Honestly, it beats me why Apple bought Beats.

Justin Daab

Apple and Beats executives, as Sgt. pepper's$3.2 billion is a lot of money, sure, but Apple has cash to spare. In fact, they’re buying companies for hundreds of millions all the time that no one ever hears about. Siri was a good example. In isolation, buying a successful company like Beats at a 3x revenue multiple would seem like a reasonable business decision for most companies. But Apple is not “most companies.” As a shareholder, I am not sure they needed to spend the cash.

Acquisitions like Siri make obvious sense. Little to no brand awareness (a.k.a baggage). Useful technology that can quickly and easily be folded into an existing product and enhance the user experience Likely a few more patents to add to the portfolio.

But… Beats? Hmm. There is nothing proprietary about Beats’ offering, shy of the brand value. And Apple already owns what is perhaps the most trusted brand in the world. What about music service users? Apple has 40 million registered iTunes radio users (paying nothing) while Beats has 250,000 paying customers (though it is unclear how many are on family plans). I cannot imagine it would take anywhere near even $1 billion to generate a 1% conversion from free iTunes radio users to paid subscriptions. Some have argued Beats has better relationships with the music industry, which has enabled them to get contracts Apple could not due to old wounds resulting from iTunes negotiations. Again, I have to think that is not a problem a billion dollars couldn’t solve.

That leaves Jimmy Iovine and Dr. Dre. Music visionaries, sure. Worth the price? Even if I give it a maybe, I’d like to add that for $3.2 billion, you could hire just about everyone in every A&R department at every major record label around the world and just reboot the music industry. Start from scratch.

So, yeah. Apple bought Beats. I have no doubt it will be fine financially. But I still think the whole thing points to a lack of innovation or vision internally. But then again, I was adamant before the iPad launch that there was no way Apple would use that name because it sounded like a feminine product. I hope they make me eat my words again.


Magnani is an experience design and strategy firm that crafts transformational digital experiences to delight users and deliver sustainable competitive market advantages for our clients.


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