Breaking Down The Apple Acquisition of Beats Electronics

They are both expensive, borderline luxury brands.

They both have completely changed the music industry.

They are both headed by powerful personas (okay, in the case of Apple, past tense. sorry Tim Cook).

And yet, Apple’s rumored acquisition of Beats Electronics still makes absolutely no sense.

Apple doesn’t typically make purchases of these size ($3.2 billion is the number being bandied around), and certainly not of a such an established brand like Beats. It’s so unlike Apple that its practically fanfiction. And yet, Beats founder Dr. Dre is posting Facebook videos boasting about soon becoming the richest man in hip-hop. So what gives? Here are some possible reasons:

Option One (The Most Likely Option): Beats Music

This past January, music streaming service Beats Music was released to the public with a huge PR push, including a Super Bowl commercial and an endorsement by Ellen Degeneres. It’s not the first streaming service (Pandora and Spotify say hello) but Beats Music was betting that its much-hyped suggestion and curation abilities would make it stand out in a very crowded but growing field. Its impact has been mild at best; its currently sitting at #12 on the Music category chart on iTunes, well below Pandora and Spotify. Apple has their own streaming service, iTunes Radio, which has also been met with a tepid response from consumers. Even as an Apple fan, I never use it.

It’s very possible that Apple intends on either merging or incorporating the two services into some kind of streaming music behemoth. With two of the most recognizable brands in the world at the helm, vanquishing its competitors and reclaiming dominance in the music industry would be a piece of cake. It also wouldn’t be the first time that Apple purchased a company to bolster their own offering (Apple purchased streaming service Lala in 2011). However, that was basically a McDouble at McDonalds; this is market price filet mignon. It’s important to note what the rest of tech media is buzzing about: if Apple is indeed purchasing Beats Electronics for the streaming service, it may be ceding its status as one of the industry’s top innovators.

Option Two: Beats Audio

Apple is actually a strong proponent of Beats products. Their headphones and speakers are on prominent display throughout Apple retail stores and on their online store. The iconic over-the-ear headphones fall into line with Apple’s accessible but high-end pastiche. Apple could see potential for growth in the audio accessories market, and what better way to enter it than to purchase the most popular brand in the country? Even more exciting is Apple using the Beats acquisition to completely revolutionize headphones in some way, just like it did with every other consumer electronic imaginable. There are two questions to be asked, though. One, what could Apple possibly do with headphones, and why couldn’t they do it themselves?

Option Three: Jimmy Iovine

While everyone is tossing Dr. Dre’s name around, it’s co-founder and Interscope Records president Jimmy Iovine in Apple’s line of sight with this acquisition. Iovine is arguably the most powerful name in music, with his label being home to some of the world’s most successful artists, including Lady Gaga. He was also the driving force behind Beats Music. His influence is undeniable and Apple knows that. Purchasing Iovine’s company would most certainly land him a seat on Apple’s board, adding a powerful partner to Apple’s side as they continue duking it out with record labels over the future of iTunes and the music industry, especially as music downloads continue to decrease.

For all we know, Apple’s purchase of Beats may not even come to pass. However, there is no doubt that it will be a serious game-changer moving forward.


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