and eXacly.me (all of these were made in the past 12 months).

Most significantly, however, is how much the digital media landscape has changed this past year.  Think about it.  Not a week goes by without some massive billion dollar plus deal (or rumored deal) in the world of convergence -- where the promise of content meeting technology to create “magic” is finally coming of age.

Facebook/Oculus Rift.  Disney/Maker Studios.  Apple/Beats.  Google/Twitch.  Yahoo!/RayV.

Who has time to sleep?

But, that’s the point!  All of us in the midst of this maelstrom should feel energized to be in the midst of it all -- not knowing exactly where it is going, but adding our own individual ingredients to push it slightly more this way than that.

We are in the midst of transformative engagement.

That’s our Year 1.

So, it's not so much that we are celebrating ourselves (although, it’s always good to fete landmark occasions).  Rather, think of it more like we are celebrating the fast-transforming eco-system all around us.  The transformative eco-system that, yes, can be daunting at times -- but which, at the same time, is full of massive opportunity with active engagement, experimentation and good old-fashioned creativity, innovation, tenacity and hard work.

(But, for those of you who want a more “traditional” Year 1 anniversary pronouncement, here it is ....)

MANATT DIGITAL MEDIA MARKS FIRST YEAR WITH SIGNIFICANT GROWTH, ENGAGEMENTS WITH LEADING INNOVATORS, EXPANDED BUSINESS CONSULTING TEAM AND RECOGNIZED THOUGHT LEADERSHIP

·       Firm Emerges as Innovative Market and Recognized Thought Leader in Providing Diversified Professional Services and Deep Industry Connections With Growing Client Base of Innovators

·       Manatt Digital Media Demonstrates Industry Expertise and Commitment With Significant Strategic Investments And Leadership in Prominent Digital Media Events

LOS ANGELES, CA — May 21, 2014 — Manatt Digital Media, a fully-integrated professional services division within Manatt, Phelps & Philips, LLP, today announced that within its first year, it has established itself as a leader in digital media and technology through the growth of its client base, strategic expansion of its business consulting team, and by providing overall thought leadership and connections in the worlds of media, entertainment, advertising and technology.

Since May 2013, Manatt Digital Media has engaged with and invested in high-visibility digital media and technology companies, including leading multichannel network DanceOn; innovative content-driven and social media-focused companies MovieLaLa, If You Can and Vadio; market-leading ad-tech companies Ninja Metrics, Trailerpop, StrikeAd and eXacly.me; and data-driven company Adomic.

“Manatt Digital Media is servicing players who are redefining the space through innovative technology and entirely new digital media business models,” said T. Hale Boggs, chairman of Manatt Digital Media. “We are gratified that in the course of a single year, Manatt has built a strong name for itself and emerged as a formidable influential player in Los Angeles — the entertainment and digital media center of the world — as well as other key digital media and investment hubs, such as New York City, San Francisco and Palo Alto.”

“Our aim is to disrupt the traditional professional services approach to bring differentiated real-world entrepreneurial and operational digital media and technology insights to our clients through our wealth of expertise, relationships and venture capital experience,” said Peter Csathy, CEO of Manatt Digital Media. “We embrace disruptive new technologies and seek to empower our clients to be market leaders who further differentiate themselves from competitors by leveraging their innovative ideas as significant new business models and revenue streams.”

Key to its innovative approach, Manatt Digital Media has built a uniquely diversified team to provide its clients the industry’s most comprehensive and meaningful digital media professional services. As one example, the firm recently deepened its business consulting team by hiring leading consulting expert Eunice Shin, who brings more than 18 years of experience and deep relationships and connections in the media and entertainment industries. The firm’s expertise in content and intellectual property at the heart of digital media also separates it from all other consultancies, along with its unique combination of expertise in social media policy, privacy and data security.

