One recent commercial deal to be aware of is Apple’s acquisition of Beats. The acquisition has cost Apple around $3 billion which makes it Apple’s largest acquisition to date. The $3 billion figure consists of a $2.6 billion purchase price and around $400 million in stock.
Apple is a company that designs and sells different products including computer software, electronics and personal computers. Some products that Apple are known for designing and selling are the iPhone, Mac and iPad. The company that Apple has acquired, Beats, is especially known for products in the headphone sector. Beats have also set up an online music streaming service that Apple have acquired.
It is planned for the Beats brand to stay separate from Apple. The Beats brand is likely to benefit from this acquisition through the large international reach that Apple has. Apple can potentially benefit from this acquisition in a variety of ways. This article will explore three main ways that Apple could benefit from the deal.
Apple’s potential benefits
As a result of the acquisition Apple now have access to the Beats online music streaming service. This means that Apple will be able to use and develop this existing service to compete with leading online music streaming services such as Pandora and Spotify. The online music streaming services sector is a growing area within the recorded music industry. This is one of the few areas that is growing within the sector as digital track downloads and CD sales are decreasing. As there is already a large audience in this area with an estimated 28 million paying customers for subscription based online music streaming services it is likely to be profitable for Apple to get involved.
Another benefit of the acquisition for Apple is that the Beats founders, Jimmy Iovine and Dr Dre, will be joining Apple as employees. This is beneficial for Apple because both founders have strong connections and experience within the music industry which could help Apple to further its reach in the industry. Jimmy Iovine has four decades of experience in the music recording industry whilst Dr Dre had a career as a record producer and rapper before founding Beats. Apple might also be interested in the way in which Jimmy Iovine and Dr Dre built up the Beats brand into the strong brand that it is particularly in the luxury headphones market.
The final possible benefit of the acquisition that I will consider in this article is the fact that Apple now own Beats products including their headphones. Beats are one of the brands that has dominated the luxury headphones sector since Beats was founded in 2006. There is speculation surrounding how Apple plan to use this to their advantage in the most effective way. As many Apple products involve the use of headphones it might be possible for the headphones to be linked with these existing products in a profitable way.
Issues and Consequences
There are some issues and consequences of the acquisition that Apple will need to deal with. One consequence of the deal is the possibility of job losses for some Beats employees. This issue has arisen because there are now overlaps in some of the job roles of employees of Beats and Apple. This is a particular issue in departments such as the legal and financial departments where there are similar roles being fulfilled by Beats and Apple employees. Some employees may not be guaranteed a permanent role but have been given temporary job offers instead.
Another issue that Apple will need to be concerned with is any lawsuits that are aimed at Beats. Bose have recently announced that they will be filing a lawsuit against Beats. Bose have alleged that some Beats products have infringed upon their noise cancelling headphone patents. This is a lawsuit that Apple will now have to deal with.
In my opinion the best outcome from this deal is for Apple to continue to develop Beats as a brand and to benefit from this in some of the ways that have been explored in this article. It is also important that Apple effectively combats the issues that have arisen as a result of the acquisition. It will be interesting to follow this deal in the coming months and see how Apple develops Beats.