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Apple officially closes on $3B purchase of Beats headphones & streaming service

post #1 of 139
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Apple on Friday gave an official welcome to Beats Music and Beats Electronics, which are now a part of the Cupertino, Calif., outfit after the $3 billion purchase price was finalized.




Apple added a "welcome" page for Beats to its own website on Friday, and the official Beats site was also updated to reflect Apple's purchase. The announcements would suggest that Apple did not face any scrutiny from the U.S. government, while the European Commission approved the deal earlier this week.

In addition, Vivendi revealed on Friday that it sold its stake in Beats Electronics LLC to Apple for $404 million. The company had a 13 percent position in the premium headphone maker.

It was announced in May that Apple had entered a deal to buy Beats for $3 billion, with about $400 million of that buyout in stock. Apple's $404 million payout to Vivendi could suggest that its stake represented the stock portion of the deal.

Apple's new Beats section of its website welcomes the acquisition "to the family." It also notes that Beats cofounders Jimmy Iovine and Dr. Dre, who are now Apple employees, "have created beautiful products that have helped millions of people deepen their connection to music."

Apple said it plans to "elevate" the experience of Beats headphones to even higher levels through the purchase.

"Today we are excited to officially welcome Beats Music and Beats Electronics to the Apple family," Apple's page reads. "Music has always held a special place in our hearts, and we're thrilled to join forces with a group of people who love it as much as we do."




Over at the updated Beats site, the headphone maker has told its customers that "there's a new instrument in the Apple family." It notes that in the early days of digital recording, the Macintosh was "the instrument of choice," while the iPod led the revolution in digital music, and the iPhone and iPad became instruments of their own.

"Starting today, we at Beats are fortunate to add our instrument to this legacy by joining Apple," the Beats site reads. "The products we build together will allow us to reimagine sound once again and to continue this great tradition of bringing imagination to life."

Apple's $3 billion acquisition was not only for the Beats headphone business, but also represents Beats Music, which is an on-demand subscription streaming music service available on desktop, iOS, Android and Windows Phone. In the breakdown of the deal, Apple paid about $500 million for Beats Music, and $2.5 billion for Beats Electronics.

Though Beats is best known for its headphones, the Beats Music product received top billing from Apple when the deal was announced back in May. Apple has said it plans to keep the subscription Beats Music service intact, and as its own brand, alongside existing iTunes Radio free streaming and song purchasing through the iTunes Store.
post #2 of 139
Now that it is official, maybe soon the point of this will come out.
post #3 of 139
""have created beautiful products that have helped millions of people deepen their connection to music."

I wouldn't call this beautiful... 1oyvey.gif but maybe it gives teenagers a "deeper connection to music". 1tongue.gif

NFC-Beats-Pill.jpg

OT: why does this site push you over to the App Store now? I've noticed that several times this week. Quite annoying.
post #4 of 139

Bravo!

Bravo!

 

This is the best!

post #5 of 139
Meh. Still has the whiff of a payoff to Jimmy Iovine.

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post #6 of 139
Quote:
Originally Posted by kent909 View Post

Now that it is official, maybe soon the point of this will come out.

Probably not in the short term. It often takes about 18-24 months for the full impact of the acquisition to become apparent. 

 

From the Beats hardware side of the business, they are one month into the Apple's Q4, so the impact of that portion really won't be reflected in Apple's earnings for until Q1 FY2015. More importantly is the timing of Beats product cycles and when the product line refreshes to new products designed and manufactured under Apple's umbrella.

 

The software/service side of the business is murkier. Typically Apple's software/service acquisitions are subsumed into OS X, iOS or iCloud, and contribute across a wide spectrum of Apple's products and/or services. Whether its a more discrete service like Siri or something like the Apple Maps (which is an amalgam of their various mapping acquisitions), it is impossible to say how one single acquisition monetarily affected Apple's bottom line, at least from a revenue perspective.

 

Both Beats Music and Apple own streaming music services had relatively few customers, it is unknown how these services will grow.

 

Note that Apple themselves typically do not provide specific reasoning for their various acquisitions (heck, they don't even divulge a lot of them). 

 

They did not discuss the purpose of their acquisitions of P.A. Semi (2008) and Intrinsity (2010), but the effects of both finally emerged with the A6 and A7 processors, not in specific functionality, but just in the nature of Apple's design differentiation vis-a-vis competitors' ARM implementations.

 

My guess is that we won't realize the full impact of the Beats acquisition until early 2016 at which time it might be considered a great, good, or disappointing acquisition.


Edited by mpantone - 8/1/14 at 7:25am
post #7 of 139
Quote:
Originally Posted by mpantone View Post

Quote:
Originally Posted by kent909 View Post

Now that it is official, maybe soon the point of this will come out.

...My guess is that we won't realize the full impact of the Beats acquisition until early 2016 at which time it might be considered a great, good, or disappointing acquisition.