“Today’s digital media world is interconnected and incredibly fast-paced, and it demands a bold and creative approach to professional, business consulting and legal services,” said Boggs. “With the growth of our client portfolio and the widely specialized executive team across legal, business and venture capital, we are building on the firm’s recognized legal experience to offer a full spectrum of world-class professional services, and we’ve seen that model benefit our clients of every size and every stage of development. We are not aware of any other organization that coherently ties together these capabilities in the digital media, entertainment or tech worlds.”

In addition to its growing team and clientele, Manatt Digital Media is widely recognized by top-tier media for its thought leadership and industry expertise. The company has hosted a number of high-level industry meet-ups and participated in several key industry events in the past year:

·       Manatt Digital Media Meet-Up — As part of Manatt Digital Media’s focus on supporting innovative entrepreneurs in digital media companies big and small, elevating new ideas, and creating a network of beneficial relationships in the digital media industry, the company hosted a number of exclusive Digital Media Meet-ups in Los Angeles, New York, and San Francisco. The events brought together a select mix of entrepreneurs, media company executives, artists, financiers, and key industry press and thought leaders.

·       UCLA Entertainment Symposium — Csathy participated as a moderator at the March 2014 UCLA Entertainment Symposium on its multichannel networks panel in the days preceding the recent acceleration of M&A activity in that space. The panel, titled “Multi-Channel Networks & Other New Premium Video Players — Their Impact on (& Opportunity for) Hollywood,” featured high-level executives of major players in the field, including Machinima, ICM Partners, Fox Networks and YouTube.

·       Siemer Summit— In October 2013, Manatt Digital Media sponsored the Siemer Summit, an invitation-only event that drew more than 500 of the most influential leaders in digital media and emerging technologies from around the world. Manatt Digital Media also provided joint funding to the winning startup of the Siemer WaveMaker Award’s Best in Show, which awarded the startup with the most innovative platform that was most poised for growth. The company will return as a leading sponsor in 2014.

·       Digital Entertainment World Expo — Manatt Digital Media sponsored Digital Entertainment World Expo in February 2014. The company served as the main sponsor of the 2014 DEW Startup Competition. Of the total prize, the winner received a $25,000 investment from Manatt Digital Media in the form of a convertible note, as well $25,000 of professional and business services from Manatt, Phelps & Phillips, LLP.

“Our active involvement in the digital media space keeps us attuned to the leading ideas and technologies that drive the industry forward,” Csathy added. “As we continuously deepen our relationships among key digital media players and develop, sponsor and participate in major events — not just at the heart of content creation in Los Angeles, but around the world — we are ensuring that our clients are the first to know about critical trends and disruptive, innovative technologies and how they can positively impact their business.”

About Manatt Digital Media

Manatt Digital Media is a full-service digital media platform created by entrepreneurs for entrepreneurs, whatever the size or stage of the company, from startup to growth-stage to mature public companies. Manatt Digital Media uniquely offers a one-stop shop of professional services that is grounded in the legal and business experience of Manatt, Phelps & Phillips, LLP, one of the world’s most respected law firms in the media, entertainment and advertising industries. Manatt Digital Media offers its clients differentiated value and impact in multiple forms and across the life span of their companies — from venture capital to strategic relationship building and artist access to business consulting and creative deal-making, including content licensing, distribution and M&A. For more information, visit www.manattdigitalmedia.com.

About Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP, is one of the nation's leading law and consulting firms, with offices strategically located in California (Los Angeles, Orange County, Palo Alto, San Francisco and Sacramento), New York (New York City and Albany) and Washington, D.C. The firm represents a sophisticated client base — including Fortune 500, middle-market and emerging companies — across a range of practice areas and industry sectors. For more information, visit www.manatt.com.

AT&T’s Bold Content-Driven Moves

AT&T is determined not to be “just a carrier” anymore -- and is making bold content-driven moves to underscore that point.

Obviously, its new $49 billion mega-deal with satellite provider -- and increasingly original-content driven company -- DirecTV is a deal that will have significant reverberations among many.  Verizon anyone?  Echostar?  DirecTV has a massive footprint/platform, of course, of its own to distribute compelling and differentiated content (NFL Sunday Ticket anyone?).  DirecTV also quietly has gotten into the HBO-like “original programming production” game -- featuring exclusive premium long-form video that can’t be found anywhere else.

