The Financial Times caused an uproar when it was the first to report that Beats Electronics and Apple are said to be in talks for a $3.2 billion acquisition. A Beats spokesman declined to comment to TWICE, but I spoke with Ben Arnold, executive director, industry analyst, of The NPD Group, to get his thoughts on a potential deal and to help me make sense of the question that’s been puzzling everyone all day: Why?
Apple and Beats are both massive brands, and while Beats has a history of forming high-profile partnerships with other manufacturers, it’s harder to picture Apple doing the same.
What would motivate it this time? According to Arnold, Apple’s motivation could be based on control: controlling how the music sounds when it leaves the device and controlling the user experience.
It could also be taking a page from the Sonos playbook of creating an audio ecosystem for consumers to exist in: from music streaming, to the device, to the headphones (or speakers). This would allow it to leverage the App Store in a new space, and it would also give Apple a presence in a category it doesn’t currently have one in — headphones, portable speakers and soundbars.
While the buzz surrounding the Beats Music service is attractive and could enhance the Beats brand, Arnold agreed with me (and just about everyone else), that there’s no reason Apple couldn’t start its own music-streaming service that could perform just as well. So this potential deal is really focused on the hardware that Beats brings to the table.
So what’s Beats motivation? It currently dominates the headphones category, capturing 28 percent of all headphone sales in 2013, according to NPD. (Bose took the No. 2 spot, with 10 percent.) Well, money, yes. Of course. But as Arnold pointed out, there’s also the opportunity to expand from being a favorite brand of millennial consumers to a favorite brand of consumers of all ages.
“Beats wants to grow their presence, and they’ve grown beyond headphones into speakers. Aligning themselves with Apple, which is a very mainstream brand that lots of consumers are fond of, helps Beats cross over from being a brand that is beloved by young consumers to an audio brand that is respected by all consumers.”
What this means for the third-party accessory manufacturers that currently sell through Apple Stores won’t be known for a while, but Arnold didn’t think many should worry too much. “I’m sure there will be a lot of promotion around Beats headphones and speakers … but I don’t really see other audio manufactures being pushed out of Apple stores.”
