Like everyone else in this sector, I’ve been trying to figure out why Apple would spend $3 billion–their biggest acquisition ever–on Beats. At first, I thought this was a play for the hardware. After all, Beats sells well over a billion dollars’ worth of headphones every year–a small drop in Apple’s big bucket to be sure, but hey, a billion dollars is a billion dollars.
And the more I thought about it, the more I like my theory about how this purchase was an attempt to boost Apple’s retail stores. After all, the Beats streaming music service had only launched in January and reportedly had just over 100,000 subscribers. That certainly wasn’t worth a billion dollars.
Or maybe it was. Consider:
- With the purchase, Apple gets music executive Jimmy Iovine, a guy who knows where all the bodies are buried in the music industry. They also get Dr. Dre, a guy who also has great connections and brand recognition.
- Jimmy was good friends with Steve Jobs.
- Apple stinks at social media-like things. Anyone remember Ping?
- Apple has to look to the future regarding iTunes. Digital download purchases are actually falling. Streaming is the future.
- Apple’s iTunes Radio hasn’t exactly been blowing the doors off the competition. It might have 1.5 million subscribers.
- They could have bought Spotify, but as popular and successful as it is, Spotify is still losing gobs of money.
- They could have bought Pandora, but maybe the fit wasn’t right.
- Beats offers human-powered curation, which (I think) is far better than algorithmic services.
- Apple could have bought Songza, a far superior human-powered curation service for much, much less–but Songza wouldn’t come with Jimmy Iovine or Dr. Dre or all those headphones.
So yeah, I think it IS about the music. Check out what The Verge has to say on the subject.