With Beats, Apple buys the unobtainable: street cred


If and when Apple enters the wearables market, its biggest problem will be persuading people to wear the technology. A big part of that will be attracting the right early-adopters.
If Apple enters the wearables market, the biggest challenge will be persuading people to wear the technology. Attracting the right early adopters will be key to Apple's success.

If the rumors are true, Apple’s forthcoming purchase of Beats Electronics for $3.2 billion is all about one thing — making wearable technology fashionable.

Apple is poised to introduce a line of wearables that likely goes beyond the long-rumored iWatch. While the technology Tim Cook’s team is cooking up might be amazing, getting people to wear it — especially cracking the crucial mass market — will be one of the biggest challenges Cupertino has ever faced.

Injecting style into wearable tech notoriously difficult. Even Nike got flustered and discontinued its FuelBand fitness tracker. So far, no company has really cracked the code and turned gear into a fashion statement for the cool kids, with one giant exception: Beats, a phenomenally successful wearable technology brand that dwarfs the rest of the industry because it’s pulled off the hardest trick in the book.

At first glance, Apple’s rumored acquisition of the company is a total head-scratcher. Why would Apple be interested in Beats? Surely Apple doesn’t want the company just for its headphones. How about the Beats Music streaming service? That’s also unlikely to be the true object of Cupertino’s desire. Although well-received, the fledgling music service doesn’t boast a lot of subscribers or appear to be based on any special technology. Rather, it relies on the oldest music technology of all: curators, otherwise known as DJs. Plus, Beats’ licenses would likely have to be renegotiated after any acquisition.

Instead, Apple wants Beats’ most valuable assets: its brand and its unique ability to turn wearables into something people will actually want to wear.

“It’s not about technology at all,” said Robert Brunner, designer of Beats’ first headphones, in an email to Cult of Mac a few weeks before the Apple/Beats rumor hit the headlines. “It’s fashion.”

Brunner was Apple’s first in-house industrial designer. He set up Apple’s legendary Industrial Design Group, which has gone on to became Cupertino’s internal ideas factory. He was responsible for a string of groundbreaking products, including the first PowerBook (which arguably defined the entire notebook segment). Brunner hired Jony Ive and passed the torch to him when he left the company.

After Apple, Brunner co-founded the Ammunition, a design consultancy with offices a block from the San Francisco waterfront. In 2008, he designed the Beats headphones, which were initially sold by Monster, a tech company best known for overpriced cables. Working with Beats, part of the goal was to create products that would be “worn as iconic body art.”

Apple’s challenge? Making wearables wearable

If and when Apple finally dives into wearables, the product line will likely include devices (and maybe even clothes) that monitor fitness and health. The clues are everywhere. Apple has hired executives from Burberry, Nike, Levi Strauss and Yves Saint Laurent. Cupertino has recruited industrial designers with expertise in apparel design and manufacturing — specifically knitting — including Billy Smith from Patagonia and Ben Shaffer, who pioneered Nike’s FlyKnit. Apple’s engineering division has been taking on scores of experts in bioelectronics and low-power health-monitoring devices.

The technology that Apple develops might be amazing and even life-saving, but no one will wear the gear if it looks dorky.

That’s where Beats, the only company that has enjoyed any real success in this arena, comes in. In just a few years, Beats has exploded onto the scene, masterfully blending design, sound, technology, fashion and youth-oriented marketing. It dominates the headphone market with a whopping 60 percent share.

Traditionally, headphones have been sold on price or sound, and Beats offers neither. Nonetheless, they’ve been able to persuade the mass market to spend hundreds of dollars on over-branded headphones that audio snobs say sound terrible. Most tellingly, people hang their Beats around their necks even when they’re not listening to them.

“No one wants to be seen as a sales rep or an arrogant ‘glasshole.'”

“I like to argue that we’re the most successful wearable technologies company in the world,” Brunner told GigaOM’s Roadmap conference last November. “One thing is we understand fashion. We understand what it means that fashion is more than what it looks like, it’s about what you aspire to be, which group you belong to, and which tribe you want to belong to.”

What’s the secret to Beats’ unparalleled success with wearables? The company has focused on three key areas, as Brunner explained in his email:

So the three things about wearables are:

1. It’s more about how you feel wearing it than function. If you don’t feel it’s part of who you are and it is enhancing that, then you won’t wear it. This is where fashion and emotion come in and few tech companies get this. It’s something we focused on day one with Beats.

2. It’s not about technology at all, but about what it does for you and how it fits and enhances your life. It is not magic anymore just to be connected per se. It needs to do something valuable and meaningful in your life.

3. It’s important who adopts it first. With Beats we were overt in enlisting visible, aspirational people to wear the product. Bluetooth headsets and Google Glass are victims of their early adopters and this has — or will — limit how pervasive they will be. No one wants to be seen as a sales rep or an arrogant “glasshole.” Again, it’s fashion and who is wearing it first matters.

Jony Ive, Apple’s head designer, already understands Brunner’s first point. During the design group’s brainstorming sessions, the designers talk first and foremost about how products will make users feel, about the experience of using the product. And in fact, that’s what Apple’s new “Designed in California” campaign tries to articulate. They work backward from the experience to the product.

