'Beats by Apple' viewed as a culturally compatible corporate marriage

Posted:
in General Discussion edited May 2014
With time to digest Apple's anticipated $3.2 billion acquisition of headphone maker Beats Electronics, industry watchers are beginning to warm up to the idea, seeing a potentially smart strategic move that could broaden Apple's appeal to new markets.


Photo via Paul Stamatiou.


Analyst Steven Milunovich of UBS said in a note to investors on Monday, a copy of which was provided to AppleInsider, that it's somewhat appropriate that the notoriously secretive Apple would surprise the market with its largest-ever acquisition. He said that before investors formulate a strong opinion on the anticipated deal with Beats, he'd like to hear Apple's rationale for the rumored purchase.

At first glance, Milunovich said the rumored $3.2 billion price tag seems reasonable if Beats revenue is about $1.4 billion per year with high margins. He also sees the Beats Music service complementing Apple's "mediocre success" with iTunes Radio, while the headphone designers at Beats could help bolster future Apple products in the wearable devices market.

The analyst said that Apple made a savvy move in the early days of the Mac, earning lifetime users by pushing its presence in schools. In his eyes, the Beats acquisition could do the same for music lovers in a post-iPod era.

"Apple has not promoted the brand of a company it has acquired, but it does have sub-brands: iPod, iPhone, iPad, Mac," Milunovich wrote. "People use the product name knowing Apple makes them. 'Beats by Apple' isn't all that different."


Beats headphones and an Apple iPhone. Photo by M.J. Rodriguez


He noted the appeal of Beats to both young users as well as black Americans, given the strong reputation Beats products carry in those demographics.

Finally, Milunovich is also encouraged by the potential addition of Beats Chief Executive Jimmy Iovine to Apple's corporate roster. The analyst said Iovine's focus on user experience fits within Apple's culture, as compared to competitors who typically focus on horsepower or specifications.

When word broke last week that Apple is allegedly in final discussions to acquire Beats, initial reaction was largely negative, with detractors saying that the purchase of a brand such as Beats doesn't fit within Apple's usual business strategy. Critics also contend that the bass-heavy Beats headphones aren't a quality product built to the standard that they expect from Apple devices.

But the rumored deal has also drawn its share of supporters, specifically those who believe the Beats Music service could be a worthwhile addition to Apple's content offerings. Proponents of the alleged acquisition say that the Beats headphone business could provide an immediate benefit to Apple in terms of high-margin headphones, while the Beats Music service could be a more long-term strategic acquisition.

Brining Iovine on as a senior executive at Apple, along with co-founder Andre "Dr. Dre" Young, are also seen as potential plusses for the iPhone maker. It's been speculated that the two could join Apple as part of a so-called "acqui-hire" agreement that would be part of the $3.2 million buyout.
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Comments

  • Reply 1 of 88
    anantksundaramanantksundaram Posts: 20,356member

    Let's hope -- given that there's already a sub-brand in the current Beats line-up -- that it'll be called iBeats.

  • Reply 2 of 88
    MacProMacPro Posts: 19,500member
    Let's hope -- given that there's already a sub-brand in the current Beats line-up -- that it'll be called iBeats.

    Oh I see a problem with that ... :D
  • Reply 3 of 88
    chandra69chandra69 Posts: 638member

    Culturally Compatible.  

    These two words are made up just to make up a positive impression.

     

    I dont feel good about this. 

  • Reply 4 of 88
    philboogiephilboogie Posts: 7,674member
    Does Apple normally deny rumours within the first couple of days? If so, this acquisition might very well be true, no matter what the media says or blogs blog.
  • Reply 5 of 88
    pazuzupazuzu Posts: 1,728member
    The headphones are crap- just buy the music service.
    Good luck trying to control the music people- especially given they have rap background.
    Does this rap influence mean Apple will get their own Air Jordan next- the Apple Jordan?
  • Reply 6 of 88
    boeyc15boeyc15 Posts: 986member

    Hopefully it works out... what ever they are getting. I would have thought they  might have bought a provider of some sort in the television world... maybe this is a warm up... get their feet wet. Can't beat them (no pun intended... got lucky), join them.

  • Reply 7 of 88

    Beats headphones have everything.  Great styling....a sense of culture.....they're endorsed by celeb's.  What they don't have is great sound.  Very bass heavy with no clear definition on the high end.

    Google "beats headphones frequency response graph" and look at the images and it tells the whole story.

    Apple better think twice.

  • Reply 8 of 88
    apple ][apple ][ Posts: 9,233member

    I'm all out of comments. I've already used them up on all of the previous threads about this subject, and I can't really think of anything else to say about this that I haven't already said.:smokey:

  • Reply 9 of 88
    MacProMacPro Posts: 19,500member
    philboogie wrote: »
    Does Apple normally deny rumours within the first couple of days? If so, this acquisition might very well be true, no matter what the media says or blogs blog.

