The Next Episode

Yes, Apple is finally buying Beats. Now what?

May 29, 2014
May 29, 2014
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The Compton-Hollywood-Cupertino braintrust.(Apple/Twitter)

Now that Apple is definitely acquiring Beats, the music streaming and headphones company, what’s next?

Don’t expect anything immediately

Apple expects the deal to close in its fiscal fourth quarter, which ends in September. By early October, Apple has usually finished making its product introductions for the year. Its music-focused events have historically been in September. Beats may get some promotion, but any deeper integration or collaboration will likely take longer.

Streaming music is clearly the focus

The Beats headphone and speaker business is a fine bonus, but Apple is sending a strong message that Beats Music is what it was really after, including the acqui-hiring of legendary music figures Dr. Dre and Jimmy Iovine. That’s despite the fact that Beats’ music streaming revenues are a tiny fraction of its hardware sales. And Eddy Cue, the Apple executive in charge of all things iTunes and content, is being brought out to talk about the deal—not design chief Jony Ive.

There’s plenty of long-term opportunity

Apple’s 800 million iTunes accounts—many with credit cards attached—and its huge iOS and Mac user bases could help make Beats the first truly mainstream subscription music service. (Note that Spotify, with 10 million paying subscribers, is still less than half the size of Sirius XM, and less than one-fourth the size of Netflix.) Plus there are lots of potential growth areas where Apple could use the Beats business, including wearable computing.

This isn’t any sort of bet-the-company deal

Beats is Apple’s biggest acquisition in pure dollar terms, but it isn’t likely to radically transform the company, for better or worse. It certainly pales next to Apple’s acquisition of NeXT and Steve Jobs two decades ago, which provided the company with an visionary leader, talented deputies, and the technical underpinnings for both iOS and Mac OS X. But if successful, Beats could easily drive Apple’s music business forward, and could help the company get better at cloud-based apps and services—an area where it’s weaker than it should be.

Read this next: A shopping list for Apple’s post-Beats era

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