> if they wanted a music subscription service, they could easily create one of their own.

Actually, they have one. (iTunes Radio)

Of course, the fact that this has to be pointed out to someone arguing how strong Apple's brand is relative to Beats might illustrate the value they get from buying Beats better than anything else.

My understanding is iTunes radio is Pandora, not Spotify. Big difference. One is Internet radio, the other a true music subscription service.

They've got iTunes Match and iTunes radio, which are both similar to but just slightly to either side of Spotify.

I use iTunes Match and iTunes radio, and still use Spotify to be able to search and play any song I want without having to buy it.

I'd say more than slightly. Spotify's main draw is that you can search for the song you want to listen to, and you can hear that song.

iTunes match works off your own personal collection, and Radio is just like Pandora. Neither allows you to look for things you don't own and listen to them.

iTunes Radio is not a music subscription service. First, it is free. Second, it doesn't allow you to call up tracks on demand. BIG difference.

...On 1.2B in annual revenue. A $200 pair of Beats headphones reportedly costs about $14 to manufacture; That's a phenomenal business. With people under 20 it can be argued that Beats has an even stronger brand than Apple. So Beats is enormously successful, dominant, high margin, and has premium brand appeal with a younger demographic. At the price Apple is paying (<3X revenue) they're getting the music streaming service (which is now included on all new AT&T Android phones) for free. So offensively in retail or defensively in music, it makes good business sense.