Apple, Beats and what the deal tells us about the business of hip-hop

Recording artist Dr. Dre wears a pair of Beats headphones as he attends the MLB 2010 season opener between the New York Yankees and Boston Red Sox at Fenway Park in Boston, in this file photo taken April 4, 2010. Apple Inc is close to buying headphone maker Beats Electronics for $3.2 billion, the Financial Times reported. The purchase of Beats, which also runs a streaming music service, would be the company's largest ever acquisition, the newspaper reported. REUTERS/Adam Hunger/Files (UNITED STATES - Tags: ENTERTAINMENT BUSINESS)
Dr. Dre, poised to become an Apple executive if the deal goes through.(Adam Hunger/Reuters)

Apple’s rumored acquisition of Beats by Dre — still unconfirmed by Apple, by the way! — remains a fascinating unknown. Nobody seems to know exactly why Apple wants Beats, although there are a lot of theories.

So we asked journalist Dan Charnas, author of “The Big Payback: The History of the Business of Hip-Hop,” for his thoughts. Charnas has written about the way music and commerce have blended into one giant part of our culture, outlining the way the business of music and the musicians themselves have become deeply intertwined with a host of other commercial enterprises. (Here’s an excerpt from his book about 50 Cent’s partnership with Vitaminwater, for instance).

The following is a slightly edited and condensed Q&A we conducted with Charnas via e-mail this week:

1. Assuming that the acquisition goes through — we’re just going to assume that for the sake of the next few questions — what does it mean that Apple, a gigantic company that is not big on acquisitions, made its first such acquisition here, with this company, with these particular players?

Apple staked its claim in digital music on the presumption that consumers wanted to own music — whether that was in physical form or delivered in packets of digital code. And, for a great while, that presumption was true. But when online music streaming came of age — with Pandora, YouTube and Spotify and Rdio — that business model was bound to decline. And Apple has not come up with a successful answer to that new reality.

That Apple would purchase Beats (a well-marketed, well-branded app that is, to be kind, still developing its audience) shows a bit of resignation and desperation that they need to get some kind of, any kind of, foothold before this market passes them by.

2. There are reports that Dr. Dre and Jimmy Iovine could potentially become Apple executives if the acquisition goes through. Putting aside the whole “first billionaire in hip-hop” thing, can we talk about the fact that Dr. Dre would become an executive at the most valuable company in the United States?

In name only. Dre ain’t showing up to anybody’s offices for nothing except to collect a check and jet. He’s a “transient creative”!

But yeah, I mean, why not Dre? He’s created more value for the corporate music business and, thus, the tech community, than most.

3. The rise of the musician/entrepreneur angle has overshadowed the fact that Dr. Dre isn’t really a musician anymore. While “Detox” will allegedly come out at some point, is this the future for the entrepreneurs to come out of hip-hop: moving away from music and shifting entirely into the business world?

It has been that way for at least a decade. The big money isn’t in music, it’s in consumer products. Jay Z learned that seven years ago when he sold Rocawear for 10 times the amount for which he sold his record company.

And that reality isn’t genre-specific, by the way. It’s just that hip-hop artists have been, because of their own history of having to come in from the outside of the industry, already predisposed to entrepreneurship.

4. Following on that idea, what does this mean for the younger generation of hip-hop stars coming up in a world where the end goal isn’t just success, but the kind of massive, earth-shattering success that leads to an Apple acquisition or owning part of the Nets?

Ha! Well, that’s what the receding American dream is doing to us all, is it not? Longer odds for the bigger payoff, and not much opportunity for dreams of a less ambitious nature? The music business used to have this conception of the “mid-range” artist — someone who could not be a mega star and still carve out a decent career for themselves. Now it is either piece your own cozy constituency together through social media or strike it rich.

5. How will this alter the way Apple is viewed in the music industry? Typically, when successful musicians become successful in business, how does it benefit the companies themselves?

Couple of thoughts: This move is an alignment of two cool, design-focused brands with hyper-loyal consumers. So there is some magic synergy that can come from that. Apple can give Beats the audience they need to challenge Spotify; and Beats can give Apple market share and one more piece of cool hardware to sell.

However, there are a bunch of folks who view this move as supremely stupid. The argument goes like this: Apple can make better headphones than Beats can, they’re just buying a brand, and an already sullied one at that. Beats Music, as a service, isn’t even off the ground yet, and they probably could have spent wiser, or even built their own. Apple is a great company in creative flux, and Beats is an opportunistic exercise in branding, not in great products. Or so the argument goes.

6. Seriously, now that he’s going to be an Apple executive, is there any chance “Detox” will ever come out?

Ha! Don’t hold your breath. But I am sure there are folks who wish Dre would be at least half as painstaking about the quality of his headphones as he is about crafting his follow-up.

Mark Berman is a reporter on the National staff. He anchors Post Nation, a destination for breaking news and developing stories from around the country.
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Mark Berman | May 14