'Beats by Apple' viewed as a culturally compatible corporate marriage
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.
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."
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.
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."
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.
Comments
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 ...
Culturally Compatible.
These two words are made up just to make up a positive impression.
I dont feel good about this.
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?
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.
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.
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.
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.
If Steve were alive this would have never happened...
/s
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]
“Apple buys smaller beats from time to time, that generally doesn't resonate well”
Damn I miss Katie already!
For that, I'd drop $600 - in a HeartBeat.
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.
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?
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.
// I love Tim, by the way. He is the best one for Apple now. No doubt.
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
FameShame Award could be up for votes.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.