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The most interesting reveal from Tim Cook's quote is that he only mentions the music service and the talent, not the headphones. That's super interesting. It b

• chadgeidel 12y ago
  I agree. I think the music industry connections are probably more important than the headphones themselves. It's the brand and the associated people.
• austenallred 12y ago
  It seems a bit absurd to pay $3 Billion for an acquihire/component deal, but Apple has $145 Billion in the bank and just bought the most popular non-Apple name in music.
  • abalone 12y ago
    It's not that absurd when you factor in the profitability of the headphones business. It's interesting, not because Apple would overpay for what they wanted (they didn't), but because they looked past the most obvious aspect of Beats from a market valuation perspective to the relatively more startup-y aspects of it.
    • gtirloni 12y ago
      Isn't this SV bias? Beats is startup-y? With 300 employees and $1.5bn revenue? Beats drives a successful marketing business (much like RedBull). I think Apple is buying that. Apple doesn't need to acquire expertise on how to build and sell luxury items.
      • jader201 12y ago
        Yet they need expertise in marketing?
      • abalone 12y ago
        No, in fact Tim Cook mentioned he was looking forward to what Phil Schiller could do to help Beats product marketing, not the other way around. Cook also said he was looking to the Beats team (Iovine, Dre) to build revolutionary new products for the music industry. So yes, that is in fact why they bought the company, to figure out the next big new technology products & services for music (is iPod still a "luxury"?) As for the revenue.. that is exactly why I call it a unique deal. Yes, Apple seems more interested in the nascent music service and the team than in the multi-billion dollar accessories business that probably every single other company on the planet would pay more attention to. I mean they're not throwing it away but it definitely got a minor mention relative to the team & music service. For Apple the headphones business doesn't really move the needle much.. they're looking at the next $100B and that's why they're more interested in the "startup-y" aspects of Beats.
  • fizx 12y ago
    They can always sell/spin out the headphones business once the acquisition stabilizes a little. See also: Google/Motorola.
  • panabee 12y ago
    the deal seems less absurd if placed in the context of apple's overflowing war chest. even if you ignore the hardware and streaming assets, and assume the deal was purely an acquihire, the deal would be comparable to a company like zynga in 2013 [1] buying a startup for $30M. whether the deal represents the optimal allocation of $3B is another matter, but the magnitude of the deal for apple -- unique in its size -- is not crazy. [1] http://seekingalpha.com/article/1919501-zynga-cash-still-piled-high http://seekingalpha.com/article/1919501-zynga-cash-still-pil...
• nostromo 12y ago
  "Unique" is one way of putting it. Another is "messy." If they wanted the headphones or the talent or the streaming service, they could have bought any one individually, or purchased a number of competing services that are better in each of those spaces. The fact that everyone is so confounded by this acquisition makes me think that Apple purchased something non-public.
  • achompas 12y ago
    I don't believe people are actually confounded by this acquisition. The headphones are wildly profitable and the Beats brand is incredibly strong. This deal is easily justifiable.
    • nostromo 12y ago
      Just grabbing some headlines from Google News: http://www.cnet.com/news/why-does-apple-want-beats-no-one-really-seems-to-know/ http://www.cnet.com/news/why-does-apple-want-beats-no-one-re... > analysts are puzzled by the choice http://www.latimes.com/business/technology/la-fi-tn-reaction-apple-3-2-billion-bid-beats-20140509-story.html http://www.latimes.com/business/technology/la-fi-tn-reaction... > We are struggling to see the rationale behind this move http://business.financialpost.com/2014/05/12/apple-inc-beats-tim-cook-innovation/?__lsa=a6d6-b38c http://business.financialpost.com/2014/05/12/apple-inc-beats... > It’s a head scratcher http://www.bbc.com/news/business-27336863 http://www.bbc.com/news/business-27336863 > This is really puzzling... They must have something hidden under the hood
      • gutnor 12y ago
        Seems like those days, if they haven't received press release and a press package the only thing analyst can say is that they are puzzled. Thankfully in a few weeks it will be time for the annual batch of rumour about the next iPhone. That has been almost a year since the last article predicting the 5in iPhone and the iWatch.
      • achompas 12y ago
        The second article says it all: these are initial reactions. I believe the sentiment has changed drastically since the deal's first announcement (at least it has among sites and blogs I frequent).
• antr 12y ago
  For those of us not familiar with Beats, what is so special about the music service compared to (for argument sake) Spotify?
  • sscalia 12y ago
    I used my trial of Beats Music for awhile -- I will admit, it had the BEST discovery and automatic playlist creation of any service I've ever used (Rdio, Spotify, Pandora, iTunes Radio) -- you really could be confident when you suggested a song it would build a list of songs that you weren't skipping. It also had a unique UI.
