Apple's Acquisition of Beats may be beyond sound

Remember when people were wearing bluetooth ear pieces.  I have a couple that I haven’t used for years.  Why?  Sound Quality, battery life, and connectivity.  I have enough problems keeping a cell connection, let along worrying about battery life and bluetooth. So, I always use a hardwire headset.  It’s probably greener too because you eliminate the use bluetooth.

Now that Apple has officially announced the acquisition of Beats, the media and analysts are asking why?

Katy Huberty, Morgan Stanley: Apple beats the service drum."Subscription music service could make the deal a home run, with every 1% penetration of Apple's 800M account base equating to $960M of revenue. Apple believes Beats offers the right strategy for streaming music as it leverages both algorithms and 200 human curators to create playlists, which differentiates it from competitors."

Scott Craig, Merrill Lynch: Expensive acquisition. "The $3bn price tag sounds high, especially given Carlyle Group's investment in Beat Electronics in September 2013 valued the company at ~$1bn. This seems out of character with Apple's track record of acquisitions which are typically more tuck-in types with focus on IP/technology, rather than brand. Apple would also be acquiring high end, high margin headphones which according to NPD, account for 27% of the headphone market and 57% of premium headphone market ($99+)."

William Powers, Baird: Technology portfolio light. "We would note that the recently launched Beats Music streaming service is reported to have a mere ~250,000 subscribers and only has two awarded patents. Beats Electronics has 20 awarded patents, most of which are for ornamental design, vs. Harman's 868 patents and Bose's 558."

Given the pervasive use of headsets it is a standard accessory.  My daughter demanded a Beats headset, I have Klipsch earbuds and use Apple’s standard ones.  It is time to change what a headset is.  You can embed sensors for heart rate.  It’s stuck in your ear.  Probably can read body temperature.  Put in motion sensors and you can figure out what way people are looking.  Put in a small camera and you can do point of view.

If Apple wanted to change the headset into an extension of the iPhone what company should it buy? an established company in sound?  Or someone who is creating new business models, like Beats?

I laugh when people only see what is in front of them.  Beats is a headphone and streaming music company.  No, Beats is a company that has successfully done things with headsets and has created a must have accessory for actors, athletes, and other high visibility people.  It’s not about sound, it’s about looking good.

Imagine if the high performing athletes used Apple/Beats headphones as their training routine, then sell 1,000x more to amateur athletes.  Could be why Nike decided to get out of the fuel band business.

Could Beats create a sunglasses with a headset and sensor technology?  Oops, this beats Google Glasses and it is cool.   Wearing shades inside, while watching video  is going to look so much better on an Apple/Beats glasses than on Google glasses.