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Monday, 12 May 2014 10:16

Our view on the Apple – Beats $3.2bn deal

Written by Fuad Abazovic



Overpriced headphones for an overpriced brand

A few days it was reported that Beats Audio will be picked up by Apple for $3.2 billion. If the deal materialises, this will be Apple’s single biggest acquisition ever. This transaction actually sounds pretty small compared to the $19 billion Facebook paid for WhatsApp, but then again Beats actually has some hardware that might be appealing to Apple computers.

Beats tried to work with HTC and this partnership didn’t really boost the company’s market share. The deal was criticised and eventually HTC pulled out. Beats Audio on HTC phones was nothing more than an overpriced graphic equaliser. This is why it didn’t pick up, as it didn’t matter to anyone who has any background in music. Beats is for hipsters rather than audiophiles and these chaps and ladies like to wear trendy things.

Apple never pinned its hopes on acquisitions


During the Jobs era Apple didn’t like acquisitions and it focused its efforts on in-house development. Of course this happened after Apple acquired Steve Jobs’ Next. In the years following Jobs’ return the company developed the iPod, iPhone, iPad, MacBook Air, A5, A6 and A7 SoC processors and many other great things. It developed iTunes, probably the single most hated piece of software on the planet, but its sales platform as well as the Apple app store helped the company make billions. 

cook-dre

Apple’s iPhone is losing some of its mojo after six years on the market. The competition is catching up fast and the brand needs some kind of boost. The cheap headphones that the Apple ships with iPhones are not enough to make people excited anymore. Companies like Vero Moda are making $100 in-ear headphones and Beats made a big impact on the hipster community, making wearing oversized headphones in public transportation cool again. Well, maybe not cool, but socially acceptable.

What Beats has and Apple wants is the on-ear branding, as youngsters are keen to act as billboards with these headphones, offering free advertising for the company. The Beats logo with a dominant B embossed on huge headphones will be replaced by Apple, and who knows maybe even a LED display at some point.

Making sense of it all


Apple has more cash than it knows what to do with, and if you are sitting on 160 billion dollars, some silly acquisitions that might work don’t sound like a bad move after all.

Some key media outlets in the world of tech and finance are questioning this acquisition and headlines titles like Ars Technica’s "Nobody knows why Apple would buy Beats, but plenty of people are guessing" sum up the attitude pretty good.

People are guessing that the Beats streaming feature is what Apple is after, but with 200.000 users its hardly enough to compete with Spotify's ten million users. The only thing that makes sense is that apple is buying the cool effect. Just like Apple, Beats is known for overcharging, too.

This is something Apple really likes. Dr Dre is pricing Beats headphones for $199.95 but in reality the company is gouging its fans, simple as it can. People are buying them and with that in mind why would anyone drop the retail price?

Apple is developing its wearables and there is a good chance Google will be the first to market, with Apple entering the market months after the first wearables started shipping. As Beats managed to sell average headphones for $200, Apple managed to sell its products for at least 30 more than the competition, which is a substantial premium given the fact that the competition is making so much headway. We strongly believe that there is an enormous pool of Apple fanatics that will pick up whatever Apple cooks up, including overpriced headphones that simply don’t impress proper audiophiles.

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