...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.