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Why the Beats deal shows Apple is actually listening

Michael Simon | May 12, 2014
After the Financial Times yesterday broke the news that Apple is in advanced discussions to purchase Beats Electronics for the tidy sum of $3.2 billion, the reaction was swift and immediate: Apple has finally gone off the deep end. Clearly the company's enormous cash pile was burning a hole in Tim Cook's pocket, because no one in their right mind would spend so extravagant a sum on a trendy company that makes overrated, overpriced headphones.

After the Financial Times yesterday broke the news that Apple is in advanced discussions to purchase Beats Electronics for the tidy sum of $3.2 billion, the reaction was swift and immediate: Apple has finally gone off the deep end. Clearly the company's enormous cash pile was burning a hole in Tim Cook's pocket, because no one in their right mind would spend so extravagant a sum on a trendy company that makes overrated, overpriced headphones.

As is often the case with these type of universal snap judgements, they've got it all wrong. Regardless of Cook's opinion of Dr. Dre's Solo HD or Studio headphones, buying Beats isn't such a crazy idea. It's certainly a bold move, but the risk isn't as big as people think: $3.2 billion is peanuts to Apple, and if Cook plays his cards right, it may go down as the best acquisition since then-CEO Gil Amelio purchased a small computer company named NeXT.

It's not about design

If Apple wanted to create a pair of high-end headphones, I'm pretty sure Jony Ive would be up to the task. (In fact, Beats's design is handled by the firm Ammunition, run by former Apple design chief Robert Brunner, — the very man who hired Ive.) Beats headphones sell just fine on their own, and I don't think Cook has any plans to rebrand them as iPhone accessories. If and when this deal goes through, it will be business as usual at Beats; Apple Stores will have the same table devoted to the company's products, Best Buy will still host star-studded launch parties, and the Home Shopping Network will run cringeworthy segments hocking the company's signature style. And we won't be seeing Apple logos on them either — Beats will be Beats, and based on the $1.5 billion revenue estimates, it shouldn't take Apple too long to recoup its investment.

But make no mistake — Beats gives Apple's street cred an instant boost. Audiophiles may hate them, but Beats headphones are incredibly popular with kids (who all apparently have high-paying summer jobs or parents willing to shell out hundreds of dollars to keep up with the Joneses), athletes, and pop stars. And if any of them happen to be Android users, the iPhone is suddenly going to seem a whole lot cooler, especially if Apple decides to bundle a pair of Beats in-ear headphones with the iPhone 6 instead of its usual underwhelming EarPods.

Influence over innovation

It's a pretty safe bet that Apple is going to incorporate Beats audio into future generations of iPhones, iPads, Macs, and any other product with a built-in speaker, but don't expect to see an HTC One-style "b" logo anywhere. Beats's audio tech is clearly an upgrade over Apple's existing systems, but that's just a happy byproduct of the real appeal of the company: star power.

 

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