The Internet turned itself inside out last night with reports that Apple was in talks to purchase Beats Electronics for $3.2 billion. It’s an interesting rumor, to be sure, but it has also baffled everyone.
Why would Apple need a headphone-maker? This is a great question, especially if you consider that many people don’t seem to like the quality of the headphones. Perhaps we’re not looking deep enough.
In my experience, acquisitions occur for a number of reasons:
- The product: The acquiring company feels strongly that they can’t compete with the other product, so they purchase the company. They could also be expanding their current product line-up and an acquisition is easier than building from scratch. I doubt that Apple is interested in Beats headphones, but Beats does have a music service that is supposedly very good.
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The people: This is an important one—sometimes more important than the product. Every once in a while, a company assembled an incredibly talented team of people that a company wants to work on its own products. In the case of Apple buying Beats, I’d say the talent acquisition is Jimmy Iovine—he’s a powerhouse in the music industry.
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The technology: This is another important one. Apple, and other companies, often buy companies with the sole purpose of integrating the acquired technology into its own. Apple has done this on many occasions over the past few years.
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The brand: Sometimes brands can complement each other in a particular market. I think this matters most when considering the younger age groups. This is where the headphones could make sense.
Most people seem to be focused on Beats as a headphone-maker that Apple is buying, but there is more to the acquisition than hardware.
Paying billions for Iovine? He’s influential, but not more than Apple in the music realm. Hardly worth billions to Apple, too. I say it’s a combination of 1 and 3; Beats has a lust factor that the iPod hasn’t had for a few years, and it’s an easy stepping stone into music streaming. If Apple did a cold launch of a music product and it failed, it’s Apples fault. If they re-launch Beats Music and it fails, it’s perceived as a Beats issue. This is a $3.2 billion insurance policy.
The iPod hasn’t needed a lust factor; it’s losing sales to the iPhone, which is totally fine with Apple.
It’s not the headphones or the Beats brand- sorry, Dre. It’s the streaming and the labels. Plus something we don’t know about.
It’s for the holographic Tupac tech.
I have seen Mr. Iovine on CSPAN several years ago
discussing future of music.
Apple should run the other way if he is approaching on
the street.
Very low opinion of this person and Beats as a company.
If Apple is trying to placate the music industry.
it is better to just give up then do a partnership or whatever spin
that will come out of Tim Cook’s mouth.
My opinion of Tim Cooks judging of People to hire will
go down to zero.
The whole Dr. Dre celebrating as billionaire before announcement is total turn off.
The whole news released as rumor and people making fun of Apple is just down right embarrassing.
Only hope that is false. otherwise total loss of faith.
part of me thinks they are drumming up this rumor for another deal.
I wonder if that was sarcasm in response to the rumors? If it wasn’t, I agree with you. Tacky.
Based on the industry contacts, the brand and even, perhaps, the high margin headphone business this acquisition makes sense, but not at a premium valuation, IMHO.
A guy raised broke in Compton just found out he’ll be the first Hip Hop Billionaire. Anyone else claiming they wouldn’t celebrate in the moment is a damn liar. Period.
I’m gonna hold off because my hope is that this is all just a farce and Apple has decided not to say so.
Beats is already a mature product and it’s not like they have any tech that I’ve heard of that’s worth 3 billion. They have some really expensive poor sounding headphones.
If Apple wanted they could come out with some big ol ear cans with their logo plastered on them and trendy wing nuts would eat them up.
I am disappointed about this acquisition.
BUT hey, it can benefit a lot for Apple. Remember when Cook wanted more share of the total iPhones sold in their retail store, because they had 20% share? Well now they boost that number by offering Beats headphones of your choice with iPhone when ordering through their Online or Retail Apple Store, the other retailers would sell with the standard Apple headphones.
years ago apple looked at starting a label. Given that the labels are the major hinderance to deals these days, as they protect their increasingly irrelevant marketing and sales apparatus, maybe this is a real musical event. Have Iovinne start a new label and head up music discussions, headphones are nice but maybe even spin them off and recoup a big part of the investment and go for the real money, distribution.
However I spin all those ideas and arguments flying around in the bloggosphere about this supposed deal (and there are a few making sense in a way), I don´t get this prize-sticker. Threethousendtwohundred Million Dollars? Gimme a break – beats must have some patented IP up the sleeve how to shit gold.
Y’all are missing the point. Apple and Beats both sell to the masses. Beats has taken a 60% share of the headphone market, at ridiculously high margins, selling a product that purists hate, but the masses love as fashion statements. Sound familiar? (Yes, I know that Apple makes great products, but their marketing has a big fashion component to it.) That’s marketing talent that Apple would love to apply to wearable tech generally, which is where this is headed. They’ve been hiring fashion talent like crazy, so you know they are getting into wearable tech launches in a big way.
The music streaming is the perfect kicker that boosted the cost of the deal. It gives Apple a unique entry in streaming, where they are nonexistent at the moment. Streaming is the future and Beats has a very smart angle on it that fits with Apple’s approach hand-in-glove. The know-it-alls who knock Iovine as a fool who lucked into $700M are wrong. He’s a genius at what he does.
People complained that Apple haven’t spent tons of money on a high profile buy, people complain when Apple spends tons of money on a high profile buy…
“it’s for the headphones” “Its for the executives” “its for the brand”
I say all of the above.
It’s a floor wax AND a dessert topping!!!