4 ms·

Why Apple Is Buying Beats

40 points by PanMan 12y ago

citrik 12y ago
I'm surprised by the perceived mystery of this deal to most people, It seems pretty straight forward to me. Seems there are two parts, Headphones and then the Beats Music licensing with record labels. I think Apple will leave the hardware to run on it's own, It's a valuable brand and can continue to bring in some profit for Apple as is. I think Apple will take the licensing deal built into Beats Music and merge that into iTunes Radio. Both of those services are small / starting out and combining them will make them both stronger. I've been finding it to be an interesting koan to replace Beats with Oculus and Apple with Facebook, In a way these two deals feel like they have misplaced partners.
exstudent 12y ago
Any talk of Beats Music adding any value whatsoever to Apple is ridiculous. Beats Music is little more than Mog (a nearly valueless online streaming service) + 6 months of development time. Mog was very close to being out of business when Beats bought them as the service was extremely lack luster. There is no tech and the licenses will not be transferable in an acquisition. Maybe the headphone business holds some value to Apple but Beats Music certainly does not.
- packetslave 12y ago
  Beats Music is a separate company from Beats Electronics. They spun it off last year.
  - exstudent 12y ago
    The reports have been of Apple buying them both and this article mentions it as a "reason" for Apple buying Beats (Electronics|Music). You're right though, and it's entirely possible that the rumors and speculation are false as it makes exactly zero sense for Apple to buy Music.
- ghshephard 12y ago
  Beats Streaming (Mog) is not even mentioned in that article beyond a single sentence saying "fixes their streaming hole", it was all about the headphones.
jackgavigan 12y ago
Okay, I'm ready to stick my neck out here. £100 says Apple is not buying Beats.
- bgroins 12y ago
  Whooooooooo are you talking to?
  - jackgavigan 12y ago
    Anyone who's ready to bet £100!
    - ghshephard 12y ago
      So, given that, by all accounts (Dre, NYT, WSJ, FT, etc..) a multi-billion dollar deal went down this weekend between Beats and Apple, what actually do you think did occur, if not the acquisition of Beats by Apple. Licensing deal? Revenue Share? Marketing Deal?
      - jackgavigan 12y ago
        I don't think a deal has been or will be done.
        ghshephard 12y ago
        If that is the case, then the WSJ will have a lot of egg on its face from screwing up the reporting on this - they supposedly have multiple sources. "Apple Inc. AAPL +1.24% is preparing to bolster its streaming-music business with a proposed $3.2 billion deal to acquire Beats Electronics LLC, the high-end headphone maker that recently launched the Beats Music subscription service, according to people familiar with the matter." That's unequivocal - and has a specific price tag, $3.2 Billion, and the LLC that is being acquired. Would love to see this all be a misunderstanding though - I give it low (but not impossible) probability.
beedogs 12y ago
Apple's run by idiots now. There's the reason in five short words. Now might be the time to get out of AAPL if you're heavily invested.
kevinthew 12y ago
They have a ridiculous amount of cash and need to spend it, that's probably the only reason to be honest
fred_durst 12y ago
Maybe this is less about headphones and instead about Beats becoming a phone brand? If Apple wants to get into lower priced phones without pulling down the iPhone brand, this seems like one way to do it.
- infosample 12y ago
  Lower end market at a mid-tier price. I'd imagine the iPhone 5c with Beats branding would sell much better than the current 5c. Plus the colors would match the headphones. Maybe Apple had the right idea but the wrong brand.
adamio 12y ago
Apple has acquired music related before, but not for the rumored 3 billion http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Apple http://en.wikipedia.org/wiki/List_of_mergers_and_acquisition...
jerryhuang100 12y ago
it's not just for the streaming and/or the headphones. it's more about the potential, such as iPod shuffle + Beats headphone = iPod Beats; wearable computing; or Apple iHealth/iFit with Beats headphone (O2, temp, BP, EEG...)
subdane 12y ago
Apple wants to own the entire music chain from beginning to end. The hardware player, a software/mobile player, the store, the streamer, the radio, the intelligence (Topsy), and the output speakers. It's interesting to imagine winamp for mobile - if Apple creates the best music player on Android and iOS then all its other services fall into place. Iovine is one of the few folks that can get an exclusive deal done with content owners and he understands marketing in a way no one at Apple currently does. Granted the Beats music player needs a lot of work. But the deal only looks weird if you don't know the personalities involved and don't see the company's end game to create/own the best music experiences everywhere.
- jackgavigan 12y ago
  > Apple wants to own the entire music chain from beginning to end. No, they don't. They want to own the pieces of the chain where they can make greater profits than anyone else. Apple products aren't successful because celebrities wear them. They're successful because they're the best. Apple doesn't buy other companies for their services or products. It buys technology, which it then uses to build better products and services.
