Why Beats is a Great Buy for Apple

Jimmy Iovine and Dr. Dre. Photo by Associated Press.
Jimmy Iovine and Dr. Dre. Photo by Associated Press.

Apple finally announced it is buying Beats Electronics for $3 billion, ending speculation about one of the most dissected tech deals in recent memory.

Since word of the deal leaked in recent weeks, many tech and media observers have been a scratching their heads: Why would the world’s most profitable hardware company spend $3 billion to buy a headphone company? Why would Apple want Beats’s streaming music service, with its small base of 200,000 subscribers, when it already has its own? And isn’t subscription music becoming commoditized anyway?

We will find out more later Wednesday when executives from both companies take the stage at the Code conference in Southern California. But I think the skeptics are dead wrong. The deal—Apple’s largest acquisition ever—is a shrewd move, and to see why you have to look beyond hardware or even streaming music.

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But those factors weren't enough for Apple to open its checkbook. A lifeline to build the kind of services that can make the iPhone a must-buy device is.


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With Mr. Iovine and Beats, Apple is boosting its odds that it can come up with that next killer music deal that no one else can, at least for a long enough period of exclusivity.

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