That’s premium long-form video content.  But, let’s also not forget AT&T’s surprising $500 million premium short-form video development-driven venture with The Chernin Group, a deal announced just one month ago.  The deal includes integration of leading anime-focused MCN CrunchyRoll.  MCN “bite-sized” premium v

And, earlier this year, Dr. Dre’s Beats Music launched with AT&T in a massive distribution deal -- again, all about content -- and now Dre looks to become a billionaire via his acquisition by Apple (which likely will be announced at some point this week).

Bold bold moves.

And bold bold moves beget bold bold moves by others.

Exciting times in the world of “content meets technology."

My Latest Guest Post in Venturebeat -- MCNs, Why the $500M-$1B Exits?

For those who follow my ruminations, you know that I have focused heavily on MCNs and the overall YouTube economy in the past couple months -- mirroring the excitement and activity in that space.

Yesterday, Venturebeat published my MCN-focused guest article titled, “Why Everyone Suddenly Wants a Piece of LA’s Super Hot YouTube Networks” (in which I discuss the recent $500-$950 million Disney/maker mega-deal and near-$1 billion rumblings surrounding leading MCN Fullscreen).  Here is the link.

Later today, I moderate a panel at Streaming Media East in NYC titled, “New Opportunities for Monetizing Premium Video” in which we will discuss MCNs, among other players in the overall multi-platform premium video eco-system.

Apple, Beats & Dre - This One’s Personal! (& Why $3.2 Billion Is Defensible)

Until the Apple/Beats deal closes -- and even after -- that $3.2 billion topic will stay front-of-mind in the global business world (and not just the tech and media sub-worlds).  I certainly have given my “two cents” about the deal -- and the questions keep coming.

But, here’s a little known fact -- this mega-deal is personal.  Literally, personal.  Very.

You see, I started my career “back in the day” as a hot-shot (or so I thought) LA-based entertainment/music lawyer -- and my single most important client was the notorious rap group N.W.A.  That’s right, I represented Dre at the height of the group’s rebellion in a major high profile First Amendment case.  And, in a strange twist of fate -- a story that I will leave for another day -- N.W.A. led me to my wife of nearly 20 years.  You see, N.W.A. was always all about the love (the world just didn’t always see it that way).

But it doesn’t end there.  I later left the law and entered the world of business (much to my mother’s chagrin) -- at one point becoming President of digital music pioneer Musicmatch (later acquired by Yahoo!).  In my role, I oversaw all major strategic partnerships -- including one key partnership with Apple -- a partnership in which our small innovative company licensed our technology to enable Apple to bring its just-launched iPod into the cross-over Windows PC world.  And, as they say, the rest -- for Apple -- is history.  That act was fundamental to mass adoption of the game-changing iPod.  Believe me, there’s a story there too.  Again, left for another day.

So, for me, it is rather poetic to be asked by the press to comment on this Apple/Beats deal.

But, again, it doesn’t just end there.

I also find it rather gratifying that Southern California-based content-driven investment and creativity are getting a well-deserved moment in the global spot-light  After all, $3.2 billion is an impressive number even for the most jaded of non-SoCal VCs.  And, let’s not forget that this follows in rapid succession to the recent $2 billion acquisition by Facebook of SoCal-based digital media company Oculus Rift -- and the near-$1 billion potential exit for LA-based digital media company Maker Studios by Disney.

Who says that content and creativity can’t be king?

