About a week ago, rumors began to surface that
Apple is apparently ready to cough up over $3 billion--a confusing figure to those familiar with either firm. Last year an investment firm bought a 50% stake in the company for $500 million, and while Beats has added new products and grown since then, it certainly hasn’t tripled in value.
So, why would the world’s largest consumer electronics company shell out such an exorbitant sum for what high end headphones? Maybe Apple is ready to ditch their iconic white earbuds, or maybe it has something to do with any (or all) of the following:
Wearables
While they haven’t announced anything yet, it is no secret that Apple is going into the wearables business, as is every other firm. Rival companies like Samsung and Microsoft are all investing hundreds of millions (to start) on their plans to enter the wearable tech world, so as of now Apple is behind the curve--at least publicly.
Wearable technology is the future, and one of the tricks needed to get it off the ground is the design aspect. Many companies are so concerned with what a smartwatch or eyewear would do, they haven’t considered the “cool factor”--something the
There must be hundreds of options in the headphones market, with many of them claiming to be the best in quality. Only Beats has managed to convince consumers that it isn’t just a functional item, it is also a fashionable one. The company’s commitment to clean, ultra-cool design is perfectly in line with Apple’s core differentiator. The two would integrate easily and immediately.
Sound Quality
One the greatest strengths that Beats has is it’s branding prowess. While hardware is certainly the largest segment of their business, the name Beats already carries a valuable cache, and it’s growth has begun. HP computers can now come with Beats Audio pre-installed, and Chrysler is also on board with Beats-branded audio technology in their newer models.
While audiophiles around the world may have varying opinions about Beats’ quality, the company is perceived to be an industry leader in music, while Apple isn’t rated as highly. If the deal goes through, it won’t take long for the Beats systems to work their way into every device that Apple creates and beyond. The company could also use Beats as an in with many brands, with deals ending in important, valuable relationships.
Lastly, if the company owns Beats headphones, you can bet sales will go up. Soon you’ll be able to buy a pair in your local Apple store, and the options will multiply. A future pair of headphones could work in tandem with the iPhone in your pocket, or that iWatch you’re wearing. With sales of iPads and iPods waning, the company needs to come up with new gadgets Apple fanatics just have to have, hopefully ones with great sound quality.
Streaming Music
Digital music sales began to slide for the first time last year, and physical retail has been declining at devastating rates for years. Basically, sales of singles and albums are not the way of the future. While Apple may have revolutionized the way we consume music with iTunes over a decade ago, they are no longer a leader. Their
Beats also launched a similar product earlier in 2014 to less than stellar numbers. iTunes Radio and Beats Music are competitors both trying to take even a small market share away from the big players (in this rare occasion, Apple is not a big player), but Beats has an algorithm that seems to be converting free users to paid ones better than any others out there. Apple may be looking to absorb this intellectual property and amp up their streaming service.
Marketing & Deal Making
Beats has a lot going for it, from fashion-forward design to quality sound to insights into monetizing the future of music consumption, but one of the company’s greatest assets could be the answer to the absurd price tag associated with the deal: it’s founders.
Beats’ massive success can be attributed mostly to industry veterans Dr. Dre and Jimmy Iovine, who are masters of marketing and making deals. Throughout their storied careers the two have proven their worth with impossible licensing deals and a keen eye for what is next and what is cool. It is rumored that if this deal does go through, both will join Apple as executives. If they were able to accomplish this much with their own startup in only a few years, there is no telling what they’ll achieve with the unlimited resources of Apple behind them.
While Apple certainly isn’t short on marketing talent, these two may be the best in the world, and their value is not to be underestimated.
