Why Apple Is Buying Beats(stratechery.com)
stratechery.com
Why Apple Is Buying Beats
http://stratechery.com/2014/apple-buying-beats/
16 comments
You've hit the nail on the head. Both companies excel at brand marketing and identification, which allows for huge markups and profits on what people perceive as high end devices. With both companies you're not just buying a product, you're buying into a culture, a lifestyle, and sense of belonging to an exclusive group of discriminating consumers. It seems like a perfect marriage between two companies with very similar business models.
But, from where I'm sitting, Apple doesn't need Beats to succeed. It's buying into the past, not the future. Headphones is a mature market. Beats would've had to expand into other products to continue revenue growth.
Lastly, Apple doesn't have a history of buying "cool" because it makes it. Buying cool is what dinosaurs like MS, HP and Dell do.
Lastly, Apple doesn't have a history of buying "cool" because it makes it. Buying cool is what dinosaurs like MS, HP and Dell do.
Apple wants to own the entire music chain from beginning to end. The hardware player, a software/mobile player, the store, the streamer, the radio, the intelligence (Topsy), and the output speakers. It's interesting to imagine winamp for mobile - if Apple creates the best music player on Android and iOS then all its other services fall into place. Iovine is one of the few folks that can get an exclusive deal done with content owners and he understands marketing in a way no one at Apple currently does. Granted the Beats music player needs a lot of work. But the deal only looks weird if you don't know the personalities involved and don't see the company's end game to create/own the best music experiences everywhere.
> Apple wants to own the entire music chain from beginning to end.
No, they don't. They want to own the pieces of the chain where they can make greater profits than anyone else.
Apple products aren't successful because celebrities wear them. They're successful because they're the best.
Apple doesn't buy other companies for their services or products. It buys technology, which it then uses to build better products and services.
No, they don't. They want to own the pieces of the chain where they can make greater profits than anyone else.
Apple products aren't successful because celebrities wear them. They're successful because they're the best.
Apple doesn't buy other companies for their services or products. It buys technology, which it then uses to build better products and services.
> They're successful because they're the best.
lol. If that were the case, then I don't understand what kind of technology they're gonna benefit from buying Beats. I mean, the internet is full of reviews stating that Beats headphones suck.
lol. If that were the case, then I don't understand what kind of technology they're gonna benefit from buying Beats. I mean, the internet is full of reviews stating that Beats headphones suck.
*They're successful because the end consumers believe the marketing propagation that they are the best.
And yet, Apple has a very low marketing budget with respect to their competitors...
Is this actually true? I've heard Galaxy marketing is fairly saturated in the US, but in Australia I see at least twice as many Apple commercials than any competing OEM.
This is quite well known, just a quick google will do:
http://www.tuaw.com/2013/11/04/apples-advertising-budget-dwa...
I think Apple recently doubling their marketing budget to $1b was taken with great fanfare, but still puts them far behind their competitors.
However, it is an open question whether Apple stores should be counted as marketing or some other kind of expense. It definitely helps promote their products, but the direct channel also helps with profits.
http://www.tuaw.com/2013/11/04/apples-advertising-budget-dwa...
I think Apple recently doubling their marketing budget to $1b was taken with great fanfare, but still puts them far behind their competitors.
However, it is an open question whether Apple stores should be counted as marketing or some other kind of expense. It definitely helps promote their products, but the direct channel also helps with profits.
Are you also saying, like I was, that apple are Good At Marketing?
Well, they don't put a lot of resources into it, but they direct their resources very well. Their biggest marketing boon has been curating a really good reputation (not releasing products that suck), building a rabid fan base, and so on.
Right, and because they don't suck, most consumers never investigate their claims of being the best by researching alternatives, and simply settle with products that don't suck.
Did Apple ever claim to be the "best"? Of course, superlatives without qualification are legally vacuous in the English speak world, but I would be surprised if they actually used this in an ad without qualification, where qualification is something like "the best battery life as determined by ..."