    • josefresco 12y ago
      "I used my trial of Beats Music for awhile" To be fair, Pandora for me was a magical wonderland of new music discovery for even the first 6-12 months of use. Now? Not so much, and I find myself often wishing Pandora was better at several things.
  • andrewmunsell 12y ago
    Curation and discovery-- they have celebrity and music curator created playlists. They also have an interesting Pandora-like radio where you can essentially select a mood and it'll build a playlist for you.
    • graublau 12y ago
      I think all streaming services have a form of this, heck even iTunes store has celebrity curated and Genius.
      • Antiquarian 12y ago
        > all streaming services have a form of this ... Quality differs.
        • chrischen 12y ago
• tinkerrr 12y ago
  They could always just spinoff the headphones side of the business at a later date if they choose to. The revenues there were close to $1 billion last year, so it isn't unlikely. After all, Google kinda did that with Motorola Mobility, right?
• JumpCrisscross 12y ago
  Wild hypothesis. Amazon started as a book distributor. Now it is fighting to become a publisher. iTunes + iPod started as a music distributor. What if it now has ambitions as a label? How would one build that out of Cupertino? One would start with a fringe, fragmented genre, to serve as a beachhead. Fragmented by not flat - there should be a node near the top of a hierarchy which can be acquired and leveraged. $1.3 billion in 2013 headphone sales justifies a $3 billion valuation neatly by itself. But this acquisition certainly comes with interesting optionality.
  • broabprobe 12y ago
    Didn't they sign an agreement with Apple Records that they would not start a record label?
    • mikeyouse 12y ago
      When that all settled, Apple Records gave Apple Computers all rights to the 'Apple' name and Apple Computers will license the name back to Apple Records for their continued use. I'm sure this involved a fairly substantial sum of money, but Apple could almost definitely start a competing record label.
    • georgemcbay 12y ago
      At one point they had such an agreement, but according to wikipedia, Apple Inc (the iPhone people) bought the trademark rights to "Apple" outright and relicensed them back to Apple Corps (the record people) as of 2007: http://en.wikipedia.org/wiki/Apple_Corps_v._Apple_Computer http://en.wikipedia.org/wiki/Apple_Corps_v._Apple_Computer Which presumably means they are free to do basically whatever they want with regards to using the Apple name on music-related goods and services.
  • swombat 12y ago
    You'd have to be pretty insane to spend $3b to get into the content industry in 2014. First, it's an industry that's been plummeting for a decade, secondly, the entire recording industry is worth about that much, and thirdly, the entire concept of making money from copyrighted works of art is under threat. This theory doesn't hold water, sorry.
• coherentpony 12y ago
  Lack of evidence does not imply lack of existence. We'll just have to wait and see what happens.
• yabatopia 12y ago
  This makes it the third fashion (aqui)hire for Apple, after Angela Ahrendts (Burberry) and Paul Deneve (Yves Saint Laurent). But 3 billion for a fashionable headphones company/music service? I don't know, the feeling I get of this deal is like Nike buying Crocs in 2007, when Crocs shoes were at the peak of their popularity.
• WalterSear 12y ago
  1. The actual design and production isn't done by Beats. It's done by a partner company, that isn't being bought. Beats is a promotional and marketing company. They aren't a particularly amazing one, but they have done ok. Certainly not innovative enough to want Apple to aquihire them. 2. The service has a tiny userbase, and doesn't have any technology apple does not. Apple will be producing the headphones now and Apple will be building the streaming service. So, IMHO, this is a brand purchase, plain and simple. There's nothing else left. Tim Cook was dissembling because he didn't want to admit he just bought the rights to a name.
• brianbreslin 12y ago
  well beats didnt own the music streaming service entirely, it was a joint venture. So i'm curious how that worked into the deal.
• nnnnni 12y ago
  I hope that you're onto something there -- the headphones are awful!
  • Corrado 12y ago
    Are all of their headphone models awful or just the lower end models? I know that most of the reviews I've heard are of the lower end models and they are pretty much universally panned as a fashion accessory. However, the high end Beats headphones seem to be pretty good; well built with a flat response curve.
    • bripeace 12y ago
      problem with that is there are a ton of high quality headphones with a flat response curve with more reputable branding.
• josefresco 12y ago
  In other interviews (1) he actually mentions music first, then the talent, than the hardware business. Sounds more like PR story-telling than an actual assessment of why they made this move. The music angle is touchy-feely, the talent angle makes it seem like Apple got something that's exclusive, and the profitable hardware business is the solid base to calm investors. 1 http://recode.net/2014/05/28/tim-cook-explains-why-apple-is-buying-beats-qa/ http://recode.net/2014/05/28/tim-cook-explains-why-apple-is-...