[Technology] APPLE Buying BEATS for $3B

SwoLy-D · May 28, 2014

It's on: Apple cranks up the Beats for $3 billion

USA Today peeps said:

6:21 p.m. EDT May 28, 2014

CUPERTINO, Calif. — In an unprecedented teaming of tech brains and musical ears, Apple confirmed Wednesday that it was doubling down on the digital music space it pioneered with iTunes by purchasing Beats Electronics for $3 billion, of which $400 million will vest over time.

"We're gaining rare talent, a fast-growing subscription service and premium headphones that have done incredibly well, but none of those are the reason for doing this deal," says Apple CEO Tim Cook of the deal, which nabs both Beats' popular line of headphones and its nascent streaming music service. "It's the future we're betting on."

Cook met with USA TODAY along with iTunes chief Eddy Cue and Beats co-founders Dr. Dre and Jimmy Iovine.

"I've been working with Apple on projects for 11 years," says Iovine. "You feel like when you walk in here, these guys get what we do. Will our products get better? Absolutely; we want our stuff to be made by Apple. But mostly, it's about feeling that these guys can bridge the gap between the tech and music worlds."

Cook says Iovine and Dr. Dre will spend more time in Silicon Valley and that the Beats brand will remain intact. While declining to outline specific next steps, Cook said expanding the reach of Beats' electronics and music service are among top priorities.

"This is about music and its importance to society and to Apple," he says. "We've found kindred spirits in Jimmy and Dre, and we're going to advance what they've done to a whole different level."

Apple stock was little changed on the news, which had been expected.

The deal represents perhaps Apple's brashest fiscal move since buying Steve Jobs' NeXT computer company in 1997. But while that deal triggered Apple's rebirth, this one comes at a critical juncture. Consumers and analysts alike are looking to see if Apple can reclaim the spotlight in the wake of a product and advertising fusillade from rival Samsung.

"It provides Beats with the market clout, cachet, credibility and deep pockets that can take (them) to an even larger audience," says Ted Cohen, managing partner of TAG Strategy, a digital entertainment consultancy firm. Meanwhile, "it gives (Apple) real rock stars in Iovine and Dr. Dre."

By welcoming Beats into his portfolio, Apple CEO Cook is acknowledging a shift away from its pioneering iTunes pay-per-song model and toward streaming audio. He also is side-stepping founder Jobs' insistence that all Apple hits be crafted in-house.

Cook shrugged off suggestions that the purchase was in response to charges of stagnation.

"This is a big deal. But to put it in some perspective, we acquired 15 companies last year and 12 this year, some 27 in 18 months," he says. "But this one is all about music, which we've always felt is in our veins, and we've always appreciated that technology alone was not enough."

Beyond its industry significance, the purchase could vault Iovine and Dr. Dre into the billionaire club, which would make the latter the first rapper with a 10-digit net worth. Dr. Dre, born Andre Young, was a pioneering force in the Los Angeles rap scene in the '80s and '90s. Iovine first made his name engineering records for the likes of Bruce Springsteen and Tom Petty, later becoming chairman of Interscope-Geffen-A&M Records.

Dre, who remained quiet during much of the round-table conversation, just smiled at the suggestion: "Financially, I'm in a place I never dreamed of. Now, I'm just ready to get started with the work."

The purchase price might seem high, considering that Beats Music just launched in January, standing out for its emphasis on human vs. algorithm-centric curation. But it represents a fraction of Apple's $160 billion cash stockpile and is in line with other news-making purchases, including Google's $3.2 billion Nest buy and Facebook's $19 billion WhatsApp gamble.

With Beats Music, Apple is instantly in position to fight for market share in the lucrative subscription-based streaming audio category, which saw a 50% jump in revenue last year to $1.1 billion, while download sales dropped 2% to just under $4 billion, according to IFPI, the global music industry association.

Perhaps as important, Apple's newest toy comes with built-in street cred dating to its 2006 founding.

Beats co-founders Iovine and Dr. Dre used their broad contacts to ensure that their headphones wound up on the skulls of top music and sports stars ranging from Lady Gaga to LeBron James. And when it came time to conjure up Beats Music, Iovine tapped Oscar-winning metal rocker Trent Reznor to guide the sonic ship.

"Jimmy's one of those guys who's always coming up with new ideas; he's never someone to let things just happen to him," says Gwen Stefani, whose garage band No Doubt was signed by Iovine. "What I love about him is he's all about the artist."

Stefani recalls the time No Doubt auditioned for Iovine in 1991. After a few songs, "he pulled me aside and said in five years, I'd be a star. And I thought, 'Uh, no, in five years, I'll have like 10 kids, and you're a bit weird.' Of course, he was right; in about that time, our song Don't Speak was a huge hit. Jimmy's a pioneer."

Iovine says he hasn't been able to say much about the impending to deal to his music industry friends, but the few he's confided in have shared the same emotion.

