Apple and Beats – in perfect harmony?

November 11, 2014 : TECHFacebooktwittergoogle_plusredditlinkedinmail

Apple and Beats in perfect harmony

One of the biggest news stories to come out of the tech world recently – and perhaps one of the most surprising – is that Apple has agreed a deal to buy headphones maker and streaming service Beats for $3 billion (£1.79 billion). That's a huge amount of money, even if you are getting one of the biggest and coolest brands in the business. Especially since Apple doesn't exactly have a reputation for being a big spender when it comes to snapping up new acquisitions.

So you'd expect it to want a lot for its money. The deal includes both Beats Electronics – the audio technology side of the business that includes its iconic headphones – and the new Beats Music streaming service that launched in the US earlier this year. Also significantly for Apple, the founders of Beats – record producer Jimmy Iovine and hip-hop star Dr Dre – will join the company, so you can expect them to lend their expertise and their name to future Apple music offerings.

What the firms are saying

As you'd expect, Apple is pretty excited about the deal, with its official announcement talking about the "energy, emotion and excitement" Beats has brought to the music experience. The firm was also keen to emphasise its own credentials in the music biz, with senior vice-president of Internet Software and Services at the firm Eddy Cue saying music is "an important part of Apple's DNA and always will be".

For its part, Beats has also been effusive in its praise for its new master, with Mr Iovine saying: "I've always known in my heart that Beats belonged with Apple." He also added the company was originally inspired by Apple's "unmatched ability to marry culture and technology", while he described the company's commitment to the music industry and fans as "something special".

What the analysts are saying

While Apple and Beats are clearly working hard to give off the impression that this is indeed a match made in heaven, some watchers of the music and tech industry are a little less certain, with much head-scratching going on as they try to figure out exactly what the deal will bring to Apple.

One of the main attractions of Beats that many have pointed out is its streaming service. But given that this is still getting going – with it said to have only around 110,000 subscribers at the moment, compared with Spotify's ten million paying users – there's some puzzlement at the value of this. 

Forrester analyst James McQuivey, for instance, suggested that given Apple already has such a big foothold in the music industry, it hardly needs to shell out millions on a competing service when it could build up its own offering much more cheaply – with a guaranteed base of loyal Apple users already waiting for it.

Nevertheless, they all agree it's certainly an interesting change of direction for Apple, which – unlike some firms like Facebook – isn't exactly known for opening its wallet at the drop of a hat.

So what's it worth to Apple?

But despite the reservations of some industry-watchers, it's reasonable to assume that Apple does in fact know what it's doing, particularly given the sums involved. After all, it didn't go from quirky, niche computer maker to ruler of the mobile world by accident. And there are several things that could yet make the team-up work in its favour.

First and foremost, it's hard to understate the power of a strong brand and the right people, and Beats checks both those boxes. It's products have a list of celebrity endorsements that most other brands would kill for, and in Dr Dre and Jimmy Iovine, Apple also gains the skills of two of the industry's biggest and most successful names.

Indeed, Apple boss Tim Cook said: "What Beats brings to Apple are guys with very rare skills. People like this aren't born every day. They're very rare. They really get music deeply. So we get an infusion in Apple of some great talent."

As well as the ideas and a ready-made music streaming service to build on, there's also the matter of hardware. Mr McQuivey suggested, for instance, that Apple is keen to get involved in the growing market for fitness monitoring tools – and Beats could act as a great sweetener to potential customers of these gadget.

He suggested a music subscription could be offered free to any fitness tracker buyer, to make sure they get unlimited access to whatever they music they want to listen to during a workout, while Beats' branding would make the device "conspicuously cool".

It could even be the case that the move helps Apple improve the headphones it offers as standard with its iPhone gadgets – as Mr Iovine hasn't exactly been flattering about the current free earbuds. "You listen to 'Apocalypse Now' and a helicopter sounds like a mosquito," he said.

This entry was posted in TECH and tagged on by sarahstooks
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