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Apple's paid less than $500M for Beats Music, $2.5B for Beats Electronics

post #1 of 56
Thread Starter 
As part of its $3 billion acquisition of Beats, Apple is paying less than $500 million for the Beats Music streaming service and more than $2.5 billion for the firm's hardware arm, one report says.

Beats Music


Following Apple's announcement of a blockbuster $3 billion Beats buyout on Wednesday, The Wall Street Journal reports most of the money is going toward Beats Electronics, which is responsible for headphones, speakers and other audio equipment.

A source familiar with Beats' operations said the firm's sales totaled nearly $1.5 billion in 2013, all of which came from the hardware division as Beats Music launched in January of 2014. However, the amount allotted to Beats Music is perhaps more interesting considering its status as a fledgling streaming service with a relatively low subscribership.

Judging by Beats co-founder Jimmy Iovine's statement that Beats Music amassed 250,000 subscribers in three months, Apple is either overpaying or has bigger plans for the streaming service.

By comparison, competing streaming music provider Spotify recently raised $250 million on a valuation of $4 billion. With 10 million subscribers worldwide, the numbers represent roughly $400 per subscriber. Applying those same metrics to Beats Music, the soon-to-be Apple subsidiary is worth $100 million.
post #2 of 56

Please surprise me Apple because so far I feel like this was a stupid deal

“What would I do? I’d shut Apple down and give the money back to the shareholders”

Michael Dell - 1997

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“What would I do? I’d shut Apple down and give the money back to the shareholders”

Michael Dell - 1997

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post #3 of 56

Any substantial material influence from this acquisition will likely take 18-24 months to register in Apple's financials.

 

Heck the deal isn't expected to close until Apple's fiscal Q4 (the quarter ending in September).

 

Come back in 2016.

post #4 of 56
Quote:
Originally Posted by mpantone View Post
 

Any substantial material influence from this acquisition will likely take 18-24 months to register in Apple's financials.

 

I expect most of these $3B will simply be written off in one of the future quarters.

post #5 of 56

I heard Beats headphones were overpriced, but this is ridiculous!  :lol:  ( /s )

 

Actually, I fully expect Apple to make their money back and then some with thier purchase.

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post #6 of 56
The only way this information could get out would be an Apple leak. Who else would leak such information? Dre again? I kinda doubt he'd want to be known as the Apple board member who can't keep his mouth shut.
Edited by SpamSandwich - 5/29/14 at 4:33pm

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post #7 of 56
Quote:
Originally Posted by jason98 View Post
 

I expect most of these $3B will simply be written off in one of the future quarters.

I'm talking about the impact of the Beats deal in generating profit for Apple.

 

The acquisition costs will likely be written off sometime in FY 2015, once the deal closes.

post #8 of 56
This is pretty close to what I thought the numbers might have been.
post #9 of 56
No one should care what I, you or anyone thinks... read what Tim Cook says himself in this Re/Code interview about Beats:
http://recode.net/2014/05/28/tim-cook-explains-why-apple-is-buying-beats-qa/
post #10 of 56
HAD!
Fire Cook!
 
Where's the new Apple TV?
 
 
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Where's the new Apple TV?
 
 
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post #11 of 56
Quote:
Originally Posted by GadgetCanadaV2 View Post
 

Please surprise me Apple because so far I feel like this was a stupid deal

 

I'm sure Apple did a shitload more research into Beats, and the reasons and benefits of acquisition, compared to how you "feel" about it. The Pros, Cons, everything. Maybe people should give Apple the benefit of the doubt (hasn't it earned at least that?) before jumping to judgement. 

post #12 of 56
Quote:
Originally Posted by pazuzu View Post

HAD!
Fire Cook!

 

Just once I'd like to see a post from you that deserves to exist. All you do is lower the level of discourse of any thread you enter into the sludge. 

 

Oh, and who's gonna "fire" Cook? Do you think this deal was just him? Obviously ALOT of people at Apple had to be for it, for it to happen. You don't even have a shred of evidence that it was Cook's idea. Nor have you given a shred of evidence of why its a BAD deal, apart from your trolling drivel. Apple stock is through the roof.

post #13 of 56
Quote:
Originally Posted by SpamSandwich View Post

The only way this information could get out would be an Apple leak. Who else would leak such information? Dre again? I kinda doubt he'd want to be known as the Apple board member who can't keep his mouth shut.

 

Where do you get board member? He gets to work for Apple, period.

post #14 of 56
Quote:
Originally Posted by mpantone View Post
 

I'm talking about the impact of the Beats deal in generating profit for Apple.

 

The acquisition costs will likely be written off sometime in FY 2015, once the deal closes.

I don't think "written off" means what you think it does.

post #15 of 56
Quote:
Originally Posted by Slurpy View Post
 

Apple stock is through the roof, so maybe you're the short-sighted  moron? 

