Apple Inc.'s Beats Buy Could Be The Start Of Something Much, Much Bigger?

One longtime Apple observer predicts Apple’s looming Beats buy carries implications few suspect. Should you be a believer?

May 28, 2014 at 10:00AM

Last night, tech giant Apple (NASDAQ:AAPL) confirmed its purchase of Beats Audio for $3 billion.

Speculation about the exact drivers behind what is Apple's largest ever buyout have been flying ever since news of the deal surfaced earlier this month. But let's face it, few know Apple's true motivation behind its pursuit of Beats.

Beats Music Logo

Source: Beats

However, one longtime Apple observer recently posed one intriguing prediction concerning the true motivation behind Apple's Beats buyout. And while certainly it's different from many of the more common explanations we've seen surface of late, this idea could hold major implications for Apple if proven true.

Apple and Beats: the start of something bigger?
Top talent commands top dollar in the technology space, a place where new and innovative thinking can give birth to multi-billion dollar businesses in an almost comically short period of time these days.

Tech companies are famous for snapping up smaller outfits as a means of bringing visionary management teams in-house, a practice that has given rise to the term "acqui-hire" to describe this acquisition tactic. Google's (NASDAQ:GOOG)(NASDAQ:GOOGL) multi-billion dollar buyout of smart thermostat start-up Nest was recently cited as one such example, a way of bringing the highly respected Apple alum Tony Fadell and his management team into Google's corporate fold. And according to another knowledgeable source, Apple could be up to the same tactic in buying Beats.

In a recent article in Billboard, Walter Isaacson pitches the idea that the ultimate motivation behind Apple buying Beats is to acqui-hire music industry legend Jimmy Iovine. For those unfamiliar with Isaacson, he was the author selected by Steve Jobs to pen the late tech entrepreneur's best-selling authorized biography, among his many other highly successful journalistic achievements.

Sitting down with Billboard's Dan Lyons, Isaacson consulted his notes from his times at Jobs' side and found a section he left out of the Jobs biography that he believes holds major implications for Apple and Beats. According to Isaacson, Iovine actually lobbied Jobs to acquire Universal Music Group throughout 2002-03 in order to help assist Jobs with the project that would ultimately become Apple's iTunes music software. Fast forward to today: Isaacson believes that Apple is turning to Iovine once again today to develop the long-awaited television offering Apple's reportedly had in the works for some time now.

Apple's next great visionary?
If this is true, this would indeed be exciting news for Apple investors everywhere. To be sure, Iovine is one of the best-connected executives in the industry, someone with the right mix of industry know-how and street smarts to finally make Apple's television ambitions a reality.

Equally important, Iovine has a long track record of forging the kinds of relationships among content producers that launching an Apple-based television product would require. As readers of Jobs' biography know, Iovine was a critical component, along with Jobs, in persuading the top five music labels to sign-up with Apple's iTunes Store, a move that helped provide the industry with a much-needed new revenue source at a time when piracy threatened to upend the entire industry.

Jimmy Iovine

Source: Wikimedia Commons

Isaacson sees Iovine landing a similar role at Apple once more, the kind of statesman who can hopefully entice enough of the media industry to once again come to terms with an Apple video product.

Can he pull it off?
While this would indeed be exciting for Apple, orchestrating the deal among content producers won't be nearly as easy this time, should Isaacson have correctly interpreted Apple's and Iovine's intentions here.

For starters, the current cable and video landscape isn't bleeding money the same way the music industry was back in the early 2000s. Few argue that a la carte TV or more streaming options wouldn't represent a clear win for consumers, but without the same sense of desperation, it's hard to see how content producers and cable distributors would be willing to walk away from the billions of dollars that currently flow between the two groups each year, even if the arrangement is long-term unsustainable.

So while this storyline certainly piqued my interest, there are so many moving parts involved that I'd remain cautiously optimistic at best. Here's to hoping.

Apple's next move could be a smart device (warning, it may shock you)
Apple recent recruited a secret-development "dream team" to guarantee their newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are even claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of these type of devices will be sold per year. But one small company makes this gadget possible. And their stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Andrew Tonner owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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