There’s nothing puzzling about Apple’s rumored acquisition of Beats Electronics (assuming the deal takes place) despite a torrent of questioning and negative comments in the press and the financial community.
The rumored acquisition of Dr. Dre’s Beats line of earphones would be another step in Apple’s strategy of wrapping fashionista hardware with software and service.
We see nothing surprising in this. After all, Apple dished out a “signing bonus” (in stock) of $68 million to lure Burberry CEO, and creative marketing expert, Angela Ahrendts, over to direct its retail operations, stores and online.
Clearly, we are entering an era of wearables – and style and fashion considerations must be wrapped intrinsically into product and brand development.
The Beats brand of earphones has a non-tech but high rap-crowd brand appeal and had a reported $1 billion or more in revenue in 2013.
What the Beats brand gains is clear: access to over 800 million iTunes account holders, product integration and possible POS offering against the stylish but frequently criticized Apple Earbuds.
Apple’s gains include getting the Beats products and its cultish following, with the easy potential extension of their existing product line to stream “Beats” style music, and other extensions, i.e. speakers, bluetooth features and application to other iWearables.
We would expect that Apple will continue to expand their in-house line of fashionista advisers with the advice of Dr Dre and team. (A good deal has been made of the prospect that music mogul and co-founder of Beats, Jimmy Iovine, could join Apple’s expert marketing team.)
This move needs to be viewed in the context of the Ahrendts hiring by Apple. As we see it, Apple is upping its commitment to the view that tech and style are going to be increasingly tightly linked. Is there risk in their strategy? Sure, but hardly as much as the risk of betting on a pure touchscreen smartphone in 2007.