 

I have never written or believed that Tim Cook should be fired, so I'm not one of those people, but I don't think that it's a good idea to use Apple's current stock price to back up your argument, because anti-Apple trolls also like to use Apple's stock price as an argument when it is low, to "prove" how badly things are going for Apple. The stock price would be irrelevant in both cases, in my opinion.

post #16 of 56

Beats Electronics will be a prolific electronics company (hence the "pipeline" comment from Eddy Cue) and a design playground for Jony and his team to create Apple accessories without messing with the "Apple" brand and reputation.  Expect a Beats phone, additional stereo speaker systems, headphones, and many other things… 

post #17 of 56

Interesting coincidence that our friend Steve Ballmer just submitted a $2 billion for the LA Clippers.  Not a great year to be a Clippers fan (if there are any).

post #18 of 56
Quote:
Originally Posted by mdriftmeyer View Post
 

 

Where do you get board member? He gets to work for Apple, period.

 

Iovine did say they will now be able to see Apple products in development, but it's true there is no confirmation that they will be on the board.

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post #19 of 56
Quote:
Originally Posted by bennettvista View Post

Beats Electronics will be a prolific electronics company (hence the "pipeline" comment from Eddy Cue) and a design playground for Jony and his team to create Apple accessories without messing with the "Apple" brand and reputation.  Expect a Beats phone, additional stereo speaker systems, headphones, and many other things… 
That's what I'm thinking. Using the Beats brand to create a sub-brand line of products which could include a less expensive phone, Bluetooth speakers, wearables. Keep the Apple brand as affordable luxury and use the Beats brand to create some fun, hip, colorful stuff. I'm sure some people would cringe at the thought of that. But I don't see why. Lots of companies have sub brands or brands they use for less expensive product lines.
post #20 of 56
Quote:
Originally Posted by malax View Post
 

I don't think "written off" means what you think it does.

Fair enough, poor selection of wording on my part. The cost of the acquisition will be accounted for in FY 2015.

post #21 of 56
Quote:
Originally Posted by SpamSandwich View Post

Iovine did say they will now be able to see Apple products in development, but it's true there is no confirmation that they will be on the board.
i wonder how true that is. I could understand Iovine and Dre having access to Beats products in development. But outside of that why would they need access to anything else. Unless Cook wants them to be consultants on future Apple hardware? Doesn't make sense to me.
post #22 of 56
http://nypost.com/2014/05/29/steve-ballmer-buys-clippers-for-2-billion/
NEWS ALERT!
STEVE BALLMER JUST BOUGHT THE CLIPPERS FOR 2$BILLION
GOT A BETTER DEAL.

http://nypost.com/2014/05/29/steve-ballmer-buys-clippers-for-2-billion/
Edited by pazuzu - 5/29/14 at 5:35pm
 
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post #23 of 56
Quote:
Originally Posted by Rogifan View Post


i wonder how true that is. I could understand Iovine and Dre having access to Beats products in development. But outside of that why would they need access to anything else. Unless Cook wants them to be consultants on future Apple hardware? Doesn't make sense to me.

 

I think because you wouldn't want to have product duplication. Who knows how many new markets Beats or Apple will enter? We may see new high-end Apple headphones, or low-end Beats smartphones.

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post #24 of 56
Quote:
Originally Posted by pazuzu View Post

NEWS ALERT!
STEVE BALLMER JUST BOUGHT THE CLIPPERS FOR 2$BILLION
GOT A BETTER DEAL.

http://nyp.st/1gFIDzZ

 

At least Ballmer will be happier and get less hate now (as long as they keep winning).

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post #25 of 56
Quote:
Originally Posted by Rogifan View Post

That's what I'm thinking. Using the Beats brand to create a sub-brand line of products which could include a less expensive phone, Bluetooth speakers, wearables. Keep the Apple brand as affordable luxury and use the Beats brand to create some fun, hip, colorful stuff. I'm sure some people would cringe at the thought of that. But I don't see why. Lots of companies have sub brands or brands they use for less expensive product lines.

 

You know, I would actually be ok with that, if they intended to keep the two brands completely segregated. One brand will remain the premium and the other can be a lower end "urban" product line brand.

 

The one thing that scares me though is if and when they begin to blend the two brands together. I don't think that they fit together at all. Beats belongs with Android hardware, not with premium Apple hardware.

post #26 of 56
Quote:
Originally Posted by Apple ][ View Post
 

 

You know, I would actually be ok with that, if they intended to keep the two brands completely segregated. One brand will remain the premium and the other can be a lower end "urban" product line brand.

 

The one thing that scares me though is if and when they begin to blend the two brands together. I don't think that they fit together at all. Beats belongs with Android hardware, not with premium Apple hardware.

Apple will keep it all separate - that's the point.  With all the recent fashion hires, Apple is using a bit of the LVMH model.  The premium brand with sub-luxury brands under the umbrella.  I wouldn't be surprised to see a few other brands in future.  Next one starts with letter "C".

http://www.lvmh.com

post #27 of 56
I'm thinking this might actually turn out to be a pretty good deal for consumers and Apple. They get the cache of Iovine and Dre plus a pretty thriving headphone and speaker business. It may not appeal to 'cork sniffers', but their products are very popular especially with the under 30 crowd. Combined with Apple marketing machine this deal could pay for itself several times. Especially if their music streaming service really takes off...
post #28 of 56
Quote:
Originally Posted by pazuzu View Post

http://nypost.com/2014/05/29/steve-ballmer-buys-clippers-for-2-billion/
NEWS ALERT!
STEVE BALLMER JUST BOUGHT THE CLIPPERS FOR 2$BILLION
GOT A BETTER DEAL.

http://nypost.com/2014/05/29/steve-ballmer-buys-clippers-for-2-billion/

:embarrass


Edited by mwhiteco - 5/30/14 at 7:05pm
post #29 of 56
Quote:
Originally Posted by malax View Post

I don't think "written off" means what you think it does.

