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Tim Cook Explains Why Apple Is Buying Beats (Q&A)

"We could build just about anything that you could dream of. But that's not the question."

Asa Mathat
Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

The Apple Beats deal has already generated lots of debate, and now that it’s official, we will see even more. Here’s Apple CEO Tim Cook’s extended explanation, via an interview he conducted with Re/code this afternoon. Beats co-founder Jimmy Iovine makes a cameo at the end.

Peter Kafka: This is such an unusual deal for Apple. Why did you make it?

Tim Cook: This is all about music, and we’ve always viewed that music was key to society and culture. Music’s always been at the heart of Apple. It’s deep in our DNA. We’ve sold Macs to musicians since the beginning of Macs. And we accelerated the music industry with the digital music revolution with the iPod and the iTunes music store.

So we’ve always loved music and believed in the power of it and believed that it could transcend language, culture and bring people together and produce emotions and deep feelings that other things can’t. And we’ve stood at the intersection of technology and the liberal arts. So I see this right in the — if you were drawing a line, this would be the logical next data point.

What Beats brings to Apple are guys with very rare skills. People like this aren’t born every day. They’re very rare. They really get music deeply. So we get an infusion in Apple of some great talent.

We get a subscription music service that we believe is the first subscription service that really got it right. They had the insight early on to know how important human curation is. That technology by itself wasn’t enough — that it was the marriage of the two that would really be great and produce a feeling in people that we want to produce. They’ve also built an incredible premium headphone business that’s been tuned by experts and critical ears. We’re fans of that. It’s a reasonable-size business that’s fast-growing.

But mostly, backing up — it’s because we always are future-focused. So it’s not what Apple and Beats are doing today. It’s what we believe pairing the two together can produce for the future.

Financially, it’s great, because even in the short term there are synergies. Using Apple’s global footprint, there’s hitting the gas on the subscription service, there’s distributing the headphones globally in countries that they’re not in today. There’s lots of things like that.

So we’re projecting it’s going to be accretive in fiscal year 2015, which as you know for us, only starts in a few months.

But the real thing that gets us excited is that feeling that you only get so few times, are the things that we can jointly do together, that neither company could do on their own.

But that’s what’s so confusing from the outside: You’ve been selling digital music since 2003. You could certainly launch a music subscription service on your own. And you’re very good at hardware already.

We could build just about anything that you could dream of. But that’s not the question. The thing that Beats provides us is a head start. They provide us with incredible people, that don’t grow on trees. They’re creative souls, kindred spirits.

And by the way — we do acquire companies. I know we don’t talk about them, but we’ve acquired 27 companies between fiscal year 2013 and this year so far. So we’ve never been of the mindset that we shouldn’t acquire things.

Nor has one of the filters been that we should only acquire things that we can’t do. Because I’m a big believer that Apple can do about anything.

The point is that Jimmy and Dre have built something phenomenal. And they have phenomenal skills. And we can begin, the instant that this deal is approved, working on the future together. And I think that future is better than either company could create on their own.

That’s the reason to go from dating to steady to marriage. It’s all about the future. It’s seeing around the next corner.

So Jimmy and Dre are going to be Apple employees? Full time?

100 percent.

To Iovine and Dre: Are you guys going to be flying up to Cupertino on a regular basis? Or will you be staying in L.A.?

Jimmy Iovine: We’re doing that on a regular basis. We’ve been doing that for a long time. And now we’re going to be doing it more, because I don’t have a day job.

We have a commitment to this, as you would imagine. It’s been our life’s dream — we’ve built Beats up and wanted to finish this dream, and the best way to finish it is with this company.

What sort of stuff can you build with Apple that you couldn’t do on your own?

Obviously, we can’t talk about that, as you know. See, in the record business, you can show someone your song, and they don’t copy it. In the tech business, you show somebody your idea, and they steal it.

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