Headphones are wearables. That simple fact puts Apple’s reported $3.2 billion deal for Beats Electronics in a whole different light.
There has been plenty of head-scratching over the merits of Apple’s reported deal. Indeed, prominent technology analyst Gene Munster of Piper Jaffray didn’t mince words in sharing his view that the acquisition on its face ”sounds like a bad deal.” In a note last week he wrote:
We are struggling to see the rationale behind this move. Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand and has never acquired a brand for a brand’s sake (i.e., there are no non-Apple sub-brands under the company umbrella). Separately, we are not aware of any intellectual property within Beats that would drive the acquisition justification beyond the brand.
Munster isn’t alone. Other Apple industry gurus such as blogger John Gruber seemed equally perplexed: “If Apple wanted to sell expensive high-end headphones, they don’t need to spend $3 billion,” he wrote on his blog Daring Fireball, a day after story on the deal emerged. “I don’t get it.”
But here’s the thing: What if Apple’s play for Beats is about taking a step toward wearable computing? One technology banker speculated as much to Quartz, arguing that Apple may see the hugely popular Beats headphones as an easy way to position itself more definitively into the growing realm of wearable gadgetry. These computing devices to be worn on the body—including Google Glass, fitness monitor bands, and other futuristic technologies—are viewed as a bold new frontier that hasn’t yet been fully tapped.
Beats could offer Apple the opportunity to soup up a set of already trendy headphones with the technology to interact with users in novel ways. For example, the headphones could play music based on your mood, or direct you to the nearest restaurants by saying directions in your ear.
A set of smart headphones could also offer a new way to control items around us that have joined the “internet of things.” Quartz has reported on experimental technology that Apple has been toying with to install ”invisible buttons” and features, known as iBeacons, that can locate where users are using low-energy Bluetooth technology and then ”calculate your relative position and trigger certain actions.” Here’s a good explanation of how Apple is thinking of that tech.
Elias Roman, the CEO of the music streaming service Songza, offered this take on the Apple-Beats deal to CNBC: ”If I had to sum it up in one line, it would it would be making wearables cool. I think that’s what’s happening.” Indeed, if Apple can use its new headphones to gin up a flashy wearable device a la Google Glass, then this Beats deal may make Apple CEO Tim Cook look pretty smart.