  - coralreef 12y ago
    Interesting, but this is a $3.2b acquisition, which is clearly not just a technology buy.
    - deleted 12y ago
      [deleted]
  - baldfat 12y ago
    When you say best you mean better then anything else? I find it hard to find many BEST that are Apple products.
  - omegote 12y ago
    > They're successful because they're the best. lol. If that were the case, then I don't understand what kind of technology they're gonna benefit from buying Beats. I mean, the internet is full of reviews stating that Beats headphones suck.
darksim905 12y ago
They are buying beats because everyone is running around with them.
chimeracoder 12y ago
I find the confusion over the Beats deal more surprising than the deal itself. Apple and Beats are very similar companies - both sell hardware that is relatively cheap to make[0][1], and sell it at an incredibly high markup. Both companies are able to do this because they've built very recognizable brands. More importantly, Apple and Beats have very powerful brands in disjoint markets - the Beats brand is the strongest in the exact demographics where the Apple brand is the weakest. It makes total sense that Apple would want to purchase a high-end brand that allows them to expand into a domestic market in which they haven't yet reached saturation, all without "diluting" their brand. [0] http://appleinsider.com/articles/12/07/27/apples_iphone_twice_as_profitable_per_unit_than_ipad http://appleinsider.com/articles/12/07/27/apples_iphone_twic... [1] http://teksocial.com/socialblog/2012/5/13/exploiting-the-consumers-and-unscrupulous-profiting-an-inves.html http://teksocial.com/socialblog/2012/5/13/exploiting-the-con...
- bgroins 12y ago
  You've hit the nail on the head. Both companies excel at brand marketing and identification, which allows for huge markups and profits on what people perceive as high end devices. With both companies you're not just buying a product, you're buying into a culture, a lifestyle, and sense of belonging to an exclusive group of discriminating consumers. It seems like a perfect marriage between two companies with very similar business models.
- jinushaun 12y ago
  But, from where I'm sitting, Apple doesn't need Beats to succeed. It's buying into the past, not the future. Headphones is a mature market. Beats would've had to expand into other products to continue revenue growth. Lastly, Apple doesn't have a history of buying "cool" because it makes it. Buying cool is what dinosaurs like MS, HP and Dell do.
uptown 12y ago
Maybe they just wanted control over the company that makes the largest body-worn hardware people are comfortable wearing. Provides lots of additional space into which sensors can be crammed.
- camus2 12y ago
  sensors for what? this sounds like a publicity stunt / insider deal like these yahoo deals that serve no purpose (Summly?).They arent really buying anything of value for Apple.
mistermann 12y ago
Maybe they're trying to find a non dorky way to introduce wearable computing, something like Google Glass....having a big set of headphones to attach something like that to, that you flip down to use and then back up when you're done, might be a reasonable way to gradually introduce it into mainstream society, without getting a bad rep like the Segway. To me, Google Glass looks a bit weird, possibly creepy. Whereas if someone's wearing Beats with the screen flipped out, I just assume they're watching youtube or surfing reddit or something like that...not that much different, but enough to be non-weird?
- Gustomaximus 12y ago
  > Whereas if someone's wearing Beats with the screen flipped out. IMO you've hit the nail on the head here. Initially it's going to be weird having people with this 'always on' aspect. Think how people feel when having a conversation/meeting with someone who is constantly looking at their smartphone or even wearing sunglasses. An item like a flip down screen will allow people to show they are paying attention and not recording everything, at least while society gets used to this tech.
  - stcredzero 12y ago
    If an always on device built into a big pair of headphones could interface with a pair of ordinary looking sunglasses, you could have all of the functionality of Google Glass in a completely non-dorky format. Or maybe both could interface with an iPhone. This would solve the antenna placement problem for both glasses and headphones. (Proximity to head)
whitehat2k9 12y ago
Beats is a perfect addition to Apple's portfolio: a product that caters to the uninitiated and non-tech-savvy, is overpriced, and sucks compared to true audiophile/professional-grade headphones made by other manufacturers.
DonGateley 12y ago
Beats 'phones could be a recognizable and elegant adjunct to a headworn VR device if Apple has any plans in that area. I'd be rather surprised if they didn't and see this as a pretty clear indicator we'll see them enter that fray.
rrggrr 12y ago
HTC, HP and Chrysler are using the Beats brand to make products that are not as 'cool' as Apple products, arguably cool. Buy Beats and Apple has a defensive play. Let yourself be outbid and watch Microsoft or Samsung or whomever drive the brand into the dirt. Defensive move.

