

Why Apple Is Buying Beats  - PanMan
http://stratechery.com/2014/apple-buying-beats/

======
chimeracoder
I find the confusion over the Beats deal more surprising than the deal itself.

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...](http://appleinsider.com/articles/12/07/27/apples_iphone_twice_as_profitable_per_unit_than_ipad)

[1] [http://teksocial.com/socialblog/2012/5/13/exploiting-the-
con...](http://teksocial.com/socialblog/2012/5/13/exploiting-the-consumers-
and-unscrupulous-profiting-an-inves.html)

~~~
bgroins
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.

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subdane
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.

~~~
jackgavigan
_> 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.

~~~
uvTwitch
*They're successful because the end consumers believe the marketing propagation that they are the best.

~~~
seanmcdirmid
And yet, Apple has a very low marketing budget with respect to their
competitors...

~~~
batiudrami
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.

~~~
seanmcdirmid
This is quite well known, just a quick google will do:

[http://www.tuaw.com/2013/11/04/apples-advertising-budget-
dwa...](http://www.tuaw.com/2013/11/04/apples-advertising-budget-dwarfed-by-
microsoft-and-samsung/)

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.

------
mistermann
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?

~~~
Gustomaximus
> 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.

~~~
stcredzero
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)

------
fred_durst
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.

~~~
infosample
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.

------
jackgavigan
Okay, I'm ready to stick my neck out here. £100 says Apple is not buying
Beats.

~~~
dustcoin
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](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.

~~~
jackgavigan
Alright, but we need to agree a time limit. Shall we say by the end of the
month? That's over two weeks.

~~~
dustcoin
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.

~~~
jackgavigan
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.

~~~
dustcoin
Ok, the bet is on.

------
uptown
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.

~~~
camus2
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.

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rrggrr
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.

------
DonGateley
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.

------
adamio
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_acquisitions_by_Apple)

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jerryhuang100
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...)

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darksim905
They are buying beats because everyone is running around with them.

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whitehat2k9
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.

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kevinthew
They have a ridiculous amount of cash and need to spend it, that's probably
the only reason to be honest

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exstudent
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.

~~~
packetslave
Beats Music is a separate company from Beats Electronics. They spun it off
last year.

~~~
exstudent
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.

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beedogs
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.

