Analyst Gene Munster is no fan of Apple’s reported interest in Dr. Dre’s Beats Electronics. But even he admits there is one very good reason for the $3.2 billion deal.
And it’s not the “coolness” factor from the high-end headphone brand and its rapper/co-founder, said Munster.
Instead, one of the most valuable parts of the reported acquisition would be Beats’ other co-founder and CEO Jimmy Iovine, who may reportedly join Apple as part of the acquisition, The Wall Street Journal reported.
“I fully appreciate how big Jimmy Iovine is in the music industry,” Munster, senior research analyst at Piper Jaffray, told ABC News. “Apple understands they can make this stuff themselves. It’s easy to do. But I think there’s a harder order in play, and that’s in management.”
Iovine, who is also co-founder of Interscope Records and chairman of Interscope Geffen A&M, is “the guy in music,” Munster said, in part because he is the visionary behind the streaming phenomenon that shifted the music business model.
“For the acquisition to make sense, he needs to take what he’s done in music and bring it into the deal,” Munster said.
And how can Iovine do that? Iovine can provide what Apple has been trying to do: providing new ways to consume video through Apple products, Munster said.
“Music is in the grand scheme of things, but not as important as video,” he said.
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Munster said he would have preferred Apple spend the $3.2 billion on acquisitions that strengthen Apple’s position in Internet services (such as Yelp, Twitter and Square), which he believes is Apple’s “biggest weakness.”
And while Dr. Dre and Apple CEO Tim Cook may be an unusual match, Munster said he can see Iovine and Cook “getting along like ham and eggs.”
Keith Clinkscales, CEO of Revolt Media & TV, Sean Combs’ music cable network, said the reported acquisition is a “great signal for music.”
“It reverberates to other marketers how important music is to the millennial audience,” Clinkscales said.
When asked if he thinks Iovine would make a move to work for Apple, Clinkscales laughed and said, “I think Jimmy will work with Apple. Dr. Dre and those guys have done a great job with that brand.” He added that Beats by Dre has done an “exceptional” job making music a lifestyle choice.
A spokesman for Apple declined to comment. Beats did not respond to a request for comment from ABC News.
Munster said he doesn’t believe the acquisition indicates Apple is struggling to innovate. Instead, Munster said it’s a sign Apple needs help in content.
“To pay $3 billion for hardware is a bad idea. There’s no question about that. I think it does signal a desire really. He’s a baller,” Munster said of Iovine. “There’s no other way to put it.”