I have been scratching my head since I heard the rumors of Apple buying Beats and continuing to scratch it since it actually happened. The reasons flowing through the interwebs simply do not equate in my mind. On one hand, you have the camp that is firmly placing the purchase on Beats streaming music service, which hasn’t been all that successful. Some pundits claim Apple’s attempts at a streaming music service are even more dismal and that Beats could shore it up and bring it back to life. On the other hand, you have the camp that says Apple’s $3 billion purchase is being invested for the hardware, technology, and R&D behind Beats. But let’s face it, there’s really nothing that special about any of those that Apple couldn’t have done on its own.
So I started to think, what else could Apple possible want with Beats? What does Beats have that Apple doesn’t? And why would they hire on Dr. Dre and Jimmy Iovine when they simply do not fit into the Apple culture?
The answer that came to me…Apple is buying their demographics. I started looking around for sources that could help me understand who it is that buys Apple’s iPhones, and I came across a report at MarketingProfs.com. The numbers they report are interesting. For example, it shows the percentage of white, non-Hispanic iPhone and Android owners are about equal at 27 and 26%. It also shows that the percentage of Hispanic iPhone and Android owners is also pretty equal at 26 and 27%. But then we take a look at the percentages for black, non-Hispanic and that’s where we see a significant difference. 16% of African Americans say they own an iPhone while 42% say they own an Android. Take a look at the graphic below.
Android and iPhone owners are equally common within the cell owner population as a whole, although this ratio differs across various demographic groups. Cell phone owners from a wide range of educational and household income groupings have similar levels of Android adoption, but those from the upper end of the income and education spectrum are much more likely than those with lower income and educational levels to say they own an iPhone. Indeed, fully half—49%—of cell owners with a household income of $150,000 or more say their phone is an iPhone. And African-American cell owners are more likely than whites or Latinos to say that their phone is an Android device as opposed to an iPhone.
This finally makes sense to me. What do we know about Dr. Dre, Jimmy Iovine and Beats? Well, we know that Iovine and Dre have been marketing geniuses. They have managed to reel in a whole culture of Rap listeners into buying their product. Sure there are more than just Rap and Hip-Hop listeners that buy Beats, but I believe the core is that demographic. This is the same culture of users that is not buying Apple iPhones but opting for Androids. We know that loyalty to Dr. Dre and Iovine in that culture is extremely high and that is why Dre and Iovine came with this deal. Arguably, we can say that Dre and Iovine’s services comprised most of the deal. Simply buying Beats and discarding Dre and Iovine wouldn’t have worked. I can’t imagine Tim Cook or Jony Ive trying to market to the Beats culture, just not going to work. But I can imagine Dre and Iovine injecting the Apple and Beats branding into the outlets they already have, thereby increasing the market for Apple devices. It could very well work!
As a minority myself and with many African-American friends I understand the fierce loyalty they have to Dre and Iovine. Beats was born and bred by one of their own, they show support and solidarity because of that. With Apple’s market share of that culture so low, it’s a great chance for them to try and catch up to Android by attempting to win the one demographic they have yet to crack. Now it makes sense and it’s a brilliant move. But what impact will this have on Apple as a whole? We’re talking about merging two different business cultures into one. Tim Cook got a good taste of that culture when Dr. Dre’s celebratory video (posted after the break) was posted on Facebook way ahead of any kind of official announcement. Both parties will have a lot to learn from each other, and I remain skeptical of this purchase but certainly wish them both success. I still think Steve Ballmer purchasing the LA Clippers was a better deal, but I digress.
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About the research: The report was based on data from telephone interviews of 2,252 adults, age 18 and older, conducted by Princeton Survey Research Associates International from April 17 to May 19, 2013
Data Source: MarketProfs