Beats Goes On for Apple
I am still reading the naysayers about the possible acquisition of Beats by Apple, so I thought I would tiptoe through the most frequent objections:
"Steve wouldn't have done this."
Balderdash. Steve changed his mind like Kroger's changes bananas. Remember when iPhone apps had to be in-house? Laser printers by Apple? How Apple products were sold in little shops, then mass retailers, then departments inside Computer City, now in Apple's own stores?
"Steve hated streaming".
Apple finds key technologies and drivers, and "music" is one of those: for iPods, iPhones, and obviously iTunes. But time marches on, and "purchased" music is declining while "rental" music grows. iTunes Radio isn't cutting it and Beats has a well regarded, if incipient service. Jobs told Tim Cook not to do what "Steve would have done" but to do what’s right.
"Beats hardware is mediocre."
Possibly true for purists and snobs, but the high end mass market doesn't think so. Beats has over half the “over $150 market.” Bose does OK at the "high end consumer" area and Beats will too, perhaps even better if improved. Importantly, Apple plays in neither headphones nor speakers except as a vendor, (Beats is sold in Apple retail stores) and they know how that market is developing. You will never satisfy audiophiles anyway, you might as well satisfy the profitable market.
"The price is too high."
Perhaps. But Apple is betting on “streaming” in growth mode, one which integrates with their core products and where they are deficient; and it's barely a dent in the corporate piggybank. Less than a year ago VCs valued Beats at $1 billion. Since then revenue has doubled and is growing.
"Apple is out of ideas."
Ah, Not-Invented-Here-Syndrome. Because they are (for the first time) acquiring a another branded company, they never should? That's not how it works. Coke had its own syrup, development, bottling plants and well curated history, yet acquired Minute Maid, Dasani, and Odwalla. Could they not have started these businesses themselves? Ford bought Lincoln. Chrysler bought Jeep. Amazon bought Zappos and Quidsis.
"Apple should have just bought Monster" (early Beats OEM.)
Nonsense. There's simply no integration between "over priced cables" and "Apple." Monster didn't even do the design work or marketing. Yes, you could get Monster for a fraction of the price, but you get almost nothing.
"Apple has gone crazy. It's like Facebook or Google now!"
Baloney. Comparing a $19 billion for WhatsApp, or even the $2 billion for Oculus is absurd. Neither of those integrate so obviously or immediately into the mother company ecosystem. And Google, frankly, rarely bothers. Motorola Mobile? Gone. Self driving cars? Really? Titan Aerospace? And say, what about that 10x revenue purchase of Nest, makers of thermostats and smoke detectors?
Beats fits quite neatly into Apple's wheelhouse; high end, high margin hardware, coupled with the growing streaming music franchise. The price may be dear but it's hardly outrageous. It's both an offensive move (new hardware) and defensive (protecting the music franchise.) "Streaming" has gone from near zero to 21% of the music market. Apple should stand around and hope iTunes Radio catches on?