On the surface Apple buying Beats Audio for 3.2 billion looks insane.  In this case I think Apple is crazy like a fox.

Beats audio on the surface looks woefully overpriced.. like their products.

The overall market for Premium headphones is about $1 billion and Beats does have a large chunk of that, but consumers are fickle.  Beats also has a premium streaming app that is doing well since its January launch, but it too early to tell.

Why is Apple so interested?  Simple demographics.  Apple skews towards affluent consumers.  Apple has a great market and an aspirational one. Unfortunately it is NOT an urban brand and is now losing/lost traction with teens and young adults.

What Beats audio has done that Apple has not is bring a premium brand to the urban youth demographic that crosses over to more affluent consumers.  This is a missing segment of the market worth many billions of dollars.  At the same time it bolsters Apples brand in that demographic and fosters the apple ecosystem and follow on purchases of iphones.

This is a good attempt at keeping apple relevant and capturing a new market. That said, the proof will be in their ability to keep the Beats brand relevant when its owned by Apple.

The problem with buying a revolution is that the followers may loose faith.

Good luck Apple.