Nothing from Apple.
Sure, if you ignore things like - as just one example of the plethora of marketing statements propagated by their senior staff - apple routinely referring to OSX as the "most advanced operating system" simply because it doesn't use the word 'best' (and even then ignore several statements which do use the exact word because their phrasing or origin disagree with your bias), which would be missing the whole point for the minutiae.
I see. You know, when you make an argument, you should (a) present the exact phrase said, and provide a link to where it was said. It is obvious with the right search term ("most advanced" site:apple.com), but not with the one you gave me previously. Just spell it out.
When you say best you mean better then anything else? I find it hard to find many BEST that are Apple products.
Interesting, but this is a $3.2b acquisition, which is clearly not just a technology buy.
[deleted]
Part of my aversion to this rumored deal is just what you say...
Why should a technology company that's created a excellent product (iPod/iPhone) have to kowtow to a decaying old media industry by buying one of their "insider" executives?
Apple has all but made music an irrelevant industry. Kids today don't identify with music like past generations and Apple's lost its marketing grip if it thinks they do. A teenager feels today about Instagram as yesteryear's baby boomers felt about The Beatles. Only this time it's even more powerful because the kids themselves are the stars.
Why should a technology company that's created a excellent product (iPod/iPhone) have to kowtow to a decaying old media industry by buying one of their "insider" executives?
Apple has all but made music an irrelevant industry. Kids today don't identify with music like past generations and Apple's lost its marketing grip if it thinks they do. A teenager feels today about Instagram as yesteryear's baby boomers felt about The Beatles. Only this time it's even more powerful because the kids themselves are the stars.
Maybe they're trying to find a non dorky way to introduce wearable computing, something like Google Glass....having a big set of headphones to attach something like that to, that you flip down to use and then back up when you're done, might be a reasonable way to gradually introduce it into mainstream society, without getting a bad rep like the Segway.
To me, Google Glass looks a bit weird, possibly creepy. Whereas if someone's wearing Beats with the screen flipped out, I just assume they're watching youtube or surfing reddit or something like that...not that much different, but enough to be non-weird?
To me, Google Glass looks a bit weird, possibly creepy. Whereas if someone's wearing Beats with the screen flipped out, I just assume they're watching youtube or surfing reddit or something like that...not that much different, but enough to be non-weird?
> Whereas if someone's wearing Beats with the screen flipped out.
IMO you've hit the nail on the head here. Initially it's going to be weird having people with this 'always on' aspect. Think how people feel when having a conversation/meeting with someone who is constantly looking at their smartphone or even wearing sunglasses. An item like a flip down screen will allow people to show they are paying attention and not recording everything, at least while society gets used to this tech.
IMO you've hit the nail on the head here. Initially it's going to be weird having people with this 'always on' aspect. Think how people feel when having a conversation/meeting with someone who is constantly looking at their smartphone or even wearing sunglasses. An item like a flip down screen will allow people to show they are paying attention and not recording everything, at least while society gets used to this tech.
If an always on device built into a big pair of headphones could interface with a pair of ordinary looking sunglasses, you could have all of the functionality of Google Glass in a completely non-dorky format. Or maybe both could interface with an iPhone. This would solve the antenna placement problem for both glasses and headphones. (Proximity to head)
Maybe this is less about headphones and instead about Beats becoming a phone brand? If Apple wants to get into lower priced phones without pulling down the iPhone brand, this seems like one way to do it.
Lower end market at a mid-tier price. I'd imagine the iPhone 5c with Beats branding would sell much better than the current 5c. Plus the colors would match the headphones. Maybe Apple had the right idea but the wrong brand.
Okay, I'm ready to stick my neck out here. £100 says Apple is not buying Beats.
I'll take this bet. I'm in the US so i'm not sure the best way to transact GBP but I can also do £100 of bitcoin.
