The Financial Times: ‘Apple in Talks to Buy Beats Electronics for $3.2B’

Matthew Garrahan and Tim Bradshaw:

Apple is closing in on its largest ever acquisition with the planned $3.2 billion purchase of Beats Electronics, the headphone maker and music streaming operator founded by music producer Jimmy Iovine and the hip-hop star Dr Dre.

The deal could be announced as early as next week, people familiar with the negotiations said, but they cautioned that some details had yet to be agreed and talks could still fall apart.

On the surface, this doesn’t make any sense to me. I can’t see Apple keeping the “Beats” brand around for headphones. If Apple wanted to sell expensive high-end headphones, they don’t need to spend $3 billion. The Beats streaming service is interesting, but can’t Apple do that on its own, as an expansion of the iTunes Music Store and iTunes Radio? And it’s not like Beats Music is even popular (at least yet) — Peter Kafka reports they only have 200,000 subscribers, most of them from a deal with AT&T.

Nothing from Beats looks like Apple. Not the brand, not the hardware. If this report is true, and Apple keeps the brand, how does that work? When is the last time Apple sold anything that wasn’t under its own brand? Filemaker is the only thing that comes to mind, and the origins of that arrangement are downright prehistoric. And if Apple doesn’t keep the Beats brand, what are they paying for?

I don’t get it.

Update: Numerous people are wondering if it’s all about streaming rights from the music labels — i.e. rights that Apple couldn’t get on its own (because the music labels have long resented iTunes’s dominance in digital music downloads), so they’re buying a company that negotiated those rights on their own. The problem with this theory is that those licenses (to my understanding) aren’t transferable in the event of an acquisition. Music label executives may be dumb, but they’re not that dumb.

Thursday, 8 May 2014

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