On May 28, 2014, Apple confirmed to buy headphone producer Beats Electronics for three billion US dollars. This purchase is the largest acquisition in Apple history. In the deal, two Beats co-founders, hip-hop artist entrepreneur, Dr. Dre and Interscope Records executive Jimmy Iovine will join Apple Inc. as part of the agreement.
People were wondering why Apple would spend such large amount of money to buy a headphone company. Here, I generalize some reasons.
Firstly, Apple seeks the high potential of Beats Music streaming service and its backstage developing team. This service allows Apple to compete against other rivals such as Spotify and Pandora, the dominant music streaming companies. Apple’s iTunes, once the dominant force in paid music downloads, has become more of a window-shopping venue. According to Billboard statistics, only 1-2% of consumers hit “download/buy” when listening to iTunes Radio.
Secondly, the headphones/earphones that Beats produce are certainly better than the Apple earphones in the aspects of sound quality and design. It seems much more appealing to have a Beats headphone/earphone package with an iPhone rather than an ear pod.
Thirdly, the innovative design of Beats perfectly fits with the design of Apple products. Both of the brands target teenagers and young adults who like fashionable products that look cool. Beats has also built a solid business off the back of celebrity endorsements, which is similar to Apple.
In conclusion, the main motivation Apple bought Beats is Apple wants to prevent its iPod and iTunes business from failure. The music streaming service may lead to more purchase and download from iTunes, while the Beats headphones/earphones may lead to increase in demand for iPod and iPhone.
Work Cited:
Moore, Heide. “Apple buys Dr Dre’s Beats for $3bn as company returns to music industry “. 28 Wednesday 2014. The Guardian. 6 October 2014.
http://www.theguardian.com/technology/2014/may/28/apple-buys-beats-dr-dre-music-streaming
Bershidsky, Leonid. “So Why Did Apple Buy Beats? “. 23 September 2014. Bloomberg View. 6 October 2014.
http://www.bloombergview.com/articles/2014-09-23/so-why-did-apple-buy-beats
Image Cited:
Moore, Heide. “Apple buys Dr Dre’s Beats for $3bn as company returns to music industry “. 28 Wednesday 2014. The Guardian. 6 October 2014.
http://www.theguardian.com/technology/2014/may/28/apple-buys-beats-dr-dre-music-streaming
Beats rumoured to be launching in Australia in the next few weeks