Apple Inc. (NASDAQ:AAPL) spent $3 billion to get its hands on headphone maker Beats, but the firm isn’t a fan of many of the Dr. Dre-led company’s projects. A new report says that Apple killed a Beats Wireless speaker program. Investors are asking what Tim Cook was thinking when he bought the firm last year.
A Variety report on the Beats Sonos-like product was authored by Janko Roettgers. He says that Beats was working on a wi-fi speaker that would be able to play Apple music without a connected smartphone, but Apple killed the project. Many of the people involved in the project have since left Apple.
Apple slows Beats down
Beats was working on a non-mobile wi-fi speaker that would be able to pick streaming off of the web and play the music in the living room of a user. The speaker was, says the Variety report, going to retail for around $750.
Beats already makes a Bluetooth speaker range, under the name Beats Pill. Those speakers are able to connect to a mobile device and play the music selected on them. The cancelled Beats speaker would have been able to work without any device connection, and Apple seems to have decided that was against its interests.
Apple recalled about 230,000 units of the Beats XL speaker earlier this month after it emerged that batteries in the device posed a fire risk. The product has since been taken off of the Apple website and it seems it’s no longer available for purchase. Apple hasn’t given any explanation about that change.
Since Apple took over at Beats the firm’s workforce has dropped by 50 percent says the report. That means that Tim Cook and the rest of the top dogs at Apple aren’t really looking for new products to come out of the company. That begs a question about the future of Beats, and the reasons behind the $3 billion acquisition that brought it under Mr. Cook’s wing.
Looking forward to the future of Beats
When Beats was acquired by Apple it was supposed that the deal was closed in order to bring the Beats name and talent to Cupertino. When Apple Music was launched at WWDC on June 8 it became clear that the name didn’t carry as much weight as Wall Street thought.
Tim Cook and Phil Schiller decided to name the firm’s streaming service Apple Music instead of Beats Music. The Jimmy Iovine-driven brand was relegated to a radio station available on the platform.
When Apple buys into a firm it leaves a simple boilerplate message for the tech world and Wall Street to read. “Apple buys smaller technology companies from time to time, and we generally do not comment on our purpose or plans,” is the message, and it asks for a lot of faith in the firm’s leaders from investors.
Trip Chowdhry of Global Equities Research said last week that “I think when it comes to Apple Music and Beats headphones they should just take a write-off of $3 billion.” He thinks that the Beats buy was a waste of money, but the rest of Wall Street isn’t so sure.
Selling Beats Radio
Mark Mulligan, a music industry analyst, says that Beats 1 could well turn into Beats 2 and Beats 3. Mulligan thinks that the radio station is a product that will work and that it adds real value to Apple Music.
“Apple is using radio, real time broadcast and high profile DJs as a way of bringing context and meaning to internet radio for the Apple mainstream (which of course is slightly different from the broader mainstream),” says the analyst.
It seems clear that Apple is getting rid of a lot of the hardware potential at Beats, but the firm is still going to make headphones, and it’s going to remain a big name in music streaming despite the WWDC relegation.
Apple is a gold-standard brand and it makes sense to use it to sell a music service. It does leave Beats out in the cold however. Whether or not Mulligan is right about the future of Beats Radio remains to be seen, but for now it seems that Apple is actively killing parts of Beats, and its path to recovery isn’t all that clear.