Beats deal defenders cite 'humanized' music subscription service as benefit to Apple
Proponents of Apple's rumored interest in Beats Electronics have cited the company's recognizable brand, its dominance of the premium headphone market, and its unique new Beats Music service as positive potential additions for the iPhone maker.
With a rumored price tag of $3.2 billion, the alleged Beats purchase would mark the largest acquisition in Apple's history, easily dwarfing its $404 million buyout of NeXT in 1996. Analyst Amit Daryanani of RBC Capital Markets admitted that the alleged price is a "shocker," but also argued that there is "more logic to the deal than meets the eye."
In particular, he cited consumers' changing music buying behavior, with listeners trending toward subscription services such as Spotify that allow access to content on demand. Beats runs its own music subscription service, and though the contracts for Beats Music are not expected to transfer in the event of an acquisition, the thought is ownership of the Beats brand could give Apple some leverage in negotiations.
Daryanani also sees the Beats deal giving Apple access to designers and engineers who could help develop new products and designs for the emerging wearable technology segment. And he believes that Beats Chief Executive Jimmy Iovine could help run Apple's iTunes music strategy going forward.
Timothy Acuri of Cowen and Company also cited potential in the wearable electronics market for a potential Beats deal. But the analyst said he's more intrigued by the unique "personalization engine" technology that drives the Beats Music subscription service.
Beats Music, which is available for $9.99 per month, is still a nascent offering, but Acuri believes it could complement Apple's iTunes Radio, and offer a new content delivery mechanism that the iPhone maker could leverage.
"Unlike other services, Beats Music doesn't select music/data using what is essentially an Internet search algorithm like the vast majority of other content delivery services," he said. "Rather, it 'humanizes' the data much like a person might create a 'mix tape' (in my day) to reflect a certain mood or physical environment rather than basing song choices on similarities to other songs."
Beats is said to have earned more than $1 billion in revenue in calendar 2013, up from about $500 million in 2012. The company also reportedly captured about 70 percent of the premium headphone market in the U.S.
In Acuri's eyes, the hardware revenues alone help provide justification for Apple's alleged interest in Beats.
Brian White of Cantor Fitzgerald is also intrigued by the addition of Beats Music to Apple's product lineup. Marketed as "the first music service that understands you," it launched in January and has over 20 million tracks with no ads and high-quality streams.
"We believe this feature could also have applications for movies and potentially other media," White said.
The comments from analysts largely align with what media insider Peter Kafka of Re/code has reported, portraying the Beats headphone business as an immediate benefit for Apple, while the Beats Music service may be a more longterm strategic acquisition that's really at the heart of the anticipated deal.
Explanations and even support for Apple's apparent interest in Beats stand in contrast to the largely negative reaction word of the deal has generated among pundits and analysts alike. Detractors say that they don't believe Beats is a good fit for Apple, as the company is largely a brand while Apple typically invests in technology or personnel through its acquisitions.
With a rumored price tag of $3.2 billion, the alleged Beats purchase would mark the largest acquisition in Apple's history, easily dwarfing its $404 million buyout of NeXT in 1996. Analyst Amit Daryanani of RBC Capital Markets admitted that the alleged price is a "shocker," but also argued that there is "more logic to the deal than meets the eye."
In particular, he cited consumers' changing music buying behavior, with listeners trending toward subscription services such as Spotify that allow access to content on demand. Beats runs its own music subscription service, and though the contracts for Beats Music are not expected to transfer in the event of an acquisition, the thought is ownership of the Beats brand could give Apple some leverage in negotiations.
Daryanani also sees the Beats deal giving Apple access to designers and engineers who could help develop new products and designs for the emerging wearable technology segment. And he believes that Beats Chief Executive Jimmy Iovine could help run Apple's iTunes music strategy going forward.
Timothy Acuri of Cowen and Company also cited potential in the wearable electronics market for a potential Beats deal. But the analyst said he's more intrigued by the unique "personalization engine" technology that drives the Beats Music subscription service.
Beats Music, which is available for $9.99 per month, is still a nascent offering, but Acuri believes it could complement Apple's iTunes Radio, and offer a new content delivery mechanism that the iPhone maker could leverage.
"Unlike other services, Beats Music doesn't select music/data using what is essentially an Internet search algorithm like the vast majority of other content delivery services," he said. "Rather, it 'humanizes' the data much like a person might create a 'mix tape' (in my day) to reflect a certain mood or physical environment rather than basing song choices on similarities to other songs."
Beats is said to have earned more than $1 billion in revenue in calendar 2013, up from about $500 million in 2012. The company also reportedly captured about 70 percent of the premium headphone market in the U.S.
In Acuri's eyes, the hardware revenues alone help provide justification for Apple's alleged interest in Beats.
Brian White of Cantor Fitzgerald is also intrigued by the addition of Beats Music to Apple's product lineup. Marketed as "the first music service that understands you," it launched in January and has over 20 million tracks with no ads and high-quality streams.
