Apple buys Beats – why?

Apple has iTunes Radio, but it has not kept pace with services such as Spotify and Pandora. Should Apple have re-built iTunes Radio instead of buying out Beats? This is a question only time can answer, but for now there are a lot of things that can be read from the acquisition.

Apple started its foray into the consumer electronics business with music and it knows that music is an important aspect of their future business as well. Hence music is going to be an important component of Apple’s strategy. Here are two articles discussing the acquisition:

How the deal almost got cancelled? http://www.fastcompany.com/3031194/most-innovative-companies/apple-buys-beats-electronics-for-3-billion

Interview with Wharton Professor Peter Fader: http://knowledge.wharton.upenn.edu/article/apples-beats-buy-desperation-opportunity/

But some interesting insights from the acquisition are:

  • Apple has generally bought really small start-ups (well before they became large brands)
  • Apple’s acquisitions have been low key affairs and so it is this time around too
  • Apple usually builds the best products / services itself, but accepting that someone else has got it right is a rare instance; it is a rarity or a change in strategy to keep up with the changing times!
  • The hardware part of the Beat’s Business seems like a good fit with Apple’s positioning of its products, as it is unique, stylish and premium positioned
  • The software part of the business is not the largest in the space, but seems to be in line with the general trend; will the acquisition give it the chance to scale?
  • More than the valuation paid for the purchase, the act of purchasing a company to strengthen its services seems to be a new trend (I think it started with maps)
  • Is Apple keeping pace with change – by not attempting to make everything itself in an open innovation world?

Will Apple open itself up as part of its growth strategy? Will Apple’s entry into the music streaming space bolster the trend away from music downloads? All these are interesting for all those who admire and watch the brand called ‘Apple’. But for now, I think what most fans of Apple want is a larger screen iPhone? While we all speculate on what Apple should do next, the best thing about Apple (historically) has been that it leaves everyone wondering: What will Apple do next?

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