SAN FRANCISCO — Can Apple CEO Tim Cook squeeze growth out of a stagnant industry?
Maybe — now that he’s bought a company that can convince consumers to shell out $100 for a pair of ear buds.
Michael Dwyer AP
Beats Audio equipment is arranged for a photo next to an Apple laptop at a Best Buy in Boston.
Apple’s acquisition of Beats Electronics gives the technology giant a small but much-needed product refresh in both hardware and software.
In addition to its line of hip consumer electronics — Beats sells audio gear at Best Buy’s online store for between $80 and $380, for example — the Santa Monica-based upstart rolled out an online streaming music service in January.
Given that global streaming music revenue surged 51% in 2013, while U.S. sales of downloaded singles fell 3.3%, the deal should goose Apple’s iTunes business, where growth has slowed dramatically in the past 12 months.
Total Apple revenue is seen rising 6% for the fiscal year ended in September, less than last year, as Samsung and other smartphone rivals take iPhone market share with large-screen devices.
If Cook can plug the music industry cred of Beats co-founder and legendary rap producer Dr. Dre into Apple’s marketing machine, he could boost growth.
And having veteran industry executive Jimmy Iovine, Beats’ other co-founder, along as a partner could help in future music-licensing negotiations with the big labels.
While Beats is Apple’s largest acquisition ever, getting a hot product portfolio that comes with industry savvy for $3 billion seems like a pretty safe financial bet when you manage more than $200 billion in assets, as Cook does.
Still, the music business is a tough place to find growth, with U.S. sales remaining stagnant at $7 billion for three straight years, according to the Recording Industry Association of America.
Digital sales rose almost 8%, though, and Cook now has the assets to capture more of that growing market if he can fit together all the pieces and personalities Apple just acquired.
In addition to new iPhones and iPads, U.S. consumers can count on seeing a lot more Beats ear buds, headphones and speakers in advertising, online and in Apple stores soon.