Were you one of those people who were shocked by Apple’s $3 billion purchase of Beats Music? Well you shouldn’t be. Yes, Apple already has a streaming radio business and a very healthy 3rd party headphone system in place. But, look a little deeper and you’ll see that it was a very strategic (and smart) move.
Here’s 3 reasons why:
1. Beat’s ability to convert free trial users of its music streaming service to paid subscribers. Beat’s streaming service is relatively new, however there has been a strong spike in users who are paying for the Beats app through the iTunes store. This is revenue that Apple would like to have going into their pockets. Which will be the case now.
2. Bringing Beats top executive talent over to Apple. Talent isn’t hard to come by these days, but TOP EXEC talent is. Given the structure of the deal, Lovine and Dre were an important part of the acqui-hire.
3. Wearable Tech. Apple is silently becoming one of the most influential companies in the Smartwatch industry. Pairing with a company like Beats–who have made big, colorful headphones a fashion accessory–is just icing on the cake. But does this put Apple and Beats Music into the same world as Sole Republic? Our money is on yes.
Apple has indicated that Beats Music will continue to be made available and operate under its own brand and platform. So what does this mean? It means that even though Apple has taken a financial hit, it was just a drop in the bucket of their $159 Billion in cash reserves.