The tech world was introduced with a little bit of a head scratcher final night time when the properly-revered Monetary Occasions reported that Apple was near buying Beats Music for $three.2 billion. Beats is an organization based by Dr. Dre and Jimmy Iovine that makes costly, crappy headphones which promote by the boatload because of sensible advertising and a heap of movie star endorsements. The corporate additionally has its personal fledgling music streaming service. Its headphones are additionally extensively bought in Apple shops. So is Apple actually going to drop a couple of billion on this firm?
At $three.2 billion a Beats buyout can be probably the most Apple has ever spent on firm.
Apple has over $one hundred fifty billion in money within the financial institution and that sum is rising. So a $three.2 billion buy isn’t truly all that a lot for Apple. It’s just a bit over 2% of their money stockpile. However the worth does appear inexplicably giant for a corporation that makes a commodity like headphones and has a streaming music service that hasn’t taken off.
Until Beats has a secret hardware product within the works, one tends to assume Apple can be a bit insane for dropping billions for a headphone producer. Apple’s largest acquisition up to now has been NeXT, which it bought from Steve Jobs within the Nineteen Nineties for $440 million.
Does Apple actually need assist in the headphones division?
Look, Apple’s earbuds are nothing to put in writing house about. Individuals both assume they’re okay, or they only ditch them for some third-get together model. Nonetheless, it might be odd to see Apple spending a lot simply to get assist with its headphones. Particularly contemplating many individuals say Beats headphones aren’t the highest quality. If Apple was dropping this cash on Bose this might be a unique story – Bose has lots of patents, proprietary hardware and is among the slickest shopper electronics manufacturers on the planet.
Beats’ streaming music service doesn’t supply something Apple couldn’t do by itself.
Beats has a streaming music service that's nonetheless in its early days. It’s good, however nowhere close to as massive as Pandora or Spotify. Its service additionally doesn’t supply any killer options that different streaming providers don’t. Meaning it’s onerous to see any acquisition of Beats as one accomplished for technical procurement or to get some valued patents for Apple’s portfolio. Positive, Apple doesn’t have a streaming music service like Beats, Pandora, or Spotify but (iTunes Radio solely allows you to stream stations; not particular person tracks and albums on demand). However is that this actually a know-how Apple can’t crack with out shopping for a small participant on this space? No.
So why would a Beats acquisition by Apple make sense?
Look, I’m nonetheless not completely bought that this acquisition is occurring –or, whether it is whether or not it’ll be for as a lot as $three.2 billion. However let’s say it does occur indirectly. The primary purpose this is sensible for Apple is due to Beats’ cofounder Jimmy Iovine. Iovine has deep and much reaching connections within the music business. He is aware of the gamers and choice makers on a deep private degree. That’s one thing Apple’s executives like Tim Prepare dinner don’t have.
The music business has all the time been leery of Apple whereas on the similar time understanding they wanted the corporate. iTunes is the most important music retailer on the earth in any case. This wariness concerning the firm has result in frosty relationships between Apple and the main music labels. But when Apple have been to purchase Beats, Iovine would more than likely come on as an Apple government answerable for music business relationships. He might take the edge off the love-hate relationship the music business feels for the corporate and may simply be the one man who might get everybody within the business to license their songs to Apple for a brand new streaming music service to rival choices from Pandora and Spotify.
My query is does Apple actually consider that Iovine is so important that it’s value shopping for his firm for $three.2 billion simply to get him?