Monday, May 12, 2014

What does the Apple-Beats merger tell us?

Apple -- the revolutionary company that brought us iPads, iPhones, iTunes and countless other innovations -- is in talks to buy Beats Electronics for $3.2m.  What does this tell us?  First, Apple can leverage Beats' new music streaming service to offset the less than spectacular rollout of iTunes Radio.  At a minimum, Apple kills off a potential competitor and maybe there are some synergies (don't hold your breath).  

Second, more and more music is being consumed on headphones and Beats has become a force to deal with in that market.  Perhaps there are some technical payoffs to this, but carrying the logic further maybe Apple buys a company that makes receivers and another that makes speakers.  Somehow I do not think consumers will start getting a $300 headphone with each new iPhone or iPad.  Next step: will Apple buy a printer company to go with its Macs?

Third, Apple now thinks it has to buy innovation instead of creating it.  As many investors feared, the pipeline of breakthroughs has run dry.  Apple has a history of acquiring small firms in the technology space, but this would be its first big buy in the consumer electronics space.  

With or without the merger, the music biz will continue creating great product.  As the former rock-and-roll critic for the Michigan State News, I encourage you to give a listen to War on Drugs' "Lost in the Dream" and Future Islands' "Singles."  You can hear both for free on Spotify.  

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