Tech companies making acquisitions isn’t anything new. A larger company will buy a smaller company for all sorts of reasons, such as the smaller company may make a very compelling product that the larger company can integrate into their own product line. Or maybe they just want to acquire the engineers and designers of the smaller company. Or just wanting to add to their patent portfolio to defend themselves from what seems to be a patent world war. But every now and again, a large company will make a purchase that has people scratching their heads. When Facebook purchased a VR company people were scratching their heads. And now Apple is rumored to be purchasing Beats Electronics for the sum of $3.2 billion dollars. Yeah … billion. And yeah, Beats as in the electronics company that Dr. Dre is co-founder of. Fans of Dr. Dre were applauding his good fortune. But there are people in the tech world (including myself) who are, again, scratching their heads.
Beats Electronics is a very successful company. Their headphones and earbuds generate an insane amount of revenue, and they hold 59% of the market for headphones that cost over $99. And it isn’t just headphones; Beats has their own line of small speakers, they’ve been used in both car and home audio, and until recently they were partners with HTC. So could Apple be planning on selling its own brand of high-end audio gear? Maybe … because, let’s be honest, the headphones that come with their devices are not very good. But you can already buy Beats in the Apple Store. And if they change the name, which wouldn’t make sense considering how strong the Beats name is, they may alienate people who aren’t all that fond of Apple. Also, Beats aren’t the best headphones on the market, despite their price and popularity. All it takes is for someone else to out market them, and suddenly that acquisition isn’t so awesome. So what else could Apple be up to?
Well, did you know that Beats offers a streaming service? No? It’s called Beats Music, and it’s a service that lets you stream music similar to how existing services like Rdio, Spotify and Pandora does. Music streaming subscription services are biting into music sales. Why purchase a song for $.99 when you can just stream it when you want to to any device that can access the app? So in purchasing Beats, Apple has another avenue into streaming music and going against the Spotify’s and Pandora’s that are out there. Apple already has their own streaming service (iTunes Radio), but it doesn’t seem to be faring very well against its rivals. Adding Beats Music may give them a leg up.
Then again, it could be something that they’re planning on doing in the future. Again, Beats is an insanely popular brand. Maybe they’re planning on using their marketing team? Maybe they’re planning on doing something in the wearable department? An iWatch with Beats audio? Or maybe they’re just so flushed with cash that they needed decided “what the hell, let’s make Dre the richest dude in hip-hop”. I just don’t know. But I’m happy for Dre; I’ve been a fan of his for years, and to see this happen for him is awesome. But for Apple … I just hope they know what they’re doing. Analysts and investors are a suspicious lot, and I’d hate for this to come back and hurt them. Time will tell. Until then … I’m still scratching my head …