Apple just bought Beats Electronics for $3 billion. Why? Tweet
The company, which consists in the headset devices division and the music streaming division, was founded in 2006 by Dr. Dre, the famous rapper, and Jimmy Iovine, record and film producer.
But why would the world’s most profitable hardware company spend $3 billion to buy a headphone company? And a streaming music service, with its small base of 200,000 subscribers, when it already has its own?
This is the biggest acquisition ever for Apple and to see the big pictures you have to go behind the simple hardware and streaming music company.
The biggest challenge for Apple is to keep the iPhone fresh and find new features that can compete with the long time opponent: Samsung.
Other competitors have also built solid and competitive smartphones with a lower price and, so, the biggest add value today is represented by services. After Maps initial fail and Siri’s modest success, other brands, as Google with Now, have proven their ability to innovate.
So where does Apple have a track record at innovating in services? Music.
In 2003, with the launch of iTunes music store, Jobs completely changed the way we listen to music. Beats co-founder Jimmy Iovine helped Jobs get the record labels on board.
So it’s pretty simple. Buying Beats, Apple has bought not just a valuable hardware brand with a positive growth and a modest music streaming competitor, but also Iovine’s knowledge who has been described “as one of the best sales guys on the planet.”
Moreover, with Mr. Iovine and Beats, Apple is boosting its odds that it can come up with that next killer music deal that no one else can, at least for a long enough period of exclusivity.
The next move? Probably start the Spotify‘s model, using iTunes as the biggest streaming music platform with over 27 million customers.
Source: The Information
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