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he analyst community has generally reacted with shock and horror at the thought of $3.2 billion for Beats – more so than when Facebook splashed out $19B for profitless WhatsApp. The dismay centers on several areas, including cost, marketing, design, quality, branding, personnel and – nudge, nudge – demographic.
Let’s take each in turn.
Cost. Gasp! Apple’s Largest Ever acquisition! $3.2B is small change. The company is minting money every quarter.
Marketing. Apple’s stores are incredibly successful, but let’s face it, without new products they could go south pretty fast. Beats adds relevant products and young consumer cool to a slowing retail channel. Angela Ahrendts undoubtedly voted for it.
Design. Jony Ive would never approve! Actually, he would, the guy who hired him at Apple leads Beats design. There’s room for more than one design esthetic at Apple and he did, after all, sign off on the various multi-color iPods and the original iMac.
Quality. Audiophiles don’t like Beats because of its bass-heavy sound. But Beats dominates the over-$100 headphone market, so maybe audiophiles can be ignored – again – by consumers who like their music their way.
Branding. Two strong brands! Integration nightmare! Apple is one of the top global brands, an icon with a fabulously successful retail channel. Easy. Beats by Apple. There. Done.
Personnel. Beat’s Jimmy Iovine is, by all reports, highly respected. Why would he stay at Apple? Here’s the carrot: “Jimmy, since Steve left we’ve needed somebody to bridge Silicon Valley and Hollywood. Take your game up several notches? Big shoes to fill, dude. Like, the biggest.” Potential CEO? Who could resist?
Demographic. Beats appeals to an urban, somewhat-more-black demographic than Apple’s affluent white techno-hipster core – and that makes some analysts nervous. But America is getting less white and, internationally, Beats is a cool brand. Expanding Apple’s demographic is a Good Thing.
The Storage Bits take
All this is not to say that the acquisition couldn’t fail. It could, easily. But failure would be a blip, not a disaster, for Apple.
Looking at it from the Apple exec suite, it’s a small bet with potentially huge benefits. Financially it could pay for itself in 2 years in higher sales. The rest is gravy.
And way better than doing nothing.
Source: Associated Press