"We believe this feature could also have applications for movies and potentially other media," White said.
The comments from analysts largely align with what media insider Peter Kafka of Re/code has reported, portraying the Beats headphone business as an immediate benefit for Apple, while the Beats Music service may be a more longterm strategic acquisition that's really at the heart of the anticipated deal.
Explanations and even support for Apple's apparent interest in Beats stand in contrast to the largely negative reaction word of the deal has generated among pundits and analysts alike. Detractors say that they don't believe Beats is a good fit for Apple, as the company is largely a brand while Apple typically invests in technology or personnel through its acquisitions.
Comments
They forgot the "mofo" at the end of the quote. Stay classy Apple. You don't need these turds.
The media has been clamoring for a story like this for at least the last two years.
Remember the old days when absolutely everyone would jump on something that Apple was not ever, for any reason, going to do? iPhone mini? Apple Television? They were CERTAIN to happen, and so all media outlets reported them as certain, as well as giving their opinions on how this CONFIRMED product would save or destroy Apple…
A lot of pent up idiocy is being released over Beats. That’s good; it’ll keep the idiocy away from real future products.
2) I keep hearing about their revenue but what about their profits?
3) I would like to see Apple give standard phones to iPhone buyers that I can actually use. Does Iovine have ideas to make Apple's PodPhones better?
According to [@]snova[/@] if Apple says nothing it means it's definitely happening. Now where is my iPhone mini* and Apple HDTV?
* The iPhone mini is now funny because it was a tim — not too long ago — when the biggest complaint was the iPhone was too big so Apple needed a smaller version on the market to be successful.
They are sure to be a lot better under Tim's control. Not that Jimmy is an idiot for one minute, I am sure they are not bad at all. They did buy themselves back from HTC (unless Apple helped there?) I know nothing about them are they listed or is this a privately held company?
So, Apple paid around 400 million USD for NeXT, which basically got Apple a next gen operating system, which all of their devices are now based on, including all iOS devices, and some "Beats defenders" think that it's smart to pay 3.2 Billion for a "humanized" music subscription service?
I still think that this is a terrible idea.
Apple's stock sure isn't rising today because of this ridiculous rumor, and surely everybody knows about it by now, because it's all over the damn web.
I've been looking for a good entry point to get back into AAPL, maybe this Beats rumor can last for another week or so, and bring the stock down to even cheaper levels, so that I can snatch some up. And then Apple can come out and deny everything. That would be hilarious.
I hope this isn't happening. If it is, what a colossal waste of money. It will rank with Facebook buying WhatsApp or Google buying Motorolla.
I thought it was the Department of Redundancy Department.
This message brought to by the Needless Corrections Bureau.
If they earned $1B in 2013, with Apple's muscle that $3.2B outlay won't be long in being recovered.
Depends on Beats's net income.
Even if all these things are true how did they come up with a $3.2B valuation? What were their recent profits? I have to at least trust that Tim et al.aren't stupid and know more than any of us commenting and if this turns out to be true they have a very good reason. From the outside looking in it doesn't appear to be a wise buy but we shall see. Beats has a high percentage of the headphone market even though the quality doesn't seem to match the price of their products which Apple would likely address. There are also lots of Beats certified Android devices that would lose that since it would then be an Apple exclusive. I still think Broadcom and Nintendo would offer more synergy and benefits to Apple but Tim knows what he is doing.
P.S. Any fans of HBO series called "Silicon Valley" think about that show when they read about the "humanized" IP algorithm?
2) I keep hearing about their revenue but what about their profits?
Profits can't be that good, it takes a lot of R&D to get headphones to sound that bad.
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1) He pooh-poohs Apple's included headphones. For that reason alone I'd like to see Apple do anything that will correct that.
2) This makes me think about the previous rumour of high-quality music being sold. Could Iovine be instrumental in getting that to happen?
3) Beats bought MOG earlier this year: http://en.wikipedia.org/wiki/MOG_(online_music)
4) Iovine talks about how Spotify is limited. He makes a lot of good points.
5) That algorithm sounds like it's right up Apple's street.
6) I love what he had to said (starting about 28 minutes in) about how music companies will never get technology right and technology companies will never get curation right. I'm digging this idea of excellent curation and I do want to know what the next song is.
I think that Apple should buy other companies like nintendo or Yahoo with a transaction over 1 billion dolars, but because of the Beats it's a terrible idea
Smart move using white as the default color for Beats headphones. Made for a natural transition to Apple's lineup. Wonder if the Beats logo will be supplanted by a red apple? Or an apple-shaped "b" with a leaf/stem at the top?
I will never buy any more Apple products if they ever came with a "beats" logo on it. That's it, I would be done with Apple, and that's saying a lot, coming from me.
At least certain "Apple ][" haters on this forum would be happy, because there would be no reason for me to post here again.
Nah, you just stuff a load of accosting dampening material in front of the diaphragm.