One more thing.  For all the haters of the $3.2 billion price-tag, just consider this:

(1) Beats already generates between $1-$1.5 billion annually -- and that’s before any revenues by the just-launched Beats Music; so, the multiple on revenues is a fraction of those used to justify the vast majority of tech deals that are widely applauded;

(2) Beats is reported to be growing its revenues at a rapid clip (I read 30% year-over-year somewhere); and Apple -- with its massive marketing budgets and global retail reach -- can only accelerate the growth of those numbers; by my math, that means that this deal likely will pay for itself in the not-too-distant future; compare that reality to the fuzzy math used to rationalize many (most?) of the deals you typically read about;

(3) Beats is an extremely valuable brand -- just ask the kids; some of you will say (I have heard this a lot in the last few days) that Beats headphones aren’t worthy of Apple, but to that I say “the numbers don’t lie.”  Bottom line -- Beats is doing something right.  Consumers -- and especially the coveted Gens Y and Z -- are devouring Beats products.  Beats is the cool kid on the block, plain and simple.  So Apple would be the beneficiary of this newly-constituted cool;

(4) Beats just launched its compelling on-demand streaming business Beats Music and, oh yes, Apple needs to be in that Spotify-like game (but isn’t ... yet); Beats built it -- now Apple will buy it -- and immediately be a force in a world it hasn’t yet known due to its legacy control of the overall digital download market (a market that is declining rapidly as on demand subscriptions a la Beats Music and Spotify rapidly ascend);

(5) Beats -- founded by Dre and legend Jimmy Iovine -- are widely hailed by the artist community for being all about real musicians and creative authenticity; their relationships with musicians run deep; they are trusted.  Apple -- on its own -- is still viewed by many in the music industry with suspicion as a result of the virtual monopoly Apple has held on digital music retail for the past decade;  so long as Dre and Jimmy are on board with the deal -- and stay on with Apple (which they will, albeit with great independence) -- then some of that respect and trust will carry over to Apple (and that is exceedingly important in this brave new world of music subscriptions where all players in the eco-system face challenging financials); and

(6) So many other factors here that can be used to justify the $3.2 billion price-tag (I previously listed and discussed 10) -- Beats would accelerate Apple’s entrance into the lucrative wearables and “in the car” markets; and Apple needed to pay up in order to derail Beats’ bee-line to an inevitably highly successful IPO.

Hmmm.  Maybe that $3.2 billion price-tag isn’t so confounding after all -- and maybe, just maybe, the creative content-driven entrepreneurs behind Beats and other SoCal-based content-driven digital media companies are smarter than most believe.

I certainly think so.

And, others seem to be catching on to this new trend of successful “atypical” digital media/tech entrepreneurs.  Even TechCrunch -- in the belly of Silicon Valley -- is starting to “get” it.  In the words of TechCrunch writer Alexis Tsotsis in a great “must read” post yesterday:

“Dr. Dre and his partner Jimmy Iovine are examples of a caste of atypical tech founders, entrepreneurs and leaders that are becoming all the more typical.  People from the worlds of fashion and art, designers and marketers and artists -- who have never written a line of code ... Tech’s future goes beyond engineering.  It has to.”

Amen to that!

5 Questions with Ninja Metrics CEO Dmitri Williams -- My Exclusive Q&A

I met data analytics startup Ninja Metrics in February at the inaugural Digital Entertainment World (DEW) conference in LA -- where I served as a judge for the start-up pitch-fest -- a pitch-fest that Ninja Metrics won.  That alone is impressive.  So is the the team of PhD’s -- assembled and led by fellow PhD CEO Dmitri Williams -- whose mission is to optimize overall marketing dollars in social games and apps by targeting the “influencers” (whom Dmitri calls the “social whales”).   They have spent 10 years developing deep technology to do it -- and take a unique approach.

In a sea of ad-tech data-focused companies, and with its deep proprietary technology platform, Ninja Metrics is worth watching.  That’s why we at Manatt Digital Media recently invested (by the way check out our portfolio of investments).

Here’s more about the company in Dmitri’s own words:

(1)  What is the reason your company exists?

We exist to help businesses with Social Value. That’s the amount that someone is worth not based on their spending, but in the spending they generate among their friends. It’s influence, fully provable.

