A guest post by Polly Howden, Mobile Product Manager at Gumtree.
This week, Apple announced that it has bought Beats Electronics for $3 billion (approx £1.8bn), in a move that is bound to make an impact across the mobile and digital music industry.
You would be forgiven for assuming that the rationale behind this purchase is for Beats’ headphones. Apple headphones are notoriously known for being unreliable, as anyone who has had to suffer hearing Lady Gaga blasting from the headphones of the person they are sat next to on the tube can attest. However, general consensus is that Beats headphones aren’t that great either – certainly not worth their price if the plethora of reviews on ‘cheaper and better alternatives to Beats headphones’ are anything to go by. People have Beats headphones because it’s fashionable to have them. If it’s good for Dr. Dre, it’s good for you too.
What Apple is really buying is the ability to take the fight to Spotify with Beats Music in the wake of declining iTunes revenue. Streaming services such as 7digital and Spotify are proving more popular with Apple’s customer base. In fact, numerous sources and analysts report that Spotify is on track to rival iTunes in terms of revenue. The best way for Apple to change its fortunes in digital music is to acquire a subscription service company – hence Beats.
The biggest coup however in buying Beats is that it reinforces Apple’s ownership of the wearable computing space. Apple was arguably the first to enter this space with its clip-on iPod shuffle. Apple has around 72% of the music player market, something we have also seen on Gumtree as ads for iPods increased 92% from 2012 to 2013. With the emergence of smartwatches and Google Glass, it’s clear that wearable technology is going to be the next technology battlefield.
This battle is going to be won by the company that is able to provide a compelling service, a well-known brand and a fashionable product. With Beats Music, it gets the compelling service; it is already a well established brand; and the Beats brand provides the fashion credibility. Wearables are currently not fashionable – Google Glass makes you look more like a sci-fi nerd than the next big thing in Silicon Valley. It is no coincidence that Apple hired former Burberry CEO, Angela Ahrendts as its VP of operations for retail. This has also been mirrored by Google who recruited Calvin Klein fashion and marketing executive Ivy Ross to head its Google Glass unit.
With the rumoured iWatch coming to the market in September, it is fair to say that Apple is geared for the battle for the wearable computing market, combining effective functionality with acceptable fashion.
At the very least, it will free up Dr. Dre to release that Detox album we’ve been waiting 15 years for.