One last (semi-secret) reason Apple bought Beats

Chris Burns - Oct 11, 2016, 10:43am CDT
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One last (semi-secret) reason Apple bought Beats

Beyond the already-spoken reasons Apple bought Beats, it occurred to me just recently that there might’ve been a less obvious line of reasoning, one that had to do with the iPhone 7. On July 28th of 2016, NPD Group’s Retail Tracking Service reported that, for the first time in the history of headphones, Bluetooth headphone revenue overtook non-Bluetooth. To see this coming many, many moons ahead of time, Apple may only have had to purchase the biggest brand in headphones.

Back when Jimmy Iovine (of Beats) and Eddy Cue (of Apple) appeared at Recode’s Code Conference in 2014, Iovine suggested that the two companies had been working with one another – or at least in contact through these two leaders – for the past 10 years. That doesn’t really add up if we check back to the founding of the company “Beats Electronics,” AKA “Beats by Dr. Dre,” back in 2006.

ABOVE: Jimmy Iovine and Eddy Cue explain the Beats deal. “This is just about [Apple] continuing to invest in music,” said Cue.

Before Beats’ deal with Apple, Iovine co-founded Interscope Records and signed Tupac Shakur and became involved with Death Row Records (a subsidiary of Interscope) by providing initial funding, co-produced 8 Mile, More Than A Game, and Get Rich or Die Tryin. SEE THIS: Apple’s Beats deal for Dre, streaming, everything else He made crazy amounts of successful moves in multiple industries over many decades, then teamed up with Dr. Dre to make Beats By Dr. Dre, subsequently capturing 27% of the headphones market (according to NPD Group in 2013 of the market in 2012) and 57% of the “Premium” headphones market (units that cost $99 USD or more).

Apple does not make major changes to their top-selling product, the iPhone, without making absolutely certain that they’re going to be able to have a solid product to sell. As such, Apple took the idea that the headphone jack might not be necessary in the future, and ran with it.

By “ran with it” I mean they researched it. To such a degree that they included analysis of this subject specifically in their negotiations with Beats before the deal was made.

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We, Apple, they probably said, want to own the company that foresaw the rise of the headphones market in 2008, then became a big part of that rise in not only unit sales, but average acceptable price paid by the consumer. We want to see when Bluetooth headphone sales will likely overtake wired headphone sales well before a company like NPD is able to report it.

In July of 2016, NPD reported that for the first time ever, Bluetooth headphones picked up more revenue than non-Bluetooth headphones.

At the top of the dollar sales chart: Beats (as owned by Apple).

On September 7th, 2016, the iPhone 7 was revealed as the first iPhone without a headphone jack.

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Apple’s music industry and headphones market insight, professional of the highest order thanks to the Beats crew, made it possible for Apple’s headphone jack-less iPhone to appear at just the right moment in history – just as Bluetooth headphones began making more money than their wired counterparts.

Apple’s major influence on perception in both smartphone and headphone markets will further push the trend, and the brand can ride the wave in to massive profit.


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