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HTC buys cultural currency

August 11, 2011

HTC is trying hard to find the right route forward in the complex and challenging world of mobile phones.

This is an industry that has the power to make or kill brands in what seems like a flash; just look at Apple, Nokia and Motorola as examples.

HTC is been one of the lucky ones- it has managed to not only navigate these waters, but to do so successfully, mainly thanks to the design.

Yesterday, HTC made a very interesting move by acquiring 51% of Beats for $300 million-the “sound” company founded by Jimmy Iovine and Dr Dre.

The PR story is that Beats will help HTC improve the sound of their mobile phones.

Clearly, this is the world of Beats- Iovine has been on crusade for the last five years about the problems of poor sound in computers and especially those ubiquitous white ear buds.

Beats is a great example of a brand that gets the times and how to operate in a challenging environment.

It’s lean and operates as a hub bringing the right people together- for example; Ammunition for product design and the Monster Cable. They’ve succeeded in re-educating the market about sound and forced a transformation where the white ear buds have been replaced by Beats. Kids who wouldn’t think about sound, now not only place a value on it, but to pay their hard earned cash.

While they clearly have a well defined mission and great products, the brand power of Beats lies in its connection to culture and the reason for the brand’s success.

Iovine and Dr Dre’s relationship with artists has made all the difference with their connections from some important people who matter in culture, Kobe, Lady Gaga, Le Bron- etc. These relationships allow Beats to create its own media and to impact culture directly.

So, while the PR release might be all about HTC acquiring a company to be bring better sound to HTC phones, really HTC is buying Iovine’s connections to cultural cool. In a world where Apple owns “cool”, HTC realizes it needs a piece of this to compete with the with the giant.

One thing ad agencies need to recognize is that companies like Beats are in a way displacing agencies because they have cultural power in a way that agencies don’t really have.

We are in a world where breakthrough is everything HTC can either rely on advertising campaigns to hit a creative high note and become culturally relevant, or short circuit the process and go straight to the cultural creators. The reality is obviously less divisive and will likely mean a partnership between the agency and Beats, but it’s very clear who’s will be in control and leading the creative charge.

While agencies might be pre-occupied trying to work out mobile and social media right now, the other real battle is all about control and access to the cultural talent that takes you to breakthrough.

Perhaps, Madison Avenue needs to pick up the phone and try calling Hollywood again.

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