Jerry: you don't even know what a write-off is, do you?
Kramer: no, but they do and they're the ones writing it off.
post #30 of 56
Quote:
Originally Posted by mwhiteco View Post
 


Actually you are wrong he made a bid of 2 billion but Donald Sterling has said he won't sell them, also the NBA has to vote on his buying them so get your facts straight! :no:

His facts are straighter than yours.

 

http://espn.go.com/los-angeles/nba/story/_/id/11003237/former-microsoft-executive-steve-ballmer-submits-winning-bid-buy-clippers-according-sources

 

Check out this bit about the losing bidder:  "Geffen's group also included Oracle CEO Larry Ellison and Oprah Winfrey, as well as Guggenheim executives Todd Boehly and Mark Walter, Steve Jobs' widow Laurene Jobs, Steve Wynn's ex-wife Elaine Wynn, and Beats by Dre co-founder Jimmy Iovine."

 

I knew there was a reason I introduced this topic to this thread.  It wasn't off-topic after all.  Too bad the Beats deal took so long to come together or Iovine could have won this one.

post #31 of 56
After continuous and rigorous observation -- it occurs to me that cats can't do pinch to zoom.
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post #32 of 56
Quote:
Originally Posted by malax View Post

Interesting coincidence that our friend Steve Ballmer just submitted a $2 billion for the LA Clippers.  Not a great year to be a Clippers fan (if there are any).

Don't you think he will make inspirational halftime speeches to motivate Griffin and Paul to flop better?
post #33 of 56
I'm still trying to see one thing beats does that apple did not already do?
post #34 of 56
Quote:
Originally Posted by Curtis Hannah View Post

I'm still trying to see one thing beats does that apple did not already do?

Compelling interest with the 14-25 age group with money to spend ... Now!
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post #35 of 56

Interesting take, this would be great for Apple.  Apple could dominate the low end spectrum without damaging their name.  Whatever area they choose to enter would be branded with the Dre brand, phones, tablets, lap tops, watches, etc.  It would be cheap and insanely decent but better than what the other brands offer.

Kind of makes you wonder which direction Samesuck would then take.  Should they continue copying the great stuff by Apple or copy the cheap stuff by Dre.

post #36 of 56

Beats Electronics already generates profit. Beats Music is probably still losing money. The latter's purpose is mainly to make sure musicians get a better cut than what they currently get from Spotify, Pandora, etc. iTunes downloads weren't a huge profit driver for Apple and I don't think they intend for a subscription service to change that. This part of the deal emphasizes Apple's love of music & musicians.

 

The hardware is already profitable and Apple will very likely look to increase that substantially. This part of the deal could potentially pay for the purchase price in a few years. I imagine they will quickly fix build quality issues and Ive will know what to do with design. Dre & Iovine will work with Schiller on marketing. I'm guessing they'll have things to teach each other.

 

This is mostly about people. The big question is will there be synergy? Both companies are doing well alone; will they do better together? Once the deal closes, I'm guessing they'll have a couple of "simple" projects to announce in fairly short order. Maybe some red-cabled Beats earbuds (or cans) as an iPhone option? Free month of Beats Music for iTunes Match subscribers? Some interesting possibilities for future products.

post #37 of 56
Quote:
Originally Posted by pazuzu View Post

HAD!
Fire Cook!

Apples stock price went up $11 since this deal was announced. We should fire you. 

post #38 of 56
Quote:
Originally Posted by Apple ][ View Post
 

 

You know, I would actually be ok with that, if they intended to keep the two brands completely segregated. One brand will remain the premium and the other can be a lower end "urban" product line brand.

 

The one thing that scares me though is if and when they begin to blend the two brands together. I don't think that they fit together at all. Beats belongs with Android hardware, not with premium Apple hardware.

Interesting words coming from you... at least try to be a little less obvious about your bigotry. 

 

Have you been to an Apple store anytime within the last several years? I'm guessing you buy all of your Apple products online. Otherwise you'd know that Apple has beats headphones all over the freaking displays in their stores. 

post #39 of 56
Quote:
Originally Posted by Apple ][ View Post
 

 

I have never written or believed that Tim Cook should be fired, so I'm not one of those people, but I don't think that it's a good idea to use Apple's current stock price to back up your argument, because anti-Apple trolls also like to use Apple's stock price as an argument when it is low, to "prove" how badly things are going for Apple. The stock price would be irrelevant in both cases, in my opinion.

It depends on what you think the future prospects are for Apple...

post #40 of 56
Two times sales for the whole thing is not a bad deal from another perspective.
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