When the news first hit of a potential Apple acquisition of Beats, it didn't make a lot of sense to me. Having given it another day to think about it, it still makes little sense to me.
There are two core parts to the Beats business: hardware (headphones and speakers) and streaming audio. Let's take a look at each.
Beats hardware products are headphones, earbuds and portable speakers. Their headphones and earbuds are not particularly innovative - they use the same basic design that other manufacturers have used for decades. Their portable speaker, the Beats Pill, is basically a me-too version of the Jawbone Jambox. Beats products are not of particularly high quality. I owned a pair of diddy beats earbuds. They had decent, but unspectacular sound quality. The left channel died about a month after the warranty expired, but that happens with many earbuds.
This is not a Google - Nest deal, where you're bringing on a team of design engineers who are rethinking everyday items. It's not Square, who have brought point-of-sale to the mobile device. There's no real innovation here. Instead, this is a company that has created a cool brand around decent quality products. Beats does offer a cachet of cool. At least for now.
But Apple doesn't need to rely on others to provide coolness to their products. Apple products are already cool. And while Apple's coolness seems to have staying power, Beats are more of a fashion statement for teens, and you can look at brands like Abercrombie to see how fleeting that position can be.
Beats created what they hoped would be a Spotify killer.
The Beats Music service launched to great hype, but has struggled to gain traction. I have not used the service, so have to rely on reviews that I've read, but in a market crowded with entries, Beats did not particularly stand out. The UI got good marks, but the core functionality was not very different for that of Spotify, Slacker, Rdio or Google Play. It wouldn't seem that difficult for Jony Ive''s team at Apple to build a comparable service. Some tout the existence of contracts with the record companies as an asset, but all of those contracts will need to be reassigned or renegotiated, and I'd guess it wouldn't be too hard for Apple to strike comparable deals on their own.
Two days in and I'm still baffled
With $151 billion in the bank, the $3.2 billion deal is not a huge financial strain for Apple, but it is significantly more than they've paid for any other acquisition. And the deal itself still doesn't make much sense to me. Beats hardware is a bit of a fad that could collapse as fashions change. Their streaming service seems OK, but it's hardly unique. But Tim Cook and his team are smart and I'm sure there are things that I've not considered. But for now, this deal makes little sense to me.