Was Apple's Beats Acquisition Smart or Desperate?

Entrepreneur Staff
Staff Writer. Covers leadership, media, technology and culture.
min read

Apple's official $3 billion purchase of Beats, and the addition of founders Jimmy Iovine and Dr. Dre to the company roster, has many wondering whether the tech giant's largest acquisition to date was the savviest of decisions.

After all, the move represents CEO Tim Cook's departure from the strategy laid out by the late Steve Jobs, who avoided blockbuster acquisitions as Apple's visionary founder and who was a noted skeptic of subscription-based music services. Plus, there's a perception that Beats itself is simply an overpriced headphone maker that Apple could have crushed if it had decided to create a competitive product.

Related: Music Mogul and Entrepreneur Dr. Dre: I'm the 'First Billionaire in Hip Hop'

Tech analyst Rob Enderle of the Enderle Group argues that the purchase is indeed a sign that Apple is clawing to stay ahead of the game, saying that, like most large companies, "they have to buy innovation now."

He also believes the move was more based on desperation rather than "sound business practice." "The kind of talent they acquired will likely have issues with Apple’s culture. The brand is redundant to Apple’s own, the headphone technology could have been acquired cheaper elsewhere, and others do streaming better and would likely be cheaper as well…part of Apple’s problem seemed to be that, up until now, they didn’t seem to recognize that their own product wasn’t competitive." 

Related: Apple Confirms $3 Billion Deal for Beats, Its Largest Acquisition Yet

Others are a bit more optimistic, arguing that the buy could spell good things for Apple's future. Gene Munster, a senior analyst at Piper Jaffray said in an investors note that it was possible the Beats acquisition could signal the start of raft of large-scale acquisitions, and not only in terms of content. "We believe that if successful, adding Iovine and Dr. Dre could help propel Apple into the next level in its content offering, particularly in video, which could pave the way for new products including a television."

Beats' $9.99-a-month subscription music service, which launched in January, could also become a very lucrative proposition under Apple's wing. Trip Chowdhry, co-founder of Global Equities Research wrote that while Beats Music currently has 250,000 subscribers, the streaming service could "easily grow to 20 million subscribers within the next 12 to 18 months" through Apple's distribution powers.  

Related: If Apple Buys Beats, What Else Will It Buy? Pretty Much Anything, Says Funny or Die.

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