Apple’s acquisition of Beats is confirmed and finally explained

Nigel Gambanga Avatar
image credit: beats by dre
image credit: Beats By Dre

After weeks of speculation Apple’s acquisition of Beats was finally confirmed with a $3 billion tag being attached to the deal. Media sources have confirmed that Dr Dre and Jimmy Iovine will be joining Apple as part of the deal.

While discussing the deal yesterday at the Code Conference, Iovine and Apple Senior VP Eddy Cue outlined the three overall reasons behind the deal that had baffled observers for a while. The “no brainer” deal was driven by a need for talent, great headphones and Beats Music.

According to Cue the Beats team will be a perfect fit for Apple with Dre being an incredible artist with an incredible ear. Cue also noted that the Beats headphones were a great product and referenced Apple’s keen interest in headphones and speakers. Regarding Beats Music, Cue explained how the music subscription service was the first in its field being done right by effectively curating songs.

Iovine mentioned how the deal was driven by the fact that Apple has respect for music, is keenly focused on quality hardware and respects copyright. Interestingly though, Beats once struck out a deal with HTC, something that Iovine said did not pan out because of a culture clash between the two companies.

This stands as Apple’s largest acquisition and judging from the polarised view on the quality of Beats headphones it looks like the deal is leveraged more on the potential of the Beats Music service than any other reason.

Apple’s earlier triumphs in music through iTunes have now been threatened by sliding revenues in downloads and the increasing relevance of subscription services such as Spotify. Apple’s own streaming service, iTunes Radio which was launched in September 2013 has not turned the industry on its head in the same way iTunes did under Steve Jobs’ direction.

It would stand to reason that a stronger foray into this field with a service that understands music “as it should be consumed” would make better business sense. The acquihire of Dre and Iovine has been stated as, and is of course, a key component of this marriage. The duo have a pulse on the industry that Apple’s entire team would have been unable to match.

Iovine’s strong connections in music, entertainment and content creation are also likely to be traded on. His insight into marketing that helped bring a new dimension of youth focused brand strategy at Interscope Records is worth exploiting for Apple’s sake. After all, this is a brand that would benefit immensely from any play that helps them maintain a “cool” factor.