Most prognosticators, critics, certified Apple watchers, and members of the technorati elite politburo had difficult figuring out what Apple was up to with the Beats acquisition, and many called it a stupid idea. So it is with almost everything Apple does. Why? Apple plays a long game while everyone who watches sees a short game. If hindsight is 20-20 vision, then it should be easier to see what Apple had planned with Beats, right?
About The Benjamins
The executives that run Apple are not fools. They’re not influenced much by changes in the market that they themselves do not cause. Beats had three things going for it that Apple didn’t but needed have. Some knowledgeable and experienced music industry executives. A streaming music service. And a line of popular headphones.
It’s only been two years and here’s what has happened. First, Apple Music, now with more than 17-million paying subscribers and an annual run rate of $2.25-billion ($11 average monthly subscription, multiplied by 17-million, multiplied by 12 months). That ain’t shabby for a business that did not exist two years ago.
Second, the Beats acquisition set the stage for Apple to remove the headphone jack from the iPhone and move the industry toward wireless earphones and headphones. Yes, it was going that way anyway, but this is the industry’s first big push. Wireless is the future. But Apple knew that years ago and made the proper adjustment in the long game strategy with short-term tactical changes.
Apple plays the long game and the Beats purchase and iPhone 7 sans headphone jack is just one example among many.
Successful product marketing is about differentiation. Apple differentiates the Mac from Windows PCs via premium components and OS X (soon to be macOS Sierra). Why buy an expensive Windows PC when a cheap one still runs Windows apps? Likewise, why buy an expensive Android smartphone when cheap ones do the same thing?
The CPUs in smartphones are not commodity items like Intel Inside or AMD CPUs, but they’re close, and the number of manufacturers who ship such chips in volume can be counted on one hand. So, how can Apple differentiate itself from whatever operating system and CPUs everyone else uses? iOS and Apple’s own A-Series CPUs, which came from the company’s purchase of P.A. Semi back in 2008. Apple’s chips run rings around the competition, which keeps the differentiation strong, sets Apple’s iPhone and iPads apart, and helps to maintain the premium brand which begets premium margins.
That wasn’t so hard, was it?
There is more of course. Apple spent hundreds of millions on AuthenTec and both Touch ID fingerprint sensor and Apple Pay showed up a few years later. Apple spent money on speech recognition and artificial intelligence acquisitions and Siri was born. Maps improved to compete well against Google– it’s the #1 maps app on iOS– by a series of acquisitions. Years earlier Steve Jobs bought SoundJam which became iTunes. His NeXT operation brought WebObjects to Apple and that became the iTunes Store. The eMagic purchase brought Logic to Cupertino, and that resulted in Logic Pro X and Garageband. Final Cut Pro, and sibling iMovie, came from Macromedia back in the last century.
See? Apple plays a very long game. It would be wise for critics who lambast the company’s incremental innovations to pay attention to the history books when predicting Apple’s imminent demise. Nattering nabobs of negativism, listen up. History is not on your side. When you write such missives which decry Apple’s decision to do this or that as a bad sign or a problem, try to look backwards as far as you can and bone up on Apple history before you write about the present or the future.