Just this afternoon the Financial Times published a report stating that Apple is in the final stages of talks to acquire Beats Electronics for $3.2 billion. The announcement might come as quick as next week. At first, I couldn’t figure out why the heck Apple would spend so much for the company, which as of September of 2013 was valued at just $1 billion. Heck, even HTC sold off its 50.1 percent stake at a huge loss.
No, Apple isn’t losing its cool factor, and I don’t think it’s buying Beats Electronics entirely for the brand, though it’s a factor. No, I don’t think Apple is buying Beats Electronics for its audio technology, which I haven’t ever found to be particularly impressive anyway. If it is doing so, we all have to wonder why the heck Apple can’t create something better with all the cash it has on hand. Or why it wouldn’t just license the tech from Beats Electronics instead. And no, I don’t think it’s simply because Apple can’t secure streaming music deals of its own.
The answer is Android.
There was a recent rumor that Apple was developing iTunes for Android. I don’t think that’s going to happen and I think those rumors are bunk. Do Android users really want to download iTunes? I doubt it, and Apple knows that. However, I think Beats Electronics can play a crucial role in Apple’s expansion into the streaming music market. Apple doesn’t need to create an “iTunes for Android,” not when there’s already one out there: Beats Music.
The streaming service launched in January across iOS, Android and the Web. It costs $9.99 per month and provides curated radio stations, unlimited ad-free streaming and more. There’s even a partnership with AT&T that allows a family of five to share a single plan for $14.99 per month.
With Beats Music on Android, Apple doesn’t need to reach out to convince Android users why they should start using an Apple service, one they’ve probably shunned already for one reason or another. One only needs to check the comments section on any tech website to see Android and Apple fans don’t often see eye-to-eye.
In fact, Apple already starts with whatever user base Beats Music has – and I don’t know the size of it, but it’s better than starting from nothing. With Beats Music, Apple can provide its service to iOS, Android and Windows Phone, and probably do so while remaining relatively veiled, at least from the people who wouldn’t buy an Apple product otherwise.
And that’s sort of where the brand comes back. Beats Audio does have a relatively popular brand name among consumers. We don’t have to argue about the quality of the company’s headsets, that’s not my point. Instead, it’s a market that already exists, and one where Apple can make headway without folks even knowing they’re subscribing to an Apple service.
Why not Spotify or another company? As recently as last year, Spotify was already valued at more than $4 billion. I think Beats Electronics is probably the cheapest option out there, and Apple not only gets a cross-platform streaming music solution, but a headphone business and an already popular brand.
Beats Electronics gives Apple immediate access to millions of Android users right away, with a streaming music application that’s already approved in Google Play, already readily available, and with an established name in the audio market. While expensive, this is the quickest and most efficient option to launch a streaming music service that is available to all.