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Apple Doesn't Give a Damn if Analysts Understand What It Does

You can see my very initial reaction to the Apple/Beats news in Tim Cook Is a Stinking Genius If Apple Buys Beats.

I sort of predicted something like this could happen.

When it was being conceived I was a big fan of the notion of Beats Music, largely because of what Jimmy Iovine had to say about the relationship between data, the music industry and musicians (see the last link). When Beats Music came to be, I jumped off the bandwagon. I don't think it's been well-executed. I was so down on Beats Music last month that I wrote:

If they're not already, Beats will soon be begging anybody who will listen -- Google (GOOG), Facebook (FB), etc. -- to buy them.

Make no mistake about it -- Apple's saving Beats Music here. I assume the headphone business would have been fine with or without Apple (though Apple can certainly enhance it and do things with it Beats probably could not do on its own). In addition, this is absolutely a play to, in some respects maintain and, in others, regain digital music dominance by Apple.

Must Read: Dow High Belies Coming Bear Market:

By buying Beats, Apple gives Beats Music breathing room to operate. There was no way Beats Music could have survived on its own. But now it doesn't matter how much money Beats Music loses with Apple subsidizing it. Beats Music has the power of hundreds of millions of iOS devices and MacBooks behind it. Though the positioning and level of which remains to be seen, Apple receives considerable exposure, via Beats, on Android and other competing platforms.

If I'm Apple I relegate iTunes Radio as a separate button in the old iTunes platform. I make Beats Music the primary music app across the ecosystem and I jettison Pandora from the App Store.

That's the streaming music part of it, but the data part is more important.

In this deal, Apple receives friends of the music industry, particularly Jimmy Iovine and Beats Music CEO Ian Rogers.

Record labels and such trust and are willing to openly deal with these guys more than they do tech companies. Expect Apple to make the most of the opportunity Pandora decided not to seize -- the data opportunity. Iovine and Rogers understand the power of data with respect to how help it can help the music industry, musicians, songwriters and brands. And they will conceive ways to make everybody happy -- the aforementioned as they attempt to monetize music beyond royalties and Apple as it looks to juice its laggard mobile advertising business.

Iovine's history is well-chronicled. He helped make Springsteen's Born to Run for goodness sake. Rogers' history -- not so well-chronicled. But he's the real deal with respect to maximizing the power of music for the industry, musicians and brands. If you want to understand what Apple gets with Rogers (I can't imagine him not being part of the deal) just read the Wikipedia entry on his claim to fame -- Topspin Media. He was banging out the future of the music business seven years ago.

I expect Apple -- with Beats in the fold -- will almost singlehandedly reenergize the music industry. It's an industry that can't seem to find its way in a digital world, but has more potential to nurture multiple dynamic revenue streams than it ever has before. And it's all because of the power of Internet radio and the data the platforms produce.

I don't completely understand the Apple/Beats hookup either, but I can make enough sense of it to "see more than one move ahead," even if I don't know -- with precision -- exactly what that move will be.

I'm going to spend some time this coming week at TheStreet speculating as to what the next move(s) might be. I have some exciting ideas as I am certain Iovine, Rogers and Tim Cook do, otherwise they never would have agreed to marry.

--Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is a full-time columnist for TheStreet. He lives in Santa Monica. Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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