"They feel like one of them has gotten into a game where they can have impact, where what we do will be understood," he says. "We've managed to bridge those worlds, because we come from music, but we've worked in software and hardware."

Cook nods.

"Apple will be doing some great things in the near term that are exciting, and you're going to love them," he says, referencing the company's upcoming Worldwide Developers Conference starting June 2.

"But today's announcement is about the long term," he says. "Dre and Jimmy bring us the artists' lens. We've had that from a relationship point of view, but there's nothing like having that under our roof, that expert ear of audio. So when you take all of those intangibles, you get excited."
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GREAT. I will now have headphones that will hurt my ears, hurt my hearing, AND make me look like a HIP HOP DJ in the process.

lpbman · May 28, 2014

Marketing company buys other marketing company. Yawn.

Pizza_Da_Hut · May 28, 2014

One company that values image over substance buys another. Seems logical to me.

BamBam · May 28, 2014

$Dre just past Diddy! He's going to be, if he isn't already with this deal, the first billion dollar rapper!...
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.......
.......

conquistador#11 · May 28, 2014

why not just create some bland headphones and an 'i' in front of it.

"stranded on silicon valley"
"the 3 billion sack pyramid"
buy these hits and more.

YourSecretLover · May 28, 2014

Beats are now known as iBeats

Dr of Dunk · May 28, 2014

BamBam said: ↑

$Dre just past Diddy! He's going to be, if he isn't already with this deal, the first billion dollar rapper!...
.......
.......
.......
Click to expand...

A couple of weeks ago when the deal was "announced", Tyrese (with Dre in the background) put up a video saying that and I was shocked. I didn't know his stake in the company was that big. He was already pretty rich, but damn.

Phillyrocket · May 28, 2014

So I don't quite get it, I thought the big earmuff style headphones were out of style amd the new hip thing was the ear buds? Then suddenly when you charge a ton of money for them they're back in style again?

And yes get off my lawn...

Space Ghost · May 28, 2014

Jobs would have never done this deal. The beginning of the fall for Apple has officially begun.

Pizza_Da_Hut · May 28, 2014

Space Ghost said: ↑

Jobs would have never done this deal. The beginning of the fall for Apple has officially begun.
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Basically everything in Cooks tenure has been that way. Seven inch iPad? Hell no. Jobs built an empire on good ideas and a strong uniform vision for apple. Were all Jobs ideas good ones? Hell no, but apple wasn't this wishy washy crap of a company it is now. Cook has no vision, none. He is their Ballmer, but worse.

DallasThomas · May 28, 2014

BWAAAAHAHAHAHAHAHA... TONE-DEAF *SS hipsters... :grin:

About the only good application for any of that is the logo.

"Beats by Dre" <- Get some real headphones.

I can think of some more responses, but... y'all are just going to flame back

A_3PO · May 28, 2014

Space Ghost said: ↑

Jobs would have never done this deal. The beginning of the fall for Apple has officially begun.
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Good starting point for discussion.

What creative thing should Apple do with their ridiculous pile of cash? Don't say "give it back to shareholders".

I'm neutral on this deal. Seems very unlike Apple but they need to do something different. The company has been treading water the last couple of years.

Ubiquitin · May 28, 2014

What a terrible purchase - From a person who enjoys using Apple products

Phillyrocket · May 28, 2014

A_3PO said: ↑

Good starting point for discussion.

What creative thing should Apple do with their ridiculous pile of cash? Don't say "give it back to shareholders".
Click to expand...

Cut their prices drastically.

rezdawg · May 28, 2014

Good move by Apple.

Beats might not be the best headphones, but millions and millions of people dont know that...in fact, those millions and millions look at this as a huge get. In their eyes, Apple just took things to another level.

dharocks · May 28, 2014

Phillyrocket said: ↑

Cut their prices drastically.
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No. You fail Economics 101.

Phillyrocket · May 28, 2014

dharocks said: ↑

No. You fail Economics 101.
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Economics smeckonomics I want cheaper Icrap!

Cohete Rojo · May 28, 2014

Maybe just a pet peeve of mine, but why do people refer to only consumer electronics as technology?

REEKO_HTOWN · May 28, 2014

Pizza_Da_Hut said: ↑

One company that values image over substance buys another. Seems logical to me.
Click to expand...

Image is everything. Ask Nike, ask Ferrari, ask freaking Coca-Cola.

$3 billion for apple is couch cushion coins.

You're right about Jobs building it up only to watch Cook spend his way down though

Jontro · May 28, 2014

Sweet! Can't wait to get my hands on the new iBeats! Best headphones evarrr

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[Technology] APPLE Buying BEATS for $3B

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[Technology] APPLE Buying BEATS for $3B

SwoLy-D Contributing Member

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Pizza_Da_Hut I put on pants for this?

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Dr of Dunk Clutch Crew

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Space Ghost Contributing Member

Pizza_Da_Hut I put on pants for this?

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