We spot the whales in any industry, but because we have the ability to follow actions through networks, we can also spot the Social Whales. These are customers who may or may not spend, but are responsible for up to 40% of most companies’ revenues. This is the product of 10 years of scientific research, and we’re in business to get it into everyone’s hands—from the tiny startup to the Fortune 50 company. This tech can help in any sector where people influence each other—gaming, ecommerce, video, music, investment, and on and on.

(2)  How are you different from your competitors? 

One the first things you learn in social science is that talk is not as important as action—and every other approach to finding those mythical influencers has been based on people talking. People who talk a lot, are listened to, and those who talk about certain things—those are all proxies for who’s important, but they are ultimately just guesses. They don’t yield any proof of actual actions like spending. We offer direct, testable, transparent evidence of who is influential. Rather than being in an abstract score, our results are in actions like dollars spent, shows viewed, time spent, etc. Our team, myself included, comes out of academic research. Everything we do is based on scientific methods and proof. As a result, we really don’t care what you say—we care what you do.

(3)  Why will you succeed (and what is your single most important ingredient for success)?

If I say a customer is worth $24 this year, and another $36 in the Social Value they generate across their network of friends, you don’t have to trust me. Our scores are verifiable because we constantly show what we estimated vs. what then actually happened. We get it right 80-90% of the time, and we always show that % as a confidence number. That builds trust, so companies can rely on the scores, budget based on them, and get constant affirmation.

Another way of answering this is the old joke “50% of advertising works, but no one knows which 50%.” We do. Our science will tell you it was that 50%, on those 6 people, which generated $54, and then another $78 across their friends. And by the way, here’s your actual ROI.

(4)  What makes you unique? (And what do you enjoy most outside of building your business?)

We’re a flat-out weird group. First, we come out of university labs and we’re not 22 years old. We’re a bunch of PhDs and engineers, but what makes us really unique is that we understand the value of both social and computer science. Social scientists are excellent at asking the right questions, but aren’t aces with Big Data. Computer scientists are those aces, but don’t have a clue why their results matter, or what to build. That kind of left-brain/right-brain division is the reason why most companies don’t create tech that both works well and addresses a real business problem. Bringing those two halves together is really hard, too. We decided a decade ago to force our teams to have each component. The result is a tough process, but one that yields superior IP that’s not just stable, but also truly useful.

But hey, if you meant me, the answer is that I happen to love understanding people, and the most entertaining place to do that is within groups and competitions. So, it’s no surprise that I’m a die-hard video game player, as well as a true degenerate poker player. So when I come to work and am tackling big data applications around people and groups, I’m a kid in a candy store. Also, I like pina coladas and getting caught in the rain.

(5)  What digital media trend is most interesting to you (and what is the least)? 

The most interesting is the boom in DIY tools like 3D printing. Unleashing the creativity that’s out there outside of labs and big businesses is really exciting. Harnessing that while lowering costs is a clear recipe for innovation.

Possibly the least interesting is the hype around wearable tech and VR. Nothing is more important to people than other people. In the end, we’re social monkeys. So when I see VR headsets or cool watches, all I really care about is whether that tech is going to make people better able to communicate, share, interact and grow. Tech for tech’s sake never lasts, never diffuses. Take something as cool as Oculus. Whether that’s an awesome product will come down to whether people use it to have better experiences with other people. I’m keen to see whether developers grok that part of the human condition, or just think that better graphics and immersion are good enough. Let’s see if Facebook can leverage the overlap between the tech and the human element.

Apple/Beats -- Why Beats? Why $3.2 Billion?

The digital media/tech world -- globally -- is abuzz with news that Apple may acquire Beats for $3.2 billion.  I literally just got off the phone with BBC Radio for a radio interview -- and will be on BBC TV via Skype video later today.  Several others have reached out for comment, underscoring the fact that when Apple sneezes, the world grabs a tissue.

So, first, if true, why Beats?  Why would Apple make a deal that would be, by far, its biggest acquisition to date?

