The picture below was the source of much mirth at MBB towers when it circulated last week. On the right is none other than hip-hop “super-producer” and former NWA member Dr Dre (not his real name). The chap on the left, I’m reliably informed, is James “Jimmy” Iovine, the record label impresario and producer who boasts Lady Gaga and Eminem as close friends. Clearly, then, exactly the sort of people you expect to be lounging around in LA recording studios having their photos taken.
But wait a minute. Who’s that chap in the middle? Why, it’s none other than Peter Chou, the CEO of Taiwanese smartphone-maker HTC. Ah, of course. I clearly hadn’t noticed the “CEO jeans” (© Steve Jobs).
So what’s the story? Last week, HTC announced it was pumping US$300 million into Beats Electronics, a firm founded by Dre and Iovine that specialises in “audio technology” (or, to be precise, “headphones”). HTC – which will acquire a 51 percent stake in the firm – says it will launch its first phones incorporating the technology later this year.
Let’s untangle this deal a little. No-one as far as I’m aware buys a smartphone on the basis of the quality of its headphones; if they did, Apple would’ve never shifted a single unit. What HTC is buying here is some street cred. It’s not that long ago that HTC was a little-known OEM firm, making phones that others could stamp their brand on. As a result, Chou and chums may make some seriously good phones, but their brand is more Gola than Nike. But they’re hoping that Dr Dre’s endorsement will help them transform into a fully-fledged “lifestyle” brand – and that’s something that takes more than just marketing dollars.
But don’t be fooled into thinking that this kind of “brand investment” is mere frivolity. Both Goldman Sachs and Merrill Lynch gave their nods of approval to the Beats Electronics deal, noting that the first HTC “Beats” devices should boost both sales and the vendor’s reputation.
Of course, this is not the first time that a mobile phone vendor has courted a recording artist in a bid to shower in their showbiz stardust. And it doesn’t always work. Lest we forget that RIM funded an entire U2 tour as part of its efforts to push into the consumer space and it doesn’t seem to have done them much good. An even more cautionary tale concerns Nokia’s spectacularly misjudged collaboration with LL Cool J to promote its N97 phone (which saw the rapper threaten to “slice and dice” the competition among other things).
Indeed, the lessons from the following video should be thoroughly learnt before Peter Chou next steps into the studio with Dr Dre.
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