Apple buying Beats (?!)

[sweenish]

the beats music service is a billion times better than iTunes radio.

if Facebook can buy whatsapp for 19 BILLION, 3.2 billion for Beats sounds ridiculously cheap.

From a pure numbers perspective, sure.

But the value of beats being 3.2 is what's ridiculous. It's easy to see the value of Whatsapp, especially for Facebook. As evidenced by this thread, the value of beats, especially to Apple, is not so obvious.

 

[BladeVenom]

Is Monster Cables next?

 

[fr]

https://www.youtube.com/watch?v=s2e5ZibypDk

 

[Ns1]

counterpoints

Tim Cook, music mogul?
So as much as audiophiles may groan, Beats headphones may bring a veneer of youth culture and cool to Apple, of a kind not seen since its silhouette-based iPod ads. More importantly, the app would give Apple an instant competitor to Spotify, the way iTunes Radio competes with Pandora. (Beats, four months old, has 200,000 subscribers to Spotify's 10 million, but that imbalance would change rapidly if Apple started pimping the app.)

Most important of all, however, is what Iovine and Dre could do for Apple's already considerable clout in the music industry. If you were trying to build a modern-day music label, to persuade more and more big-name artists to ditch their regular suits and release their latest works exclusively via digital download and streaming service, you could do a lot worse than starting with these guys.

Iovine, currently president of Interscope Geffen A&M, has worked with everyone from Springsteen to Lady Gaga to U2; the New York Post is reporting that Iovine will leave Interscope and join Apple as a "special advisor" as part of the deal. Of course, Dre has the hip-hop world covered, from Snoop Dogg to Eminem to 50 Cent. And then there's Trent Reznor of Nine Inch Nails, who also happens to be "chief creative officer" for Beats.

As anyone who's attended an Apple launch event with a musical guest knows — not to mention the iTunes exclusive concerts and Apple store gigs for local artists — Tim Cook has hardly diminished Steve Jobs' passion for taking Apple deeper and deeper into the music business. The long-running lawsuit with Apple Corps over its logo has been settled. Downloads on iTunes are starting to falter. The company is desperate to get more exclusive album deals, as it did with recent releases from Beyonce and Broken Bells.

The more you dig into the possible synergy of an Apple-Beats deal, the more it seems Tim Cook would be getting the company for a bargain price if he strikes now. Headphones not included.

http://mashable.com/2014/05/08/apple-beats-not-headphones/?utm_cid=mash-com-fb-main-link

 

[desura]

I suppose that what Apple is really missing is a true deal-making executive. Cook seems more like a finicky little accountant than a leader who cuts groundbreaking deals like $0.99 cent iTunes singles.

Maybe Iovine will be rising higher.

Or Dre

 

[Mopetar]

Seems a rather surprising move, especially the price tag. Apparently Beats is making over $1 billion in revenue per year now, so maybe that has something to do with it. Then again, if almost none of that is profit, it doesn't exactly pay for itself in time.

Is the streaming service or the deals that Beats has with the record companies actually worth that much to Apple? There haven't been any rumors about other companies trying to buy Beats so it doesn't seem like a defensive move by Apple. The last time Apple bought a company with a streaming service (lala, which according to some Google was also in acquisition talks with) nothing much came of it, or at least nothing that was overtly apparent.

The really interesting bit would be if Apple were attempting to acquire some key people to essentially form their own record company or at least to sign digital distribution deals directly with artists. That would give Apple a lot of clout and even if they didn't attempt to be monopolistic, it would at least allow them to profit from two sides of the music business.

 

[Graze]

From a pure numbers perspective, sure.

But the value of beats being 3.2 is what's ridiculous. It's easy to see the value of Whatsapp, especially for Facebook. As evidenced by this thread, the value of beats, especially to Apple, is not so obvious.

beats as a company is profitable with a net revenue exceeding $1 billion. Whatapps has never been profitable and loses money.

 

[WelshBloke]

beats as a company is profitable with a net revenue exceeding $1 billion. Whatapps has never been profitable and loses money.

They are different types of business though.
Now I'm admittedly just looking at the hardware side of Beats, but their streaming service seems fairly small potatoes. It has few subscribers (AFAIK) and is not available in a lot of places.

