In the first of a five-part series that assesses the music industry through a looking glass, our bloggers analyze Beats’ market in the wake of its acquisition by Apple. With Beats’ software compatible on Android and Windows phones, what will be the possible ways that Apple will strategize to make the most of this new acquisition?
May 2014 witnessed one of the biggest acquisitions in the music industry with Apple purchasing streaming radio service and manufacturer of headphones, speakers and other audio software, Beats, for a whopping $3.2 billion. A giant of the headphone market, Beats, which enjoys over 51% of the $100-plus market share, is said to have sold nothing less than 20 million units of its audio products till date. While the company doesn’t reveal official revenue figures to the public, a general assessment puts its revenue generation until the sale at about $140 million.
What makes Beats special?
In less than five years into its launch, people across the world of music and sports were swaying to the music of Beats. From Lady Gaga to Nicki Minaj and Lil Wayne, every big name in the industry looked to Beats for customized headphones and speakers. Sportsmen of the likes of LeBron James, Serena Williams and Neymar swear by the quality of music that Beats’ products provide for use in their training sessions, while artistes such as Alexander Wang, Futura and Snarkitecture have collaborated with the company to create and market special limited edition products that have sold like hot cakes.
Beats Electronics was formed when a premium manufacturer of audio hardware led by Dr. Dre joined hands with Jimmy Iovine of Interscope Geffen A&M Records. Soon enough, their combined power had the best of music rolling out of their products. Beats grew magnanimously by returning to the studios the energy and emotion of playback and the power of sound entertainment.
The story before Apple made its grand entre
In 2011, Taiwan-based HTC Corp purchased a majority stake of 50.1% in Beats for about $180 million. However, it sold half its shares the following year. Soon after, Samsung Electronics and Apple Inc. got embroiled in a musical war with each vying for a stake in Beats. With stiff competition coming its way, HTC announced its intent to sell the remaining 24.5% stake for $265 million, expecting to make a profit of nothing less than $85 million. Soon after in 2013, Beats was valued at $1 billion and received a $500 million capital investment from the Carlyle Group.
With over 50 registered trademarks and a strong patent portfolio in the music industry, Beats set about adding to its coffers with its rich patent portfolio. In 2013, Beats dragged Yamaha to court alleging that the brand’s Pro 300, 400 and 500 lines of headphones infringed upon Beats’ patents D632668 and D552077, and trade dress. Beats added that these products of Yamaha were fabricated on the lines of Beats’ popular range of Solo, Studio and Wireless headphone models.
Apple’s day at the disc
Apple has been associated with Beats for a while now, selling the brand “b” products through its retail stores and select authorized re-sellers. With Beats holding a 51% share of the $1 billion premium $100+ music industry, and with its strategic relationship with Chrysler to offer excellent high-definition music technology across select models such as the Fiat series, Apple stands to gain strong with a ready platform to propel its new CarPlay product and thus create a mark in the automobile sector. (Read about Digitech developments in the automobile sector)
But the most that Apple gains with this acquisition is a fabulous boost to its popular iTunes. A business vertical of Beats offers customized streaming music that has become very popular among users. This platform is set to boost the social experience offered by Apple iTunes. Apple is set to also exploit Bates’ music segregation and assimilation platform that finds and plays music based on genre, artist and curator. With such services set to enter the Apple experience, the California-based company is hoping for a whopping increase of its existing 800 million accounts.
But with Beats offering a music platform for Windows and Android Smartphones, will Apple continue to share this experience with its rival mobile platforms? Well, that would be an interesting aspect to note.
(Featured image source: https://pixabay.com/en/ipod-apple-music-media-electronics-34894/)