Apple Buying Beats?!

Courtesy: Forbes

Lots of outlets have been reporting for the last 12 hours that talks are in the final stages between Apple and Beats, with the former set to purchase the latter for a reported $3.2 Billion.

Citing sources close to the deal, The Financial Times on Thursday reported that an Apple-Beats tie up could happen as early as next week. The publication cautioned, however, that final details have yet to be hammered out and talks may ultimately dissolve.

News of the rumored talks have been corroborated by BloombergThe Wall Street Journal and The New York Times, among others. 

Under the supposed deal, Apple would gain control of Beats’ audio hardware division as well as the firm’s subscription-based music streaming service. The Beats management team would report to Apple CEO Tim Cook.

Well, I’ll be damned.

Lots of hand-wringing and second-guessing going on here by the technorati.

And rightly so.

I don’t get it. Beats’ hardware is (at best) over-priced, and (at worst) subpar. Certainly Apple could hire an expert to shore up it’s headphone hardware if it wanted to. Does Beats have some other hardware in the pipeline that has piqued Apple’s interest? Doubt it.

That leaves Beats’ rather underperforming streaming service.

Reports are that it’s not a bad service, with a large library and good curation. I wouldn’t know, I’ve been happy with Spotify and iTunes Radio. I haven’t felt the need to even explore Beats’ offering. Based on the reported 200,000 subscribers numbers thrown around the internet, I’m not alone.

The only thing that makes any sense of this comes from the negotiated contracts with the record companies angle. It’s pretty well-known that the recording industry has felt that they have given up too much control of music sales and distribution to Apple thanks to iTunes. This is why we haven’t seen the kind of easy access to movies and television shows like was have with music: motion picture, television, and cable companies have been much more restrictive of allowing Apple access to their products. It also explains why we haven’t seen a Spotify-like streaming service from Apple yet-the music companies are playing hardball with their negotiating tactics.

The Beats acquisition might change this situation if (BIG “IF”) the contracts Beats was able to negotiate with the record companies for it’s streaming service are transferrable. They must be, or else what would Apple have to gain from this?

Tim Cook has been talking up Apple’s acquisition strategy the last few earnings conference calls. Certainly, Apple has a war chest unlike anything seen in modern business.

But Beats?

Unless Apple knows something we don’t (and I have to assume they do), this seems really small-minded. Not that Apple is sinking by any means, but this seems to be a bit like shuffling the deck chairs on the Titanic. Apple has bigger fish to fry (cloud services comes immediately to mind).

When Apple pulls the trigger on Yahoo!, I’ll feel much better.