Five Things Beats Electronics Brings To Apple

And The Beats Go On

Apple has finally confirmed its acquisition of Beats Electronics and Beats Music for $3 billion, $200 million less than what was originally reported. The Cupertino, Calif., corporation made public a press release Wednesday night confirming the purchase, and Apple CEO Tim Cook tweeted of the deal shortly after.

The confirmation came after almost three weeks of reports and speculation that Apple was close to acquiring the popular headphone maker.

But why would Apple do this deal? Is it really "all about the music," as Cook tweeted? And more importantly, is it worth $3 billion?

Here are five things Beats Electronics brings to Apple.

Beats Music Streaming Could Rejuvenate iTunes

Last quarter, iTunes revenue dropped 24 percent year-over-year, according to Fortune. iTunes Radio has not been a hit among iTunes’ 800 million subscribers as just 2.5 percent use the streaming service. With Pandora and Spotify boasting more than 76 million and 40 million users, respectively, streaming is in and downloading is out.

Beats Music has just 250,000 subscribers, but being merged with iTunes could seriously boost those numbers and reshape iTunes. With Apple’s expected HD audio feature on iOS 8, we could see a free streaming service in addition to an HD streaming service for paid subscribers.

Impact On Unreleased Apple Wearables

There have been whispers that Apple is ready to release a line of wearables. Besides the ready-made retail channel that Beats Electronics offers for Apple, its team of marketers and developers is what sets Beats apart from the competition.

Beats has convinced consumers to think large, bulky headphones are cool. It's integrated fashion with wearable technology. Before Beats, people wore earbuds or wraparound headphones. Now, instead of a more discreet look, it is considered cool to wear the bigger, bulkier Beats headphones. Could Apple be striving for the same marketing expertise for its wearables?

Shouldn’t it want to?

Dr. Dre And Jimmy Iovine Dynamic

The co-founders of Beats Electronics have a long, successful history in the music industry: Jimmy Iovine is a successful music producer and co-founder of Interscope Records. Dr. Dre (pictured) is a hip-hop mogul, credited for discovering some of the most popular artists in music.

They bring with them a cultural understanding of what younger generations want. They individually have more expertise in that field than the members of the Apple board of executives, and clearly more connections in the music industry. Both will have a voice at Apple.


Apple has said it plans to keep the Beats brand intact.

Beats Electronics is a vendor of high-end headphones, earbuds and portable wireless Bluetooth speakers. There are those in the audio industry who will argue that the Beats by Dr. Dre line is not as high-quality as most believe, but they sell exceptionally well at a high-end price.

Beats’ market share of $100-plus premium headphones was north of 64 percent in North America as recently as last fall, according to NPD Group.

A New Business Strategy

Apple’s $3 billion acquisition of a company led by two music moguls is a surprise. This is the largest acquisition in Apple’s history, almost seven times that of its second-largest acquisition, NeXT Software in 1996 for $429 million. That deal brought Steve Jobs back to the company after he was ousted in 1985.

"They are moving in a new direction," said Michael Oh, CEO of Tech Superpowers, an Apple partner based in Boston. "Cook to this point has been riding the coattails of Steve Jobs, and I don't think Jobs would make that acquisition."

Might we see more surprises this Monday at WWDC?