91 Billion Reasons Apple Inc's Beats Music Deal Makes Sense

Apple is making a bigger bet on music. Credit: Beats Music

What did Apple (NASDAQ: AAPL  ) get when it purchased Beats Music for $3 billion in total consideration? Host Ellen Bowman puts this question to Fool analysts Nathan Alderman and Tim Beyers in this episode of 1-Up on Wall Street, The Motley Fool's Web show in which we talk about the big-money names behind your favorite movies, toys, video games, comics, and more.

The party line is that music is an essential element of Apple's business and that Beats is a brand leader with celebrity fans and a deep talent bench. All of which is true, of course. Yet Tim says Apple is purchasing Beats for the same reason it's moving into smart-home software: to protect iPhone sales by making the device more attractive.

There's plenty to protect. In fiscal 2013, Apple's $91 billion in iPhone sales accounted for 53% of revenue -- up from 50% the year prior and 42% in fiscal 2011. Smartphones have never been more important to the company than they are right now. As the owner of Beats, Apple could encourage shoppers to buy via bundled headphone deals or free streaming with a new iPhone purchase.

Nathan agrees, adding that Beats Music co-founders Dr. Dre and Jimmy Iovine could also help Apple to bridge the creative and cultural gap that exists between Hollywood and Silicon Valley, making it easier for the company to sign exclusive iTunes licensing deals. Entertainment-related sales could soar as a result.

Now it's your turn to weigh in. Click the video to watch as Ellen puts Nathan and Tim on the spot, and then leave a comment below tell us what you think of Apple's purchase of Beats Music. You can also follow us on Twitter for more segments and regular geek news updates!

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