Things seem to go from bad to worse for HTC, and now it may lose a key alliance, with Beats By Dre, if US reports prove true. In 2011, HTC paid a reported $300m for a 50.1% stake in the audio firm, gaining a well known brand as well as acoustic technology to differentiate its smartphones and compete with Sony and Apple to associate the devices with music.
However, the Wall Street Journal reports that Beats is now looking to buy out HTC stake ‘ now reduced to 25% after the Taiwanese firm sold back half its holding last year for $150m. That transaction indicated that the partnership had not gone well ‘ HTC only got back the amount it paid for the shares, even though Beats’ revenue had grown from under $200m to about $1bn in the period.
Apparently, the founders of Beats ‘ including hip-hop artist Andre Young (known as Dr Dre ‘ want to expand their reach beyond headphones to other consumer electronics systems such as in-car audio devices, and are working on the long-awaited music streaming service. Though the latter was once expected to be promoted and branded by HTC, Beats is now looking for a new investor to take a minority stake and provide debt financing to buy out the handset maker entirely.
It is questionable how much the Beats technology, now loaded into most HTC devices, has actually affected sales, and recently the OEM’s marketing has centered more on imaging capabilities, which seem to be the driver du jour of consumer interest. Nonetheless, the audio technology was a useful enhancement to the firm’s range and image, and if the deal does break down, it will be another blow to confidence, even if HTC continues to license the technology and logo. That, presumably, will partly depend on whether Beats can sniff alternative branding agreements with handset makers that, these days, have greater clout than the wounded Taiwanese lion.