Edit: Some proof of reputation: http://pastebin.com/raw.php?i=J9u6KyMk
Reply to this post to confirm within 24 hours, assuming Apple does not announce anything officially beforehand. Elsewhere in the thread you state there will be no deal, so I will count deals that result in Apple controlling or owning a significant portion of Beat's business as a win for me. We can figure out the payment later.
Edit: Some proof of reputation: http://pastebin.com/raw.php?i=J9u6KyMk
Reply to this post to confirm within 24 hours, assuming Apple does not announce anything officially beforehand. Elsewhere in the thread you state there will be no deal, so I will count deals that result in Apple controlling or owning a significant portion of Beat's business as a win for me. We can figure out the payment later.
Alright, but we need to agree a time limit. Shall we say by the end of the month? That's over two weeks.
Don't M&A deals take a long time to actually close? From some quick googling I'm seeing an average of a couple of months.
I'm betting that a deal is actually going to happen, not that lawyers will move quickly.
I'll bet that an Apple spokesperson or apple.com will confirm the deal before or on June 13, 2014, GMT.
I'm betting that a deal is actually going to happen, not that lawyers will move quickly.
I'll bet that an Apple spokesperson or apple.com will confirm the deal before or on June 13, 2014, GMT.
Yeah, I'm not suggesting we wait until it's been signed, sealed and delivered. I'm happy with an announcement by/on June 13th.
Ok, the bet is on.
I agree. I predict Facebook or Yahoo will outbid the offer. Apple has intention, but Dre want's to be a billionaire and wouldn't be at the proposed price. The best way to get to a billion for him is to get companies fighting over Beats.
On Tyrese's Instagram he clearly insinuates that it's a done deal. Why would they troll everyone like that? Sure they could just be playing along but it's not like them, or they haven't done anything stupid like that in the past that would indicate they're trying to troll everyone. Dre has all but directly said they were bought out. It is a done deal.
Whooooooooo are you talking to?
Anyone who's ready to bet £100!
So, given that, by all accounts (Dre, NYT, WSJ, FT, etc..) a multi-billion dollar deal went down this weekend between Beats and Apple, what actually do you think did occur, if not the acquisition of Beats by Apple. Licensing deal? Revenue Share? Marketing Deal?
I don't think a deal has been or will be done.
If that is the case, then the WSJ will have a lot of egg on its face from screwing up the reporting on this - they supposedly have multiple sources.
"Apple Inc. AAPL +1.24% is preparing to bolster its streaming-music business with a proposed $3.2 billion deal to acquire Beats Electronics LLC, the high-end headphone maker that recently launched the Beats Music subscription service, according to people familiar with the matter."
That's unequivocal - and has a specific price tag, $3.2 Billion, and the LLC that is being acquired.
Would love to see this all be a misunderstanding though - I give it low (but not impossible) probability.
"Apple Inc. AAPL +1.24% is preparing to bolster its streaming-music business with a proposed $3.2 billion deal to acquire Beats Electronics LLC, the high-end headphone maker that recently launched the Beats Music subscription service, according to people familiar with the matter."
That's unequivocal - and has a specific price tag, $3.2 Billion, and the LLC that is being acquired.
Would love to see this all be a misunderstanding though - I give it low (but not impossible) probability.
WSJ hasn't screwed up anything, they've just said that they're in talks.
A deal is not done until both sides have signed. Prematurely going public has ruined many a deal, and in the Jobs days the other side announcing a deal first would have completely torpedoed anything. Apple has said nothing on this at all, and it's been almost a week.
It seems extremely unlikely that this is real, given the way that it was announced. It just smells completely fishy.
Most likely Beats thought they could get a better price by going public too early, and didn't think that Cook would cancel the deal because of it. That or they're just complete fucking idiots. Don't talk about deals until they're done, unless you know exactly what you're doing, because it's a tight rope to walk.
