Two reasons why Apple shouldn’t buy Beats

“By now, hopefully every tech investor has gotten wind of the rumor that tech giant Apple has entered advanced negotiations to purchase the uber-cool headphone and streaming music company Beats Audio for a whopping $3.2 billion,” Andrew Tonner writes for The Motley Fool.

“This deal has gotten plenty of deserved notoriety as it contains a number of juicy storylines at both Beats and Apple. However, in circling this deal, which appears to have yet to close as of today, it’s difficult to determine whether this is a good deal for Apple and its investors,” Tonner writes. “So, as this storyline evolves, let look at two possible arguments that Apple should scrap its deal for Beats altogether.”

“1. Apple could be overpaying… Apple is really interested in Beats’ streaming music service. And although Beats Music product is apparently a membership conversion monster, its user base remains a drop in the bucket, at just north of 110,000 paying subscribers, especially compared to the likes of Pandora’s 76 million subscribers. So, all told, between an attractive, but hardly necessary, line of headphones and a start-up music service, it’s fair to question whether Apple is making the right decision in shelling out $3.2 billion for Beats rather than developing a comparable service internally,” Tonner writes. “2. Apple and Beats: Brand competition… Apple is consistently ranked as the most valuable brand in the world. And while Apple has shrewdly borrowed cool points from other brands in the past (partnering with Bono and U2 for instance), it’s hard to see how a marriage between the Apple and Beats brands would work from in a practical sense.”

Read more in the full article here.

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38 Comments

  1. If analysts say this is a bad deal, it must be the best opportunity this century.
    I was ambivalent but now I’m thinking Apple are onto something.

    1. It’s what no one is saying. A huge tax write off. A way to gain something for less than 35% of $3.5 billion. If it’s a good deal, then not so much of a write off. I mean it’s boom years for all tech companies, Google, Apple, Microsoft, Facebook. They need to buy some junk so they don’t have to “over spend” their tax liability. It’s a CFO safe bet, where no matter the outcome, they look like the good guy.

      You are right, Apple typically does not do stupid. So there’s something we are missing.

  2. MF and MDN on exactly the same track with exactly the same answers. Results: a step in the right direction of asking what the hell is Tim Cook thinking. If Steve had wanted what Beats had, he would have innovated it only it would have been much better, cost a tiny fraction of what Tim is paying, and completely taken over the market leaving Beats looking for a way to survive. MDN could then have used one of their favorite headlines – something about more blood on the device and the company that Apple had just destroyed. That was then. This is now. It’s the darkness of the the Tim Cook era.

    1. Unless those people who would be spent developing the service are needed for redeveloping iWork, fcpx, updating aperture, and (of course) coming up with the next big thing.

  3. Maybe there is something to this that no one knows about yet..??

    But one of my main concerns at this moment is :
    This is potentially the biggest acquisition apple has ever made..
    The biggest associated with a mediocrity like Beats ! Not something with big wow factor , That blows the mind..
    Its …Beats with mediocre headphones and app!

    ( i downloaded the app.. Its more of an eye-candy…rather than practical …with all those bubbles flying around for set up ..etc…etc)

    Sometimes i hope this rumor is just a gameplay by Iovine.. To creat buzz for their app … Nothing more !

    Time shall tell..
    Right now it feels very uncomfortable !

    1. I disagree with your assessment of Beats Music — I think the UI is great (MUCH better than iTunes Radio). And it seems to select music that I like much better than Pandora or iTunes Radio.

  4. This deal is rumored to be instigated by audio legend Tomlinson Holman, formerly of Lucasfilm. Holman has been around Apple for a couple of years with nothing to show for it. Kudos for finally getting some runs on the board!

  5. The streaming service is quite good, and the whole deal will send reverberations across the music industry to stop screwing over Apple with licensing. Some people blame Eddy Cue, but it has nothing to do with him. It’s the labels.

    By the way, 110,000 subscribers (gained in only a few months) that are paying $14.99 per month is nothing to sneeze at. I would much rather have the premium segment of the market than rely on advertising for everything.

    1. The TV cable companies promised that their subscription-based services would be ad-free too. But it didn’t take long for each and every one of them to renege on that promise.

      Why is it that everything “innovative” in the software/tech world today is just a thinly veiled ploy to force everyone into subscriptions? It’s not a good value for the customer — just look at cable TV. Is that how you want your audio to work too? 250 channels of “curated” garbage, with ads, and with no option for you to pay for only what you consume?

      Jobs hated the subscription model, and I do too.

      1. Isn’t it possible that this could work on both levels? Perhaps you could even listen to curated channels that are 80% or more your own stuff. It would be iRadio, only, you know, good.

  6. Any article/comment that says that Jobs would never have done this, would have innovated a better product, is one that I just tune out of.
    Steve Jobs was great, but he was not perfect. Apple bought companies when he was around, Apple had failures as well. iPod Hi-Fi anyone?
    Assuming they are buying Beats, assuming they are paying $3.2b, there is nothing to say Steve Jobs wouldn’t have done the same. Apple are a bigger company now, the market has changed, it stands to reason that Steve Jobs would have had to do new/different things as a result.
    I don’t think the subscription model is going to be the all dominant, profit making phenomenon that analysts seem to think it already is, just like is hasn’t been for years, but it has reached a point where it can’t be ignored.
    I’m not saying this is a good or bad move, or that the price would be right for the purchase as a whole, but don’t harp on about Steve Jobs all the bloody time.

  7. It never ceases to amaze me how many commenters on this board sound WAY too much like (former Palm CEO) Ed Colligan and his “PC guys aren’t going to just walk in” comment….which would indicate a total lack of understanding about the whole situation. Why not wait and see what the intricacies are before jumping into the “idiot comments” pool?

    1. The fun of this whole thing is reading the deranged rantings and ravings of tech pundits that glom onto a single issue of Beats and/or Apple and use it to advance their narrative on Apple.

      Audiophiles don’t like Beats, therefore Tim Cook is not innovative.

      Beats subscription service doesn’t have as many customers as Spotify, therefore Apple is doomed within the next 3 years…and Tim Cook is not innovative.

      It’s really delicious.

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