Reports of the deal first surfaced today (9 May) and could be confirmed by both parties as early as next week, according to the Financial Times. Analysts and industry observers alike scratched their heads at the mooted acquisition as they did when HTC shelled out $300m (£190m) for Beats in 2011 – and that, as we all know, proved unfruitful.
HTC cut its ties with the business last September after finding accessories like headphones do not factor in someone’s decision to buy a smartphone. Handsets such as Sensation XL and Rezound, which came with free headphones, struggled to win over consumers and inflated the retail price above rival handsets.
If people want Beats headphones, then they will buy them directly. What Apple should focus on is using the audio equipment maker’s innovations and products to inform future designs and expand its existing services. It should use the acquisition for R&D and let Beats continue developing products consumers are willing to pay a premium for.
It is a point Apple chief executive Tim Cook alluded to earlier this year when discussing the company’s acquisition plans. Cook said Apple’s acquisitions would be in-tune with its race to make “the world’s best products, that really enrich people’s lives”.
With Beats, Apple gets a brand that fits this strategic objective. It receives a streaming music service, hip products and some street cred that could buoy its iTunes and iRadio services. Apple is also better placed than HTC to make use of Beats’ well-connected executives in the music industry, particularly when it comes to exploiting the growth of the subscription market
Apple has recently experimented in the arena through its iRadio service with limited success as it searches for a catalyst to increase iTunes sales. Music downloads from services such as iTunes are declining as consumers opt for streaming products such as Spotify and Pandora. Album sales were down 14.2 per cent and individually song purchases were 12.5 per cent at the end of the last quarter, according to the Nielsen SoundScan.
Conversely revenue from the likes of Spotify jumped by more than 50 per cent last year, according to a recent International Federation of the Phonographic Industry report.
Apple’s ultimate intentions for Beats are uncertain, but it is hard to deny the fact it could add a whole new dynamic to their ecosystem.