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Apple Picks Up Beats in Apple's Largest Deal Yet

TMCnet Feature

May 29, 2014

Apple Picks Up Beats in Apple's Largest Deal Yet

By Steve Anderson
Contributing TMCnet Writer

For a company like Apple (News - Alert), to talk about the largest price it has ever paid for an acquisition is no small feat. But that move, which was rumored to take place for some time now, is now official. Apple has released word saying it has agreed to buy Beats Music and Beats Electronics in a deal valued at $3 billion, the largest such move that Apple has ever made, according to reports.

Apple doesn't just get the company for its investment, however, as it also gets some of the personnel involved. Both Jimmy Iovine and Dr. Dre, co-founders of Beats, will join Apple in positions with the company that don't yet have titles. Apple CEO Tim Cook, meanwhile, offered up some comment on the matter, saying in a statement that Cook hoped the Beats acquisition would serve to help Apple “...continue to create the most innovative music products and services around the world.”

Reception of this deal seems somewhat split. It's not hard to see why Apple would take an interest in Beats; after all, a hefty chunk of Apple's comeback in recent years is owed to the iPod and its musical connection, a development that carries on through the current product line, and is actually a substantial portion of Apple's business today. One of the biggest profit centers for Apple is iTunes, after all, so investing in a way to make Apple more appealing musically does make sense, especially as several competitors start to emerge in the space like Pandora (News - Alert) and Spotify on music, even Amazon and Netflix on video. Plus, Apple and Beats have something like common ground in terms of marketing. Recently, we saw how Beats was using a combination of carefully-chosen “brand ambassadors” and powerful social media impact to push an image, one that connected audio equipment to fashion, a move that did quite well for Beats as a whole. Tim Cook has even been overheard to suggest that the move will help Apple get a bit more credibility with Hollywood, something that could prove useful for Apple in terms of landing properties for iTunes.

But the amount of the deal overall likely has some balking. Why would Apple make the largest deal of its existence as a company to buy a headphone maker? Sure, Beats is a hot property right now, and that marketing has given it quite a bit of power as a company. Beats would help infuse Apple with a fresh shot of that same image-driven component that made lines go around the block for earlier Apple releases. But Apple hoping for a halo effect to help drive hardware sales from Beats may be a bit too much, and it likely won't help with concerns over Apple's innovation woes. Releasing similar devices year after year, but now with special headphones, isn't likely to drive a sudden revival at Apple.

Naturally, as time goes on, we'll get a better idea of why Apple picked up Beats. It could be that Apple has something special in mind to throw that innovative edge behind these popular peripherals. But there's potential this may be an expensive flub for Apple, and one that, right now, it really can't afford, no matter how much cash it has on hand.

Edited by Maurice Nagle

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