The Blogosphere seems to be grasping at straws to make sense of Apple’s purchase of Beats. Two words:
Celebrity Endorsement
We’ve all begun to speak of the Smartphone market as a luxury goods market. Success is driven by the halo factor of the panache and image of a device rather than any functional specifications or capabilities. This explains, for example, the failure of the iPhone 5C to take off, as well as the significant lift Samsung seems to have gotten from Ellen’s selfie at the Oscars going viral.
Headphone companies are ahead of other electronics manufacturers in moving to celebrity based branding. Looking beyond Beats, Monster Products features a variety of brands including UFC, Rapper Meek Mill’s 24K lifestyle, S.K.A.M DJ line and others. Dr. Dre turned around the Beats brand with the right celebrity endorsements, and has built a company that has the connections and DNA to create branded products and gaining the celebrity endorsements to stand above the brand clutter.
Apple stands to benefit from celebrity endorsements more than it does from a subscription music service or a headphone line, however popular or profitable they may be. Beats brings not only a specific set of endorsements, but also the organizational and cultural know how around endorsements. Anything that helps Apple to better market its products – and improve gross margins – may be worth a premium.