Apple also clearly understands the second point. Unlike Samsung, which tends to load products with dozens of features and see which ones stick, Apple’s products come out of the gate very focused, with a clear benefit to the user.

The hardest part for Apple will be the third point — defining the early adopters for its wearables.

At the Roadmap conference, Brunner explained that at first, Beats photographed glamorous models wearing the company’s colorful headphones. But Beats Chief Executive Jimmy Iovine instinctively knew this was the wrong approach. Consumers wouldn’t connect with the slender aliens who rule the fashion world’s runways. They didn’t represent a tribe anyone wanted to join. Instead, Iovine gave the headphones to his friends in the music business and photographed them.

“One of my favorite statements Jimmy made to me was, ‘Robert, our marketing strategy is a lot of people owe me a lot of favors,'” said Brunner. “I didn’t understand what that meant. We were shooting the product on beautiful models. He’s like, ‘No, I don’t know any of those people.’ Jimmy would carry the product around and these are his friends, people he knows and he would give it to them and photograph it. And pretty soon, this is how you begin to understand the brand. This is the tribe you aspire to be with.”

Brunner pointed to the infamous photograph of Robert Scoble in the shower with Google Glass to prove his point. “This is a wearable product and the most sensitive thing you ever do is put something around your face,” he said.

When Apple launches its wearables lineup, it will want to associate the products with groups of people that consumers can relate to, groups they want to join. Their tribe.

“Capturing people’s imagination in a way that makes them want to put your stuff on their body is a skill set that not many people have,” Brunner told Wired. “It definitely doesn’t exist in many large corporations.”

Still, it won’t be simple for Apple to marry its strong brand with the Beats label. To date, Apple has acquired companies for technology or talent, not brands. The company’s previous biggest purchase was NeXT for $400 million, a deal that brought Steve Jobs back to Apple (along with a next-generation operating system). Since then, Apple has snapped up smaller, largely unknown companies like FingerWorks (for multitouch) and PrimeSense (3-D motion sensors).

It’s going to be monumentally difficult to marry Beats, a brand that represents aspirational wealth, with the brand that represents Think Different.

Nonetheless, it appears to be a done deal. First reported by The Financial Times, the deal has been confirmed by Bloomberg, The Wall Street Journal, The New York Times and apparently even Beats co-founder Dr. Dre himself. The acquisition would give Apple control of Beats’ hardware and its subscription music service, plus make Iovine a “special adviser” to Tim Cook.

Successfully integrating Beats could give a critical boost to the iWatch and whatever other wearables Apple has up its sleeve. Because the iWatch won’t really be about technology — it will be about fashion. Beats has shown it knows how to turn technology into fashion, and that will be key to persuading millions of people to wear Apple’s technology.

  • iFreek

    Why would Apple, the most valuable brand in the world, buy a brand that they would never put on their core products? I can imagine Apple buying Beats to have branded speakers on a television set as a unique selling point. Apple should sell their own speaker products, but they would be better off buying BOSE for that.

    • aardman

      Who says Apple should slap their label on Beats? Who says Apple can’t have more than one brand name for wearable tech? That category is very broad. Maybe the tech is similar across products and demographics but the same one-size-fits-all approach probably won’t work. After all Toyota had to create Lexus and BMW had to acquire MINI.

  • Doug Stalnaker

    This article is so wrong. Apple is after Beats Music…the headphones are a nice money generator, nothing more.

    • Charilaos Mulder

      I think you’re wrong. Beats profits are literally nothing to Apple. Some other services of Apple don’t generate a lot of money either, but those services are part of the core experience of the bigger products, fully integrated in a way that gives customers one more reason to buy Apple products. Beats headphones is no such thing, nor will those headphones be bundled with any other hardware product.

    • lucascott

      I have to agree. This is about patents, algorithms etc.

  • Steven Fierberg

    It is about the music streaming as well, but this article is right on the money otherwise. Apple radio streaming has the same issue: it’s not cool enough. Beats can fix that, too. If there’s one thing that Tim Cook, is not, is cool. They need an icon of cool to sell streaming and fashion. Dre and Iovine are the guys for that.

    • lucascott

      Sorry but the whole Beats connection will not make iTunes Radio any cooler. It needs internal improvements, including perhaps being moved out to its own app at least for iOS devices.

      Slapping the Beats name on it won’t really help it particularly since Beats appeals to a small group of users.

      • Steven Fierberg

        Beats sells 60% of all headphones. that is not a small group. And you’re right, the software needs improvements. Hopefully those can be jumpstarted by the software in Beats.
        Acquiring the talent behind Beats will help get iTunes to a cooler place.

  • Paul Dale

    Finally, a writer who gets it. The nexus of tech and culture is not just an intersection, it is in fact the street. The lived, felt experience of folks living real lives with deep aspirations, tied together by common experiences. Sure, tribal, if you want to call it that. Beats gets it. Lovine and Dre know it. All fashion, music, and the arts get their pulse from real life, not from tech toys or lifeless machines, but the “beat” of modern technology is all around real life, the sounds of trains and automobiles, telephones, washing machines, on and on. But, here’s a slight correction, just to keep it real. The question for Apple should not be how does it feel to use our products. The cultural question from the customer’s perspective is to put it in reverse order, “do you feel me?” That crosses the intersection. If Apple can that, they win big.

