Yesterday we were going to bed with one of those news stories that you don’t know if it’s true or you’re dreaming it. The Financial Times was the first to open the melon and say that Apple would be negotiating the purchase of Beats Electronics, something that was quickly confirmed by sources at Bloomberg, Wall Street Journal and Recode. According to these publications, the deal would be pending confirmation next week and would close Apple’s largest acquisition to date, worth $3.2 billion.
Immediately, everyone has begun to wonder what Apple sees in the company founded by famous rapper Dr. Dre and music producer Jimmy Iovine. Is it the flashy music headphones? Is it their streaming music service? What is Apple missing that is found in Beats Electronics? For some, it’s a matter of acquiring a company whose profits and generous margins are a perfect match for Apple’s business, while others see Apple as desperately in need of something to patch up the slump in iTunes music sales.
But what everyone seems to agree on is the excessive price that is intended to be paid for the company. 3.2 billion is a lot of money, but then you know that that amount is rarely paid in cash. Google sold Motorola for 2.9 billion dollars, although 750 were in Lenovo shares, 1.5 billion to be received in 3 years and only 660 in cash.
The possibilities offered by Beats to Apple
When a large company buys another, our part of the brain in charge of the imagination takes flight. If Apple’s purchase of Beats is confirmed, they would be bringing in their hardware section :
- Music headphones: Apple has redesigned the headphones that come standard with the iPhone and iPod by introducing the EarPods in the iPhone 5 presentation. As much as they said they were created to fit everyone’s ears, the reality is that many still drop them. Apple could take advantage of Beats’ technology and know-how to create an external Apple-branded headset sold separately.
- Speakers: Beats Pill is a portable speaker that works by bluetooth. Apple tried to get into this arena with its iPod Hi-Fi but withdrew the product soon after. It was clear that this was not their thing.
- BeatsAudio: few people know that Beats has this technology that it has licensed to car brands like Chrysler. The Chrysler 300S has a premium sound system with technology from this company. Considering that Apple is at full capacity with their CarPlay, it wouldn’t be strange if they had some kind of integration in mind and more presence in our cars in the future.
Just Beat It de kozumel, Beats by Dr.dre. de MIKI Yoshihito y Apple Engineer de Ryan Orr.
Then there is the software part, which curiously has been the least commented at first, at least on Twitter, but which seems to be gaining prominence . At Apple we already talked about Beats Music, the umpteenth streaming service for iOS and OS X that aspires to a piece of the pie. Although the business model of Spotify and company continues to generate numerous doubts about its profitability, the truth is that they are taking away the presence of iTunes and that Apple does not have a streaming service itself. iTunes Radio and iTunes Match are two services that do not make up for this lack in Apple, so Beats Music could be something very interesting for Cupertino’s people.
The less glamorous side of buying a business
When a large company takes out its checkbook to take a company home, there is a reason behind the purchase that is less glamorous and not usually discussed: talent. When Facebook took over Whatsapp, nobody noticed that out of 55 employees there were only 30 engineers who made sure the messaging service worked perfectly. Millions of messages are sent every day by the hundreds of millions of users of Whatsapp. If handling this volume is not thanks to a very talented team, I don’t know what is.
Perhaps one of the reasons Apple is thinking about paying that amount is to bring the engineers behind Beats Music or the hardware section into its workforce. If this transaction is confirmed, we may see information about the achievements of the Beats Electronics team pointing in this direction. What products would you like to see in the future as a result of this transaction?