In its biggest acquisition to date Apple has bought Beats for $3 billion. That’s a lot of cash to spend so it’s reasonable to think that Apple has some big plans for the company, but just what are they?
The Beats buyout included both Beats Electronics, which makes speakers and headphones, and Beats Music, which is a music streaming service that you’d be forgiven for not having heard of as it’s estimated to only have around 111,000 paying subscribers.
However it’s this that could have been the real appeal of Beats to Apple. Streaming music has taken off in a big way and despite being a pioneer of early digital music, Apple has stuck with the purchase model and is very late to the party with streaming.
Given the success of streaming it makes sense that Apple would want to get in on it and while it could certainly build its own streaming service Beats Music provides it with the infrastructure and a core subscriber base, saving the company a lot of time and effort.
Beyond that, during an interview about the acquisition, Tim Cook described Beats Music as “the first subscription music service that really got it right. They had the insight early on to know how important human curation is. That technology by itself wasn’t enough — that it was the marriage of the two that would really be great and produce a feeling in people that we want to produce.”
So if you hadn’t already heard about Beats Music you can expect to start hearing a whole lot about it in the near future, as Apple works at bringing subscription numbers up. It will be a tough fight against the reigning champion Spotify, which is thought to have over 10 million paid subscribers and over 40 million users in all, but then around 800 million people use iTunes, so Apple’s certainly starting from a strong base.
While it’s possible that Beats Music will be renamed something more i-ppropriate in future, for now it’s expected to keep its Beats branding.
Apple obviously cares a lot about music, yet the earphones that you get with an iPhone are functional at best. Jimmy Iovine, the co-founder of Beats, has claimed that the dream is that ultimately everyone who buys an iPhone will also buy a new pair of headphones to go along with it.
That might be optimistic given that the headphone market doesn’t really lend itself to biennial upgrades, but it’s reasonable to think that most users are going to want something a little better than what comes in the iPhone box and if they’re mainly going to be using the phones with an iDevice then it makes sense to get Apple branded or Apple owned headphones, especially as Beats headphones will likely be sold in Apple stores.
The Beats buyout wasn’t just about the products but also the people. Jimmy Iovine is a major catch for Apple as he is a tremendous force in the music industry and may even be able to sign on some of the hold-out artists who’ve resisted the allure of iTunes over the years.
He also has significant ties to Apple, having been instrumental in the creation of iTunes, so bringing him in as a full time Apple employee as part of the deal is likely to have been a big draw for Apple.
It’s unlikely that the Cupertino company were quite so interested in Dr Dre, but he’s a brand name in himself, which could be useful and he’s been added to the Apple payroll along with the rest of Beats’ staff.
For now it looks like it will more or less be business as usual for Beats and Apple, albeit with each company benefitting from the other. But there’s a sense that Apple wants to shake up the music industry all over again, just like it did with iTunes more than a decade ago.
A few years from now we wouldn’t be surprised if Apple was the number one force in music streaming, while the already popular Beats headphones could soon find their way onto the ears of millions of iPhone users.
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