And The Beats Go On
By Tony Clark, 2-Dooz Inc. – October 12, 2014 (Original Publication Date)
Colin Kaepernick, the 26 year old star quarterback of the San Francisco 49ers was fined $10,000 last week by the NFL for wearing Beats by Dre headphones to a post game news conference. A simple act of defiance, as seen by some against what’s become known as the No Fun League, is in fact a brilliant piece of public relations on the part of Apple’s largest acquisition to date.
“And the Beat Goes On,” by The R&B group The Whispers, was a number one hit on the soul and dance charts in 1980—seven years before Colin Kaepernick was born. The upbeat song embraces change, exclaiming in the refrain, and the beat goes on, still moving strong, on and on ... the beat goes on. The song could be the theme song for what played out this past week regarding old school Bose, represented by the stodgy NFL corporate offices and new school Beats, represented by the young, iconic quarterback.
Beats, formally established by Dr. Dre and Jimmy Iovine in 2006, rocketed to prominence through the celebrity of Dre and a through a series of shrewd endorsements by hip-hop stars and other star entertainers, including football players like Kaepernick. The company is best known for its lineup of brightly colored, high-end, studio style headphones. Extremely popular with the post Boomer demographic (i.e., the “Boomerangs”), Beats is estimated to have captured more than 64% of the market for premium headphones in 2012 and by doing so made it onto Apple’s radar.
Apple closed the roughly $3 billion dollars acquisition of Beats on August 1st of this year. In the press release announcing the deal, Apple noted, “Beats Electronics has brought the energy, emotion and excitement of playback in the recording studio back to the listening experience and has introduced an entirely new generation to premium sound entertainment.” Almost certainly, if they hadn’t done so before, Bose took notice.
Bose, founded in 1964, is a loudspeaker legend. This year the company was able to wrest the NFL headsets sponsorship deal away from Motorola. At the announcement, Sean Garret, vice president of the noise-reduction technology group at Bose, noted, “For us, it’s more than a sponsorship … it’s an opportunity to be a part of the game and help the NFL improve their communication on the sidelines.” Though not explicitly stated, an additional goal of the deal, which came to light with the fine imposed on Kaepernick, is to bar players from using other headphones, especially the category leading Beats headphones, during game day, including during post game interviews.
To the Boomerangs, the sacking of Beats and Kaepernick registers as another abuse of power by the old guard. And, their reaction reminds us that brands have a generational expiration date, of which Bose is not immune. The once hip Bose brand is showing its age. The move against Beats feels like an act of desperation. I can hear The Whispers singing, do you ever wonder … that to win somebody’s got to lose. In this case, Bose is the loser. The misguided attempt to ban Beats by the NFL league offices backfired big time.
The $10 thousand dollar fine imposed on Kaepernick will most likely be paid by Apple’s Beats division. Moreover, the fine is a pittance to pay for all of the free publicity that Beats has received. The story blew-up on Twitter and concurrently appeared in the broader media including in the financial media, e.g., CNBC’s Fast Money Half Time Report on October 10, 2014—sparking a widespread emotional debate. It would not surprise me if the public relations backlash against Bose by the Boomerangs contributes to further market share gains by Beats in the premium headset sector at the expense of Bose.
In spite of Bose’s best efforts, the beat goes on … the Beats go on, the Beats go on, the Beats go … Those are my thoughts. As always, I invite and look forward to learning what you think.