On Thursday night, news broke that Apple is in talks to acquire the Beats Electronics brand for $3.2 million. Beats is perhaps best known for its Beats by Dr. Dre headphones, but also recently launched a streaming Beats Music subscription service. But why does Apple, which has historically stayed away from major acquisitions like this one, want to buy the company for such a large sum?
This was the question CNBC’s Squawk on the Street panel was attempting to answer Friday morning when host Simon Hobbs threw out a surprisingly frank hypothesis.
But first, corespondent Jon Fortt argued that Apple was making a mistake in buying Beats because a competing hardware company has the potential to “dilute” their own solid brand. “There’s actually potentially negative value here,” Fortt said. “Apple should buy either the biggest or the smartest in the space. Beats is neither.”
Hobbs countered Fortt by saying the move was more about Beats’ image, and in particular the racial component of that image. “Don’t you think there’s a hip hop, African-American cool about this that Apple may have not achieved in other ways?” Hobbs asked. “I mean, come on.”