40 points by PanMan 12y ago

I'm surprised by the perceived mystery of this deal to most people, It seems pretty straight forward to me. Seems there are two parts, Headphones and then the Beats Music licensing with record labels. I think Apple will leave the hardware to run on it's own, It's a valuable brand and can continue to bring in some profit for Apple as is. I think Apple will take the licensing deal built into Beats Music and merge that into iTunes Radio. Both of those services are small / starting out and combining them will make them both stronger. I've been finding it to be an interesting koan to replace Beats with Oculus and Apple with Facebook, In a way these two deals feel like they have misplaced partners.

exstudent 12y ago

Any talk of Beats Music adding any value whatsoever to Apple is ridiculous. Beats Music is little more than Mog (a nearly valueless online streaming service) + 6 months of development time. Mog was very close to being out of business when Beats bought them as the service was extremely lack luster. There is no tech and the licenses will not be transferable in an acquisition. Maybe the headphone business holds some value to Apple but Beats Music certainly does not.

packetslave 12y ago
Beats Music is a separate company from Beats Electronics. They spun it off last year.
- exstudent 12y ago
  The reports have been of Apple buying them both and this article mentions it as a "reason" for Apple buying Beats (Electronics|Music). You're right though, and it's entirely possible that the rumors and speculation are false as it makes exactly zero sense for Apple to buy Music.
ghshephard 12y ago
Beats Streaming (Mog) is not even mentioned in that article beyond a single sentence saying "fixes their streaming hole", it was all about the headphones.

jackgavigan 12y ago

Okay, I'm ready to stick my neck out here. £100 says Apple is not buying Beats.

bgroins 12y ago
Whooooooooo are you talking to?
- jackgavigan 12y ago
  Anyone who's ready to bet £100!
  - ghshephard 12y ago
    So, given that, by all accounts (Dre, NYT, WSJ, FT, etc..) a multi-billion dollar deal went down this weekend between Beats and Apple, what actually do you think did occur, if not the acquisition of Beats by Apple. Licensing deal? Revenue Share? Marketing Deal?
    - jackgavigan 12y ago
      I don't think a deal has been or will be done.
      - ghshephard 12y ago
        If that is the case, then the WSJ will have a lot of egg on its face from screwing up the reporting on this - they supposedly have multiple sources. "Apple Inc. AAPL +1.24% is preparing to bolster its streaming-music business with a proposed $3.2 billion deal to acquire Beats Electronics LLC, the high-end headphone maker that recently launched the Beats Music subscription service, according to people familiar with the matter." That's unequivocal - and has a specific price tag, $3.2 Billion, and the LLC that is being acquired. Would love to see this all be a misunderstanding though - I give it low (but not impossible) probability.

beedogs 12y ago

Apple's run by idiots now. There's the reason in five short words. Now might be the time to get out of AAPL if you're heavily invested.

kevinthew 12y ago

They have a ridiculous amount of cash and need to spend it, that's probably the only reason to be honest

fred_durst 12y ago

Maybe this is less about headphones and instead about Beats becoming a phone brand? If Apple wants to get into lower priced phones without pulling down the iPhone brand, this seems like one way to do it.

infosample 12y ago
Lower end market at a mid-tier price. I'd imagine the iPhone 5c with Beats branding would sell much better than the current 5c. Plus the colors would match the headphones. Maybe Apple had the right idea but the wrong brand.

adamio 12y ago

Apple has acquired music related before, but not for the rumored 3 billion http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Apple http://en.wikipedia.org/wiki/List_of_mergers_and_acquisition...

jerryhuang100 12y ago

it's not just for the streaming and/or the headphones. it's more about the potential, such as iPod shuffle + Beats headphone = iPod Beats; wearable computing; or Apple iHealth/iFit with Beats headphone (O2, temp, BP, EEG...)

subdane 12y ago

Apple wants to own the entire music chain from beginning to end. The hardware player, a software/mobile player, the store, the streamer, the radio, the intelligence (Topsy), and the output speakers. It's interesting to imagine winamp for mobile - if Apple creates the best music player on Android and iOS then all its other services fall into place. Iovine is one of the few folks that can get an exclusive deal done with content owners and he understands marketing in a way no one at Apple currently does. Granted the Beats music player needs a lot of work. But the deal only looks weird if you don't know the personalities involved and don't see the company's end game to create/own the best music experiences everywhere.

