Last night The Financial Times reported that Apple was in the final stages of talks to acquire Beats for $3.2B with the deal being announced as soon as next week. Acquisitions of this size are completely out of character for Apple. Like many journalists and bloggers, the more I think about this the less sense it makes. Assuming the report is accurate and a deal is inevitable, I've got a ton of questions without any obvious answers...
Is Apple interested in the headphones, streaming music, or both?
My gut reaction is that they're really interested in the streaming music service. The Apple engineers don't need help tuning speakers and device EQ to make things sound better. If they wanted to they could design a pair of headphones or a docking station to compete with Beats. Apple already tried speakers with the iPod HiFi, which was quickly discontinued. Music has always been important to Apple, from iTunes to iPods to GarageBand. There have been a number of rumors about the future of iTunes lately, and perhaps this is part of Apple's answer to Spotify and Pandora.
Why not just buy Pandora or Spotify or Jawbone?
The Beats streaming service is not that successful yet. Assuming the $3.2B price is accurate, they could spend another few billion to acquire Pandora (current market capitalization of $4.65B), which is the leading music streaming service in the US. They could buy Spotify too, although that would probably be much more expensive.
If they're interested in the Beats hardware, a company like Jawbone seems like a more natural fit. They make nice bluetooth speaker systems and headsets, and of course the UP wristbands. All of those would fit into Apple's product lineup more naturally than Beats would in my mind.
Will they keep the Beats brand?
I can't imagine Apple doing any co-branded products with the Beats logo on an iPhone, iPad, or Mac. They could continue to sell the headphones and speakers under the Beats brand though. Most consumers probably wouldn't realize that Beats was owned by Apple anyway.
It's got to be about the people
I think the acquisition has got to be about the people, not the products themselves. Apple is hellbent on staying cool and fashionable. They want those creative marketing minds that turned big plastic headphones into a fashion accessory. Another possibility is they want access to Jimmy Iovine's music industry contacts and expertise to build out the next generation of iTunes and iTunes Radio.
They're still focused on music
Whatever their motivation, as a music lover and Apple fan I'm happy to see they're still focused on music. I'm more hopeful of unique Apple hardware and software that makes the experience of discovering and listening to music more effortless and enjoyable.