10 Reasons Why an Apple Buyout of Beats Electronics Makes Sense

by Don Reisinger

Apple’s not one to acquire companies often, but when it does, it typically tries to up the “cool” factor. By acquiring Beats, Apple can do just that. Beats is arguably the “coolest” brand in the music space right now, and many artists are using its headphones. Acquiring Beats would give Apple more access to celebrities—something it wants badly.

Apple’s earbuds used to be the only thing hanging off of people’s ears whenever they were listening to music. But as time has gone on, Beats has taken a significant slice of that space, due in large part to the popularity of Dr. Dre and the other artists using the headphones. Apple doesn’t like losing ground, which might be why it’s so enthralled with Beats.

In a large number of audio tests, Beats performs quite admirably compared with other headphones or earbuds on the market. The Beats headphones deliver crisp sounds and although the devices are a little expensive, customers are getting products that will deliver the kind of sound the artist intended. That matters to Apple and could be why it is so interested in the company.

Let’s not forget that Beats has a budding streaming audio service in place that Apple could capitalize on. Apple is already offering its iTunes Radio streaming service, but it could use some of the technology in Beats and bring it to iTunes. Although this acquisition is more about hardware, software does play a role.

Jimmy Iovine is reportedly being considered for a role at Apple as “special adviser” to Tim Cook. In that capacity, he would help Apple on creative matters. Iovine is a giant in the music world and has become a major player in tech since co-founding Beats. Maybe Iovine is integral to Apple’s creative plans going forward.

Although Apple shouldn’t throw its money around, the company is at war with major firms that have been spending serious cash lately. Microsoft acquired Nokia, Google has been acquiring firms across a wide range of industries, and Apple has bought only small companies. Investors can grow concerned when they believe management is averse to big deals. Perhaps the Beats deal is designed to allay fears and remind competitors that the company’s cash stash is still in play.

Beats headphones fit nicely into Apple’s product line. For one thing, the devices are already sold in Apple stores, and they’re also well-designed. Best of all, Apple could offer them with special deals on Macs or other products. Beats actually seems to complement Apple right now.

Beats was once owned by HTC until it was bought back by Iovine and company. There has been random talk from time to time suggesting it has been an acquisition target for other companies. It’s entirely possible that Apple’s Beats acquisition is a protective measure to take control over such a popular company rather than let another firm get its hooks into it.

Given Beats’ headphones, Apple could possibly benefit by taking over the company’s device engineers. Those folks obviously know how to develop hardware, and their acumen on the audio side isn’t too shabby, either. This acquisition could help Apple gain access to very talented engineers it currently doesn’t have working on its team.

Beats is a music industry favorite. The company is partly owned by Universal Music Group, and Iovine himself runs Interscope Records. It’s possible that Apple would use Beats as leverage to cozy up to the music industry and put its own streaming services in a better position from a royalty perspective against Pandora and Spotify. Look out for the impact this deal could have on Apple’s relationship with the music business.