Apple's rumored decision to purchase Beats Electronics for a vast $3.2 billion has puzzled many across the tech sphere. But, there may be a simple answer: Purchasing the Jimmy Iovine and Dr. Dre empire may give Apple a slice of the millennial pie.
"I got teens, and they don't listen to anything unless it's with those headphones. The association that Beats has with teens is it's cool. Apple is the brand of your mom,” Jonathan Adams, digital agency iCrossing’s head of media in North America, said.
Adams points out that Apple obviously doesn't have a brand problem and is still profitable. But, it can't champion that spritely youthful image that wearing a pair of the bombastic headphones, which have become a fashion accessory, has. And, it seems Apple wants its mojo back, as noted by its tepid dip in the Tumblr waters in March.
Whether or not getting that millennial buzz is worth billions is another question. Danielle Levitas, group vp and gm for IDC's consumer, broadband and digital marketplace team, said it's probably only one part of the reason that the Cupertino, Calif.-based company wants in so badly. While Beats will definitely help the brand expand into different demographics and markets, it also may provide insight into the booming wearable tech market and streaming music service.
"I think they are trying to appeal and reappeal to the younger demographic, but this is also about getting into other form factors in the future," she explained.
Forrester principal analyst James McQuivey added that purchasing the Beats Music will jumpstart Apple's foray into streaming music world—but argued it's a very expensive way to do it. The company can easily build its own service. He said the deal seems out of place for a brand that tends to shy away from external ideas. Plus, he disagrees that Apple has an image issue.
"It’s not like Apple isn't already making billions doing what it already does," McQuivey said.
Both McQuivey and Levitas are skeptical that those three reasons together equal $3.2 billion. There's many other aspects that don’t quite make sense for Apple, despite the upsides.
"Valuations are crazy right now, but they aren't crazy for hardware," Levitas pointed out, with Google's $3.2 billion acquisition of Nest being the outlier.