I received an email from Apple inviting me to try out the Beats Music app on the iTunes App Store (a message probably sent to a few hundred million Apple customers). The app gives you access to Beats Music streaming music service on your iPhone or iPad. The app is free. Beats Music is not (subscription fee). How does Beats help Apple’s numbers?
Apple’s Numbers Game
As a business, Apple is far more diversified than Microsoft or Google or Amazon and more profitable than Samsung. No other tech gadget company comes close to being as diversified or profitable as Apple Inc.
Let’s go down the lists of Apple’s profitable business lines. Mac, iPod (declining), iTunes (music, TV shows, movies), iTunes App Store, iPhone, iPad, Apple TV, Apple Store, Mac App Store.
What did I miss?
Beats Electronics. Beats makes audio products (headphones and speakers), is a streaming music service, and is Apple’s new $3.2-billion division.
Beats as a company has a checkered past, started by Jimmy Iovine and Dr. Dre to help overcome a couple of industry problems. Crummy sound and music piracy. We can argue whether or not Beats does much to improve either issue.
Cellphone maker HTC threw a few hundred million dollars into the company before Beats decided to dump the Monster Cable relationship and go its own way on headphone and speaker designs.
We often hear tech pundits ask the question, ‘What does Beats bring to Apple?‘ How about if we reverse that question. ‘What does Apple bring to Beats?‘
Beats may have been modestly profitable before Apple came along, but the brand stands to grow rapidly, if the recent email promotion to iTunes customers is any indication of Apple’s big numbers.
How many iTunes customers are there? Hundreds of millions. When Apple promotes something to that huge base of loyal, card-carrying customers, in this case the free Beats Music app on the App Store, the cash register starts ringing (I couldn’t find a good analogy for clicking the Buy button on the iPhone).
Apple has over four hundred retail store locations to hawk Beats headphones and speakers, plus the advantage of tens of thousands sales channel retail stores which sell Apple products. I won’t be surprised to see Beats show up on Apple TV and as a component of iTunes on the Mac. There’s already a Beats app for Android devices.
I don’t think the Beats Electronics acquisition is an issue of what does Beats bring to Apple. It’s really a matter of what Apple brings to Beats. The answer is simple. Numbers. Big numbers. The highly prized numbers of increased revenue and profits for a well known brand, and a rapidly growing product line for Apple.