WhatsApp had the biggest messenger user base when they were bought by Facebook. So it was pretty easy to see what Facebook were paying for.

This deal is a bit more murky. There's nothing technical that Apple would be buying that they couldn't achieve themselves, and the user base of the streaming service seems too low to pay for.

I just want to know if HTC are laughing or crying about this.

 

[sweenish]

beats as a company is profitable with a net revenue exceeding $1 billion. Whatapps has never been profitable and loses money.

So, that thing I said earlier?

From a pure numbers perspective, sure.

It's still super easy to see why Facebook would buy Whatsapp. Apple and beats, far less so. And all your counter is doing is making the 3.2 billion dollar buyout get called further into question. Why would a profitable, billion dollar a year company sell itself for so little?

And how is beats worth that kind of money anyway? Their headphones are among the bottom rung of audio gear at their prices. Apple buying beats for status, as suggested by just about everyone before that mashable link appeared, is just sad.

 

[Eug]

^^^ I don't know what you are trying to argue.

Beats is hugely profitable, with tons of revenue. More so than I had thought actually.

As for buying Beats for the technology, you totally missed the point. Apple is buying the customer base and headphones brand recognition amongst consumers (among other things). It's the same reason Google gave up on Google Video and bought YouTube. YouTube's technology was easily replicatable by the likes of Google, but YouTube was THE brand and go to site, with the biggest customer base.

Nowadays, Google Video doesn't exist, and YouTube brings in $5.6 billion in ad revenue for Google, which is more than 10% of Google's entire ad revenue.

 

[WelshBloke]

Apple is buying the customer base and headphones brand recognition amongst consumers (among other things).

So is Apple going to continue to sell beats branded headphones?
Otherwise buying the brand name would seem a bit of a waste, and if they do sell under that name it would be a bit of a departure from the norm for them, yes?

 

[Eug]

So is Apple going to continue to sell beats branded headphones?
Otherwise buying the brand name would seem a bit of a waste, and if they do sell under that name it would be a bit of a departure from the norm for them, yes?

I would be shocked if they didn't keep the Beats brand. As much as I personally am not a fan, the Beats brand has a HUGE consumer following.

P.S. My preferred headphones for my home theatre is Sennheiser wireless (RS 180) , and for my iPhone, Etymotic ER-4P.

 

[WelshBloke]

I would be shocked if they didn't keep the Beats brand. As much as I personally am not a fan, the Beats brand has a HUGE consumer following.

Beats is a huge brand but I'd say that Apple were a better known one. It'll be interesting to see if Apple diversify into selling things under a different brand.
I think that if it was just about the brand Apple would have been better off releasing a line of high end Apple branded headphones. They are pretty much the best known brand in that area already. Likewise the streaming music service. ITunes is a massive brand, I can't see them running a streaming service under a different name.

P.S. My preferred headphones for my home theatre is Sennheiser wireless (RS 180) , and for my iPhone, Etymotic ER-4P.

I use some sennheiser 555s and 595s at home (Beats really wouldn't suit my music). Out and about I use any of the huge collection of mid range earbuds I have (I keep losing them and buying new ones, then finding the old ones in jacket pockets), I'm not too worried about quality when I'm out as there's usually enough background noise to make any semi decent headset sound similar.
I do like my headphones to be fairly neutral though, I'll adjust the sound with software if I need to.

 

[Strk]

I would be shocked if they didn't keep the Beats brand. As much as I personally am not a fan, the Beats brand has a HUGE consumer following.

P.S. My preferred headphones for my home theatre is Sennheiser wireless (RS 180) , and for my iPhone, Etymotic ER-4P.

Sure, there are plenty of better options than Beats, but like you said, it's hard to beat the brand recognition. A lot of people wouldn't know Etymotic, but they will know Beats. I know I love my Shures.

 

[Eug]

I'm not convinced about this Beats streaming service either. Despite the claims out there, I see it as a non-factor in this purchase. Or at most, a minor factor.

---

In some spots (near any traffic or if I need to hear ambient sounds) I just use the Apple earbuds. Having the mic and volume control is helpful too. I've been waiting for an Amazon sale on the Sennheiser 595 to pick up a pair for home though.

 

[WelshBloke]

I'm not convinced about this Beats streaming service either. Despite the claims out there, I see it as a non-factor in this purchase. Or at most, a minor factor.

