Apple is apparently in advanced talks to buy headphone maker Beats Electronics in a deal that could be worth $3.2 billion.
Many people are puzzled why Apple would want to acquire Beats: reviewers have repeatedly described Beats headphones as average, an attribute that doesn’t fit with Apple’s mantra to make the best products in the world. Some are arguing that Apple is buying Beats for its streaming service Beats Music, which was launched earlier this year. If so, the question is why Apple doesn’t buy Spotify or Rdio, two established streaming services that don’t come with the additional weight of a hardware business.
From an economic point of view, a $3 billion purchase of Beats doesn’t seem like that bad a deal. After all, despite its mediocre reviews, Beats headphones are immensely popular among the youth, as anyone who has recently used public transportation can testify. Running a well-oiled marketing machine, heavily relying on celebrity endorsements Beats managed to make its headphones the hottest brand in the industry. The result of a Spring 2014 survey among American teenagers speaks for itself: 46% of the respondents claimed that their next pair of headphones is going to be a pair of Beats. Ranked second, ironically, at 25% was no other than Apple itself.
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