(1) Apple needs to make a bold move -- it’s been quiet for too long;
(2) Music has always been core to its DNA -- near-and-dear to Steve Jobs in every respect, especially marketing his products;
(3) Apple needs to get into the on-demand music streaming business; downloads are declining, subscriptions are on the rise.  Yes, Apple has its own Pandora-like service -- but it doesn’t have its own Spotify-like service;
(4) Beats and Apple are simpatico in many many ways -- the perfect marriage -- share the same DNA;
(5) Beats, unlike Spotify -- but VERY much like Apple -- is a hardware-first company; music services (like new Beats Music) are a Trojan Horse to drive more hardware sales of headphones and other hardware products (remember, Beats drove about $1.2 billion in revenues last year, all of which were hardware-driven); Apple markets music and media to drive more hardware sales -- THAT’s its business model (music is the means to an end);
(6) Beats and Apple are both artist-focused and have deep ties to the artist community; contrast this to Spotify which bills itself as a technology-first company; it’s just a different way to think about the world;
(7) As a result, Beats and Apple executives know each other well -- very well -- so there is a significant comfort factor here;
(8) In fact, Apple and Beats have been partners for a long time -- Apple features Beats products in its retail stores;
(9) Why?  Both Apple and Beats products share the “cool” factor; both make and sell premium products that represent more than the hardware itself -- they represent a lifestyle; they are aspirational; consumers are invested in those brands;
(10) Both share significant partnerships with AT&T; Beats Music just recently launched with AT&T as its primary distribution partner; Apple -- a few years back -- launched its game-changing iPhone with AT&T as its primary distribution partner.

So, how about the rumored $3.2 billion price-tag? How can that be justified?

(1) As indicated above, Apple needed to make a bold move -- and has plenty of cash to do it; this may be a first bold move (with more to come ... stay tuned below);
(2) Beats already drives $1.2 billion in annual revenues; Apple -- with its much broader platform and overall reach -- can magnify that number, especially with its renown marketing prowess; this may be a case where “cool” + “cool” = “cool” squared; and
(3) Scarcity -- given all of the above, Apple may view Beats as standing alone in this overall game -- which leads to the issue of scarcity and the need to make a bold move to take that target out; remember, Beats was driving toward an IPO; only a massive price-tag could stop that train.

What’s next?

Assuming Apple closes this deal, expect Apple to do the unexpected -- retain Beats’ brand (something I don’t recall them previously doing).  That brand alone is valuable -- very.

And, here’s a bold prediction (that I made one year ago far before more recent rumors started to swirl around about it).  Maybe it is Beats first, and Tesla second (interestingly, I am writing this post at the Tesla Service Center in San Diego while I get my Elon Musk-driven safety coating installed on my Model S).  Car audio makes so much sense for Beats.  And, Tesla makes so much sense for Apple.

One more bold bonus prediction -- why doesn’t Apple just buy DISH Networks to solve its iTV content problems (much in the same way Apple may buy Beats to solve its on-demand music streaming problem -- i.e., music label licensing agreements)?  I wrote about this previously as well and laid out the rationale.  DISH’s CEO, just the other day, publicly said that they have the critical mass of the network licenses they need to run their own compelling OTT “TV” service.  With AT&T potentially making a play for DirecTV, maybe Apple may take another bite by dishing it out for DISH.

We live in interesting times indeed ....

5 Questions with Tugg CEO Nicolas Gonda -- My Exclusive Q&A

Tugg is an Austin-based digital media company I have known for nearly a year - and have always found to be in an intriguing space - crowdsourced demand for screenings of motion pictures in movie theaters (which solves a core problem for theater owners -- i.e., filling empty seats during the week).  Tugg is an exciting new approach for independent filmmakers and “smaller” films in general -- and also frequently brings social impact-driven stories to mass audiences who share a sense of “community” (and can now together can share the motion picture experience as a community in a theater environment).  I recently reconnected with Tugg’s CEO Nicolas Gonda, and just yesterday he announced a major new partnership with EDM-focused leader Insomniac (creators of the famed Electric Daisy Carnival) and Focus Features (a division of NBCUniversal) to bring crowdsourced theatrical screenings of the new movie Under the Electric Sky (which was premiered in this innovative new way).  In an increasingly multi-platform OTT premium video world, Tugg uses the virtual (crowdsourcing) to fund the physical (theatrical screenings).  Intriguing ...

