“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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