Apple (NASDAQ:AAPL) isn't typically the kind of company that you want to pick a fight with, but that's exactly what premium headphone maker Bose is doing. Of course, Bose now finds itself in direct competition with the Mac maker following its acquisition of Beats.
Can Bose win?
In March, Bose inked a deal with the NFL where the company would become the official headphone and headset of the league. As part of the partnership, Bose would design, engineer, and manufacture headsets for coaches to use during games. Sony inked a similar deal with FIFA during the World Cup over the summer.
Then earlier this month as part of the deal, the NFL began enforcing a ban on players wearing non-Bose headphones during televised appearances. This week, the NFL fined San Francisco 49ers quarterback Colin Kaepernick $10,000 for wearing Beats headphones after a game.
Presumably in response to the ban or the newfound competition, MacRumors reports that Apple is now about to remove all Bose products from its large network of retail stores. It's also worth noting that Bose filed a patent infringement lawsuit against Beats over the summer (after the Beats deal closed) around noise-cancelling technology, which has now been settled.
As a private company, it's difficult to quantify what impact this could have on Bose. Bose generated an estimated $2.5 billion in revenue last year, compared to Beats' estimated $1.3 billion. Apple operates 254 retail stores in the U.S. alone, which could be a significant distribution channel for Bose, even as Bose also operates its own retail stores.
Ever since the Beats deal closed, Apple has been heavily promoting the brand through its online and retail stores, which may have also hurt Bose's sales through Apple channels.
The competing sponsorship deals threaten to undermine one of Beats' greatest assets: its brand. Part of Beats' successful marketing strategy has always included a wide range of endorsement deals with celebrities across numerous industries, giving the brand maximum cultural exposure. That's been key in appealing to younger demographics.
While Apple frequently winds down the operations of its acquisition targets in order to integrate them into its own products, it is maintaining the separate Beats brand as a testament to how strong it is. Even though Bose products are generally considered superior purely on a product level, Beats has over 60% market share of the premium headphone market.
Does Apple really care?
Still, it's unlikely that Apple will dedicate as much energy into competing with Bose as Bose will with competing with Apple. Premium headphones are now a side business for Apple, while premium headphones are Bose's bread and butter. Sure, the company wants to sell more headphones, but it'd rather sell more iPhones.
On top of that, Apple seems more interested in the curation technology in Beats Music, which has clear use cases in iTunes Radio. Last month, TechCrunch said that Apple might shut down Beats Music, which Apple subsequently denied, although it could change the branding of the service.
Bose's fight with Apple will be little more than a thorn in its side.
Evan Niu, CFA owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.