In the following video, tech analyst Eric Bleeker and Max Macaluso discuss Apple
$3 billion buyout of Beats. The deal was formally announced last Wednesday and has left Wall Street analysts and Apple observers scratching their heads. It was Apple's largest purchase ever by almost an order of magnitude, and it wasn't one that had been heavily speculated on before news of the impending deal leaked.
Focusing ion why Apple felt compelled to purchase Beats, Eric discusses an interview with Tim Cook hosted at the CODE conference the day the deal was announced. In the interview, Cook discussed how music had always been a huge component of Apple's identity, and that the deal was focused on ensuring it hired musical talent like producer and Beats co-founder Jimmy Iovine and Dr. Dre.
iTunes is increasingly becoming irrelevant in the music space. Digital music track sales were down 6% last year. The future of music looks less and less dependent on songs users have purchased a la carte and instead is shifting to a monthly service where listeners pay for a wider selection. So while Beats headphones racked up an impressive $1.3 billion in sales last year according to The Wall Street Journal, Eric believes the best way to look at the deal is ensuring Apple stays relevant in music both from the talent it acquired -- Iovine and Dr. Dre -- and by purchasing a streaming service that has already cut deals with major labels.
To see Eric and Max's full thoughts, watch the video.
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Eric Bleeker, CFA, has no position in any stocks mentioned. Max Macaluso, Ph.D., owns shares of Apple. The Motley Fool recommends and owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.