A deal is not done until both sides have signed. Prematurely going public has ruined many a deal, and in the Jobs days the other side announcing a deal first would have completely torpedoed anything. Apple has said nothing on this at all, and it's been almost a week.
It seems extremely unlikely that this is real, given the way that it was announced. It just smells completely fishy.
Most likely Beats thought they could get a better price by going public too early, and didn't think that Cook would cancel the deal because of it. That or they're just complete fucking idiots. Don't talk about deals until they're done, unless you know exactly what you're doing, because it's a tight rope to walk.
How do we formalize this bet?
Maybe they just wanted control over the company that makes the largest body-worn hardware people are comfortable wearing. Provides lots of additional space into which sensors can be crammed.
sensors for what? this sounds like a publicity stunt / insider deal like these yahoo deals that serve no purpose (Summly?).They arent really buying anything of value for Apple.
HTC, HP and Chrysler are using the Beats brand to make products that are not as 'cool' as Apple products, arguably cool. Buy Beats and Apple has a defensive play. Let yourself be outbid and watch Microsoft or Samsung or whomever drive the brand into the dirt. Defensive move.
Beats 'phones could be a recognizable and elegant adjunct to a headworn VR device if Apple has any plans in that area. I'd be rather surprised if they didn't and see this as a pretty clear indicator we'll see them enter that fray.
Apple has acquired music related before, but not for the rumored 3 billion
http://en.wikipedia.org/wiki/List_of_mergers_and_acquisition...
http://en.wikipedia.org/wiki/List_of_mergers_and_acquisition...
it's not just for the streaming and/or the headphones. it's more about the potential, such as iPod shuffle + Beats headphone = iPod Beats; wearable computing; or Apple iHealth/iFit with Beats headphone (O2, temp, BP, EEG...)
They are buying beats because everyone is running around with them.
Beats is a perfect addition to Apple's portfolio: a product that caters to the uninitiated and non-tech-savvy, is overpriced, and sucks compared to true audiophile/professional-grade headphones made by other manufacturers.
They have a ridiculous amount of cash and need to spend it, that's probably the only reason to be honest
Any talk of Beats Music adding any value whatsoever to Apple is ridiculous. Beats Music is little more than Mog (a nearly valueless online streaming service) + 6 months of development time. Mog was very close to being out of business when Beats bought them as the service was extremely lack luster.
There is no tech and the licenses will not be transferable in an acquisition.
Maybe the headphone business holds some value to Apple but Beats Music certainly does not.
There is no tech and the licenses will not be transferable in an acquisition.
Maybe the headphone business holds some value to Apple but Beats Music certainly does not.
Beats Music is a separate company from Beats Electronics. They spun it off last year.
The reports have been of Apple buying them both and this article mentions it as a "reason" for Apple buying Beats (Electronics|Music).
You're right though, and it's entirely possible that the rumors and speculation are false as it makes exactly zero sense for Apple to buy Music.
You're right though, and it's entirely possible that the rumors and speculation are false as it makes exactly zero sense for Apple to buy Music.
Beats Streaming (Mog) is not even mentioned in that article beyond a single sentence saying "fixes their streaming hole", it was all about the headphones.
Apple's run by idiots now. There's the reason in five short words. Now might be the time to get out of AAPL if you're heavily invested.
Apple and Beats are very similar companies - both sell hardware that is relatively cheap to make[0][1], and sell it at an incredibly high markup. Both companies are able to do this because they've built very recognizable brands.
More importantly, Apple and Beats have very powerful brands in disjoint markets - the Beats brand is the strongest in the exact demographics where the Apple brand is the weakest.
It makes total sense that Apple would want to purchase a high-end brand that allows them to expand into a domestic market in which they haven't yet reached saturation, all without "diluting" their brand.
[0] http://appleinsider.com/articles/12/07/27/apples_iphone_twic...
[1] http://teksocial.com/socialblog/2012/5/13/exploiting-the-con...