    And then again, there are obviously those here on AI that think if they state the same objections over and over ad nauseum, Apple will drop the acquisition due to 'high blog-pressure'. Maybe there is a new biometric device coming from the new partnership that addresses that terrible condition. :D
  • Reply 10 of 88
    asdasdasdasd Posts: 5,686member
    Apple haven't confirmed yet either.
  • Reply 11 of 88
    macxpressmacxpress Posts: 5,389member

    If Steve were alive this would have never happened...

     

    /s

  • Reply 12 of 88
    rogifanrogifan Posts: 10,669member
    Since we're quoting analyst notes to investors...

    http://bgr.com/2014/05/12/apple-beats-acquisition-celebrity-endorsements/

    [QUOTE]"Apple stands to benefit from celebrity endorsements more than it does from a subscription music service or a headphone line, however popular or profitable they may be. Beats brings not only a specific set of endorsements, but also the organizational and cultural know how around endorsements. Anything that helps Apple to better market its products – and improve gross margins – may be worth a premium.”[/QUOTE]
  • Reply 13 of 88
    philboogiephilboogie Posts: 7,674member
    And then again, there are obviously those here on AI that think if they state the same objections over and over ad nauseum, Apple will drop the acquisition due to 'high blog-pressure'.

    “Apple buys smaller beats from time to time, that generally doesn't resonate well”

    Damn I miss Katie already!
    Maybe there is a new biometric device coming from the new partnership that addresses that terrible condition. :D

    For that, I'd drop $600 - in a HeartBeat.
  • Reply 14 of 88
    Quote: "He noted the appeal of Beats to both young users as well as black Americans, given the strong reputation Beats products carry in those demographics."

    I said this very thing in a previous thread about this. Hate to say it and I am sure to get flamed for it but Apple products are viewed as being for upwardly mobile whites. Yes there are more minorities represented more recently in Apple advertisements but for the most part Apple products appear to be targeted to a white market. That's the way of the world (Earth, Wind, and Fire) but time will tell if this really pans out. It is a smart move if that is what Apple is aiming for. Besides, I do like Dre much better than P-Dummy.
  • Reply 15 of 88
    rogifanrogifan Posts: 10,669member
    chandra69 wrote: »
    Culturally Compatible.  
    These two words are made up just to make up a positive impression.

    I dont feel good about this. 
    This headline gave me a good chuckle. Spin at its finest. If AI had put up a poll a week or month ago asking members what company/technology Apple should buy/invest in no way would Beats been near the top, or even made the list for that matter. Now that it's a real possibility AI needs to try and put a positive spin on it. :lol:
  • Reply 16 of 88
    philboogiephilboogie Posts: 7,674member
    rogifan wrote: »
    Since we're quoting analyst notes to investors...

    Don't forget sites that confirm this acquisition, 13 hours ago!

    http://www.startupsmart.com.au/technology/five-reasons-why-apple-has-bought-headphone-company-beats-by-dr-dre/2014051212262.html

    "Five reasons why Apple has bought headphone company Beats (by Dr Dre)"

    Maybe they did it because they have such a classy and colourful headphone?

    400
  • Reply 17 of 88
    chandra69chandra69 Posts: 638member
    Quote:

    Originally Posted by macxpress View Post

     

    If Steve were alive this would have never happened...

     

    /s


    How can you say?  

    If you tell the samething to Cook, he would reply... "Steve asked us to not to think what would Steve do."  

    So, Tim had listened to his inner voice and went ahead. :D

     

    // I love Tim, by the way.  He is the best one for Apple now. No doubt.

  • Reply 18 of 88
    bbqkimchibbqkimchi Posts: 10member
    Just watched Iovine's D interview with Mossberg, I'm totally sold. I have never listened to a pair of Beats as I fancy the classics from Grado, Koss and Sony so I assumed the beats were always a marketing thing and probably had generic bass boasting drivers. I don't care about Beats headphones or hardware, it's Iovine's vision for software to assist the listener, the comfort in knowing the next song is great for the occasion all the time every time. Great acquisition Apple, fair price too.
  • Reply 19 of 88
    MacProMacPro Posts: 19,500member
    rogifan wrote: »
    This headline gave me a good chuckle. Spin at its finest. If AI had put up a poll a week or month ago asking members what company/technology Apple should buy/invest in no way would Beats been near the top, or even made the list for that matter. Now that it's a real possibility AI needs to try and put a positive spin on it. :lol:

    Boy if it turns out there is something none of us knew about and it is a huge success down the line, there is going to be a lot of eating crow around here ... yes we keep records ... The Dvorak Hall of Fame Shame Award could be up for votes. :D
  • Reply 20 of 88
    ron1701ron1701 Posts: 24member

    The Music service is crap too.  I'm already finding that they don't have the selection of Rdio and I suspect Spotify.   Their mobile app may be slick but there web app is clumsy and difficult to use and they don't have the pricing options that the others have.

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