Aug 19th, 2013

It looks like we’re coming up on another “it’s not you, it’s me” situation for Beats. When HTC originally bought up 50.1% of the company’s shares, it wasn’t long before the company sold 25% back to Beats (for a reported $150 million). HTC still remained a majority external stakeholder, and continued to market their phones with Beats branding.

It looks like HTC might be boxed out altogether if the latest reports from the Wall Street Journal are to be believed. The publication claims Beats is planning to buy back a majority of the shares HTC still controls, effectively boxing out any outside influence.


Beats was making under a quarter million dollars annually when HTC bought half the shares back in 2011, but the company has since ballooned into a billion dollar cash machine. Strong performance in the consumer electronics space thanks to endorsements from all sorts of celebrities and athletes helped the company sell their “premium” headphones without issue.

But it sounds like Beats wants to expand to other areas, including vehicle audio and home theater. This move would allow them to do that without having to worry about any commitments to HTC in the future. With that, it sounds like HTC could be poised to make quite the profit on their early investment, so it’s not outside the realm of possibility to see HTC agreeing to sell back their shares.

So what would this mean for HTC? Well, it doesn’t necessarily have to change anything. HTC could simply agree to a deal under the condition that they retain exclusive rights for Beats branding / technology in the smartphone space. After all, that’s all HTC really wanted out of Beats in the first place — the company stopped offering Beats earbuds packaged with their smartphones quite some time ago.


Still, such a deal would cause a slight degree of uncertainty for HTC in the future. Any exclusive deal HTC could conjure up after the sale will naturally have a time limit, and once that time limit expires you have to know Beats will consider licensing their “technology” and branding out to more than just one OEM. That hasn’t been a problem for HP in the PC space or Chrysler in automobiles, but the possibility must always be considered.

Beats Audio in smartphones has gained the reputation of being little more than a glorified equalizer. While that may be true, the typical consumer will be swayed by seeing that logo on the back of HTC’s smartphones regardless. Should this rumor turn out to be true it will be interesting to see just how things turn out for both parties involved.

local_offer    HTC