    • lucascott

      I disagree that Apple has missed that connection. If anything they have it as much if not more. They aren’t out there spec wanking etc like some companies. They are making devices for folks to use. To create, to connect etc. And they celebration the ways folks have found to do that very publicly by putting those stories on their website. How many companies do that. How many sponsor class trips to the Apple store for special lessons or a summer camp for grade school kids.

      Sure they might not have the backwards cap, pants under the ass, ‘yo be-yotch’ hip hop crowd but they have plenty of other fans.

      If anything perhaps its Beats that needs Apple. Being in Apple stores, especially in those early days, may have done more for Beats than any other move they made.

  • aardman

    “Because the iWatch won’t really be about technology — it will be about fashion.” Been saying that since the news came out that Apple hired Deneve.

  • zagatosz

    Apple already has street cred, just look around. Beats are overpriced crapy headphones for people that are look to make a fashion statement but fashion is fickle it can change on you in a second. Apples gig is to make products that can do what you want before you have even thought of it. If Apple wanted to sell head phones they could make , design, sell their own and people would beat a path to their door, no Beats needed.
    If as some have suggested the wanted to get into streaming they could have bought spotify and have immediate presence in the field.I guess Lovine pulled some of that well known salesmanship on Cook.

    • lucascott

      Do a survey. Hop on a bus in a decently sized city. Or a train. One of those were no one talks but just listens to music or plays on their phone. Count how many folks are using iPhones, iPads or iPods. Count how many are using Beats. Enough said

  • ianthetechman

    To be honest i cannot see the reason apple has acquired beats for so much money BUT i am sure there is a really good reason for it they are hardly a stupid thinking company so the reason must be legit.

    • lucascott

      Decimals likely in the wrong spot. End of the week we will get an official announcement that Apple both a shit ton of patents etc for Beats Music for $3.2 Million

  • You can’t buy “street cred” beats might have had it, but now that Apple bought them and Dre and Levine become part of Apple’s Corporate Board… What ever ‘Street Cred’ they had got swallowed up in their stock options and 401k … Apple Sucks and all these corporate billionaires like Dre, Levine etc… are so out of touch with the ‘real world’ they might as well be living on the moon…

  • Site7000

    Great article, Leander. It makes the acquisition make sense, fits in with Apple’s “new product category” of wearables and opens a new demographic for Apple. The difference with Beats is that it’s Apple’s first acquisition that can’t be smoothly absorbed into the company—it’s worth more as an independent brand. If they can make it work, it will come to be seen as brilliant. I wonder who Google is going to acquire in response to this.

    I think the story that’s not being given enough attention is Apple’s incredible acquisition and hiring spree. It includes not only fashion, but also medical, photography, payment services and others. These are being reported on as they happen, but not as a whole.

  • iFreek

    Apple is making Beats an Apple Store exclusive productline.

  • Brandon Franklin

    Yeah I thought apple disrupted this type of industry with its own amazing designs and technology( I guess when your worth a hundred billion you just buy it now) but my thinking is beats didn’t create any amazing design that everyone has to have. All their success comes from the fact that kids actually think dre uses his beats headsets in the studio to make all those hit records and maybe he does…but i seriously doubt it. It’s genius… kind of like how when u were a kid u thought your air Jordan’s made you jump higher and run faster. And I guess if they were able retain dre as a spokesperson or something they might retain dre’s fan base but I fear it might even water down dre’s brand to point he’s considered a sell out and apples left 2 subpar products

  • Jhabril_Harris

    Great article CoM founder :) It does explain how aquiring the Beats brand could do good for Apple fashion wise. Although, like other readers have said, the fashion world is ever changing just like the technology one, therefore this (huge) potential buy may gain Apple advantage for future products’ image but only for a little while. Not to mention the actual technology used in Beats products are absolute crap and the incredible amount of sales bother me somewhat (then again, fashion). I suppose this deal would be enough to at least kick start the trend for future Apple products (worth actual money by the way) such as the rumored iWatch.

  • MayorSwiss

    I think they’re just shifting their money around.

  • lucascott

    What a joke. Apple has street creed. Possibly way more than Beats could dream of.

    IF there is any truth to this rumor it has zero to do with buying cred and every thing to do with Beats Music and perhaps some patents. The music service apparently isn’t doing that great but there come be algorithms Apple wants. Jimmy and Dre as ‘advisors’ might be to explain the how and why of the system.

  • BoutrosBoutrosGali

    the only way apple could buy street cred here is if the deal actually included dr. dre himself.

  • Bill Dresselhaus

    Just a small note of truth…the first in-house industrial designer and product designer at Apple was Jerry Manock, industrial designer and product designer of the Apple II, plus he did much more ID/PD for Apple such as the first Mac, and there were others after him before Bob.