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!
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