jackgavigan 12y ago
> Apple wants to own the entire music chain from beginning to end. No, they don't. They want to own the pieces of the chain where they can make greater profits than anyone else. Apple products aren't successful because celebrities wear them. They're successful because they're the best. Apple doesn't buy other companies for their services or products. It buys technology, which it then uses to build better products and services.
- coralreef 12y ago
  Interesting, but this is a $3.2b acquisition, which is clearly not just a technology buy.
  - deleted 12y ago
    [deleted]
- baldfat 12y ago
  When you say best you mean better then anything else? I find it hard to find many BEST that are Apple products.
- omegote 12y ago
  > They're successful because they're the best. lol. If that were the case, then I don't understand what kind of technology they're gonna benefit from buying Beats. I mean, the internet is full of reviews stating that Beats headphones suck.

darksim905 12y ago

They are buying beats because everyone is running around with them.

chimeracoder 12y ago

I find the confusion over the Beats deal more surprising than the deal itself. Apple and Beats are very similar companies - both sell hardware that is relatively cheap to make[0][1], and sell it at an incredibly high markup. Both companies are able to do this because they've built very recognizable brands. More importantly, Apple and Beats have very powerful brands in disjoint markets - the Beats brand is the strongest in the exact demographics where the Apple brand is the weakest. It makes total sense that Apple would want to purchase a high-end brand that allows them to expand into a domestic market in which they haven't yet reached saturation, all without "diluting" their brand. [0] http://appleinsider.com/articles/12/07/27/apples_iphone_twice_as_profitable_per_unit_than_ipad http://appleinsider.com/articles/12/07/27/apples_iphone_twic... [1] http://teksocial.com/socialblog/2012/5/13/exploiting-the-consumers-and-unscrupulous-profiting-an-inves.html http://teksocial.com/socialblog/2012/5/13/exploiting-the-con...

bgroins 12y ago
You've hit the nail on the head. Both companies excel at brand marketing and identification, which allows for huge markups and profits on what people perceive as high end devices. With both companies you're not just buying a product, you're buying into a culture, a lifestyle, and sense of belonging to an exclusive group of discriminating consumers. It seems like a perfect marriage between two companies with very similar business models.
jinushaun 12y ago
But, from where I'm sitting, Apple doesn't need Beats to succeed. It's buying into the past, not the future. Headphones is a mature market. Beats would've had to expand into other products to continue revenue growth. Lastly, Apple doesn't have a history of buying "cool" because it makes it. Buying cool is what dinosaurs like MS, HP and Dell do.

uptown 12y ago

Maybe they just wanted control over the company that makes the largest body-worn hardware people are comfortable wearing. Provides lots of additional space into which sensors can be crammed.

camus2 12y ago
sensors for what? this sounds like a publicity stunt / insider deal like these yahoo deals that serve no purpose (Summly?).They arent really buying anything of value for Apple.

mistermann 12y ago

Maybe they're trying to find a non dorky way to introduce wearable computing, something like Google Glass....having a big set of headphones to attach something like that to, that you flip down to use and then back up when you're done, might be a reasonable way to gradually introduce it into mainstream society, without getting a bad rep like the Segway. To me, Google Glass looks a bit weird, possibly creepy. Whereas if someone's wearing Beats with the screen flipped out, I just assume they're watching youtube or surfing reddit or something like that...not that much different, but enough to be non-weird?

Gustomaximus 12y ago
> Whereas if someone's wearing Beats with the screen flipped out. IMO you've hit the nail on the head here. Initially it's going to be weird having people with this 'always on' aspect. Think how people feel when having a conversation/meeting with someone who is constantly looking at their smartphone or even wearing sunglasses. An item like a flip down screen will allow people to show they are paying attention and not recording everything, at least while society gets used to this tech.
- stcredzero 12y ago
  If an always on device built into a big pair of headphones could interface with a pair of ordinary looking sunglasses, you could have all of the functionality of Google Glass in a completely non-dorky format. Or maybe both could interface with an iPhone. This would solve the antenna placement problem for both glasses and headphones. (Proximity to head)

whitehat2k9 12y ago

Beats is a perfect addition to Apple's portfolio: a product that caters to the uninitiated and non-tech-savvy, is overpriced, and sucks compared to true audiophile/professional-grade headphones made by other manufacturers.

DonGateley 12y ago

Beats 'phones could be a recognizable and elegant adjunct to a headworn VR device if Apple has any plans in that area. I'd be rather surprised if they didn't and see this as a pretty clear indicator we'll see them enter that fray.

rrggrr 12y ago

HTC, HP and Chrysler are using the Beats brand to make products that are not as 'cool' as Apple products, arguably cool. Buy Beats and Apple has a defensive play. Let yourself be outbid and watch Microsoft or Samsung or whomever drive the brand into the dirt. Defensive move.