Baffling Hatred for the Apple-Beats Deal

 | May 10, 2014 | 10:45 AM EDT
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We have been inundated with opinions on Twitter, on CNBC and in blog posts about Apple (AAPL) potentially buying Beats Electronics for $3.2 billion. Nobody likes this deal!

Seriously, I can't find anyone saying this is really smart or cool or helpful to Apple.


If you listen to the negative chatter from the tweeters and bloggers -- otherwise known as the great unwashed -- you can sum it up in a few bold lines. But let me take you a bit further:

It's Too Much Money! Tweeters think that paying $3 billion for a headphone company is nutty. From what I've read, Beats did $1 billion in headphone sales last year. I haven't seen anyone with numbers on its music-streaming service. Let's say they're nil (which they're not). Is paying 3x sales that outrageous for an acquisition? There are lots of tech companies trading publicly for much higher multiples today.

It's Not Spotify! I don't use Spotify, but it's been around longer. A lot of people seem to like it. It must have more subscribers than the Beats music service does. But the record companies don't seem to like Spotify or Pandora (P). They do like Beats, though, as it was developed by one of their own -- Jimmy Iovine.

There's a Rapper Involved! Bloggers seem to think that it's funny or silly that a rapper like Dr. Dre is a part-owner of Beats. Paying a lot of money to a rapper? The service must be silly. Wouldn't you think a rapper, especially Dr. Dre, would know something about music and music trends?

The Headphones Are Low-Quality! I've never used them. But tweeters' ears are ringing that the quality isn't very high. Apple only does high quality, so this must mean that Apple is accepting low quality. That logic seems, well, a bit off-balance.

It's a Bubble! Anyone who's ever said it was a bubble before can say this again about this deal. It's a lot of money for a piece of hardware that's sometimes sparkly and therefore must be worthless. Perhaps the tweeters should just wait fo the next shiny thing in the distance?

Apple Doesn't Make Big Acquisitions! In the past, when I'd propose some big acquisition, people loved telling me that Apple should do it -- but that this company just doesn't do big acquisitions. Now Apple is doing a big acquisition, and that's a little startling for some Apple fans. It suggests the Apple they thought they knew is changing. This, of course, leads to the next refrain.

Steve Jobs Never Would Have Done This! Of course, he was good buddies with Jimmy Iovine. But we won't mention that.

The bottom line here is that Beats headphones are already sold in Apple stores and must do well -- and Apple can see just how well firsthand. Just from its future sales, I'm sure Apple can pay back this deal in a few years.

Apple is getting hardware that can potentially be more integrated with their wearable efforts. It gets a music service that the record companies like, which Apple can push. It has an entrée to bring iTunes more aggressively into the hands of Android users. What's there to hate?

I don't see any big downside to this deal for Apple.

A distraction? Please.



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