On with the 5 questions:

(1) What is the reason your company exists (and what problem(s) are you looking to solve)?

Tugg's mission is engage, empower and entertain. In an age of unparalleled access and choice, Tugg provides a simple way to give audiences a power they never before had: to program their movie theaters with the content they want to watch, when they want to watch it. The magic of Tugg is finding an audience for every film – whether that film be a Sundance award winning documentary about an AIDS orphanage in India (Blood Brother),  a documentary about the spirit of motorcycle riding (Why We Ride) or an inspirational family narrative film about muscular dystrophy (Different Drummers). Giving audiences around the world content that matters to them is our first solution—and everything that transpires from that interaction is the intangible magic that you get from giving people what they want – when and where they want it.

(2) How are you different from your competitors?

We pride ourselves most on our theatrical and content owner relationships - Tugg works with 90% of movie theaters in the country and we partner with major studios and independent filmmakers alike to offer a catalogue of over 1,500 films to fans. Beyond our partnerships, we develop the tools our attendees, promoters and partners need to succeed. Most recently we created a Contributions tool that allows any event to double as a fundraiser so that each event Promoter can raise money for their cause or charity directly on their event page.  We are also constantly evolving our service offering for our filmmakers - we recently began handling Non-Theatrical license sales for our filmmakers, widening their capability to turn interest into action with universities, places of worship, community centers, and a growing body of venues that can facilitate communal experiences of premium content. 

(3) Why will you succeed (and what is your single most important ingredient for success)?

The top-down model for traditional, theatrical distribution is no longer applicable in a world that is so much about tailored experiences and in-demand content. Content owners require a bottom-up way to directly access and empower their fans to engage. One word of mouth conversation has the impact of 200 TV ads. Given that fact, filmmakers and studios alike love that they can directly engage their superfans who will then promote the film to their individual networks allowing anyone, anywhere to see the film the way it was meant to be seen - in a packed movie theater with your community.

Our conversion rate is over 13.3%, which in marketing terms is off the charts. We succeed because we are a company that facilitates open collaboration between content owners, influencers and fans with shared goals and rewards. Our single most important ingredient for success is the long term impact a Tugg campaign can have for a content owner - not only does a Tugg release leads to exposure and revenue through a theatrical campaign, it provides the content owner with deep analytics and contact info for their fan base of superfans and attendees, all of whom are usually ready and willing to purchase the film's DVD, merch, and much more.

(4)  What makes you unique? (and what do you enjoy most outside of building your business)

Well for starters we’re bold enough to start a company in 2014 that focuses on movie theaters [Nick laughs as he writes that].  In truth, we are unique because we are one of the few companies that truly understands the ever-growing importance of the theatrical experience in the film industry and how it acts as the ever-lasting relationship builder with the consumer. With more choice now than ever before, the studio and independent filmmaker both need a tool to identify, engage and activate their audience through theatrical, eventized screenings, and we can’t wait to continue helping them.

As for time spent outside of building the business, I love being in Austin, Texas, where Tugg is based. Every weekend there’s something great happening different from the last.

(5)  What digital media trend is most interesting to you (and what is the least)?

We’re quite excited about the recent activity between studios and MCNs  The more willing major studios are to adopt the latest in what is happening in tech and the Creator movement, the better off everyone – audiences especially – will be. Least interesting? Perceived value of “likes” and “followers” as a determinant of success. The difference between real influence and how many likes a Facebook page has is vast, and we’re excited to see more services like Tugg offering a direct metric for the monetary value of influence (as defined by ticket sales, in the case of Tugg).