It's an interesting purchase anyway. Apple usually make acquisitions for a reason and are probably on of the most focused companies out there so they are bound to have a well thought out reason and a road map of where they are going with this, it's just fun to try to work out what it is and how it fits in with their usual way of doing things.

In some spots (near any traffic or if I need to hear ambient sounds) I just use the Apple earbuds. Having the mic and volume control is helpful too. I've been waiting for an Amazon sale on the Sennheiser 595 to pick up a pair for home though.

I've been really happy with my 595s, they are very comfortable and the sound suits a wide range of music, really, really not suitable for a portable player though.

 

[Muadib]

I don't know what this will do for Apple, but it makes Dr Dre the richest man in hip hop.

 

[Eug]

I anything I think Apple may expand the Beats brand. They failed miserably in the past with their own iPod Hi-Fi, and I've been waiting since then for Apple to come up with a replacement. I was surprised to learn that that replacement could end up be a Beats product.

Still, despite the brand recognition and strong sales, I still don't understand why Apple has valued Beats at $3.2 billion. Not that I'm a financial guru or anything, but that seems really excessive to me.

 

[WelshBloke]

I anything I think Apple may expand the Beats brand. They failed miserably in the past with their own iPod Hi-Fi, and I've been waiting since then for Apple to come up with a replacement. I was surprised to learn that that replacement could end up be a Beats product.

Like I said it's certainly an interesting acquisition, it seems to be changing the way Apple do business.

Still, despite the brand recognition and strong sales, I still don't understand why Apple has valued Beats at $3.2 billion. Not that I'm a financial guru or anything, but that seems really excessive to me.

Beats apparently turn a healthy profit, the mark up on them is "healthy" to say the least.

 

[jhansman]

We're talking about a company with over $150 billion in cash; even if Beats turns out to be a bust for them, it's chump change. They'll likely find a way to integrate it into their ecosystem so the cult will feel even more, ummm, better.

 

[southkrn]

I already see the headlines >> Dr. Dre makes $500 million off of the Beats Deal with Apple.

Forbes 2014, Dr. Dre is at the top of the list for 2014 income with $550 million overtaking the likes of Floyd Money Mayweather, Jay Z, Sean P.Diddy Combs and Oprah, to become the highest paid black person in the U.S. to date.

 

[desura]

I anything I think Apple may expand the Beats brand. They failed miserably in the past with their own iPod Hi-Fi, and I've been waiting since then for Apple to come up with a replacement. I was surprised to learn that that replacement could end up be a Beats product.

Still, despite the brand recognition and strong sales, I still don't understand why Apple has valued Beats at $3.2 billion. Not that I'm a financial guru or anything, but that seems really excessive to me.

The Beats business model isn't that bad, actually. I mean, if you're an audio geek they're terrible, but in terms of pure business it is great.

They could expand it further. For instance, Beats by Dre for hip-hop fans.

Tremelo's by the Arcade Fire for rock fans

Capacitor's by M83 for electronica fans

on and on.

 

[sm625]

As bad as this deal is, it is better than wasting $3 billion buying back stock. It is shame to see them amass all that cash just to waste it all trying to cook their books. At least they'll get at least a couple hundred million in actual marketable assets from this deal.

 

[desura]

Read an analyst...

you know, Steve Jobs also handpicked Steve Sculley to lead Apple. he ended up regretting that decision, no?

Cook is a numbers guy. An accountant. No creativity or vision in this one.

 

[Commodus]

As bad as this deal is, it is better than wasting $3 billion buying back stock. It is shame to see them amass all that cash just to waste it all trying to cook their books. At least they'll get at least a couple hundred million in actual marketable assets from this deal.

I agree on that bit -- Apple has been spending a lot of cash on what ultimately amounts to fending off activist investors like Carl Icahn, who are all about short-term greed.

If you believe Bloomberg, the deal is about tweaking Beats' headphone formula and getting Beats Music's streaming technology. Which is good news, quite frankly. I don't think anyone wanted to see Apple simply rebrand Beats' existing hardware and online service.

(For reference: http://www.bloomberg.com/news/2014-05-12/apple-s-deep-ties-with-iovine-key-driver-of-beats-deal.html )