I suppose it is not big enough to be a complete disaster like Google's acquisition of Motorola, Microsoft's acquisition of aQuantive, or (soon) Facebook's acquisition of WhatsApp.
post #8 of 139

Well, that's a rather different situation. An Internet ad agency with no hardware division acquired a smartphone company. Google does not have any real hardware background.

 

Apple's business model is considerably different from Google's. The Motorola acquisition by Google was rather puzzling.

post #9 of 139
Quote:
Originally Posted by SpamSandwich View Post


Ugh. I hope you understand how ridiculous your comments look.

 

explain.

 

There a bunch of people who hate this deal for a simple fact that it caters to the urban/hip hop community.

post #10 of 139
Quote:
Originally Posted by sog35 View Post

explain.

There a bunch of people who hate this deal for a simple fact that it caters to the urban/hip hop community.

Are there more people who were / are opposed to it because of the low quality / overpriced junk product issue?

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post #11 of 139
Quote:
Originally Posted by SpamSandwich View Post


Are there more people who were / are opposed to it because of the low quality / overpriced junk product issue?

 

nope. People don't complain about Apple's headphones

 

Related note:

 

Apple headphones are now $14 on Amazon.  Regular price is $30.  Wonder if this is related.

post #12 of 139
Quote:
Originally Posted by sog35 View Post
 

 

explain.

 

There a bunch of people who hate this deal for a simple fact that it caters to the urban/hip hop community.

While that's true, the deal still deserves a critical eye because you have to wonder why Apple couldn't develop their own superior headphones (and streaming service) for far less than $3 billion.     And also because in spite of Beats' tremendous commercial success, anyone who knows anything about audio would tend to agree that the quality of the audio coming through their phones simply isn't very good.   

 

IMO, getting Dr. Dre and Jimmy Iovine isn't enough of a reason.  It's not like urban youths aren't already using Apple products and this was a market they were missing and didn't know how to get.

 

On the other hand, paying 2x revenue for a consumer products company is not excessive at all and Beats' 2013 revenue was $1.5 billion, which was quite impressive.    That means they probably sold about 10 million headphones in that year.   

post #13 of 139
Quote:
Originally Posted by SpamSandwich View Post


Are there more people who were / are opposed to it because of the low quality / overpriced junk product issue?

 

This.

post #14 of 139

Clicking on buy on the Beats site now takes user to the Apple Store.   It is good to see there is a highly coordinated launch and integration plan 

 

What is odd is that it takes the user to the "iPad Accessories" section of the Apple Store.  Also, when I go to "Shop Accessories" on Apple Store, there is not clear organization for Beats, you have to hunt to 'Filter' and then select 'Beats'.  It's early, but all of this needs to be addressed 

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post #15 of 139
How long until Beats HP Laptops are killed off?
post #16 of 139
Quote:
Originally Posted by sog35 View Post

explain.

There a bunch of people who hate this deal for a simple fact that it caters to the urban/hip hop community.

Please don't speak the truth about people when it makes them uncomfortable, you know you're gonna hear a million reasons why you're an idiot when you do that. (I tried before)
post #17 of 139
Quote:
Originally Posted by rulebreaker View Post

How long until Beats HP Laptops are killed off?

No one here knows since we haven't seen the terms of the licensing deal, not the original contract.

 

Plus, we do not know HP's intent. They may wish to continue making Beats-branded notebooks through the duration of the existing contract. Alternatively, they may wish to terminate their involvement with the brand and not refresh their notebooks.

 

You might be better off asking this question at an HP-focused Q&A forum. The readers there would likely have a better understanding of HP's management style and possible direction.

post #18 of 139
Quote:
Originally Posted by sog35 View Post

nope. People don't complain about Apple's headphones

Related note:

Apple headphones are now $14 on Amazon.  Regular price is $30.  Wonder if this is related.
People don't complain about Apple's headphones? Are you f'ng serious?!? Also, last time I checked Apple's earpods were $29. The cheapest Beats headphones on Apple's store are $99.
post #19 of 139
Quote:
Originally Posted by sog35 View Post
 

 

nope. People don't complain about Apple's headphones

 

If you're referring to the ear plugs which come with an iPhone, I never used those until recently, when my Sennheiser headset stopped working (they always eventually short out, due to poor plug construction and wires that are too small).   I was actually surprised as to how good they do sound.  Very crisp, clean high end, and if you stick them all the way in, even pretty decent tight bass, which isn't easy in an ear plug.  Quite the opposite sound of Beats headphones (haven't tried the in-ear), which sound muddy and unmusical, IMO.   

 

The major problem I have with the Apple in-ear plugs is that they don't fit very well in my ears.   But if they made a lightweight, physically small headset, which had pretty much the same sound as the plugs with a bit better bass and were reasonably priced, I'd buy those. 

post #20 of 139
Quote:
Originally Posted by zoetmb View Post

While that's true, the deal still deserves a critical eye because you have to wonder why Apple couldn't develop their own superior headphones (and streaming service) for far less than $3 billion.     And also because in spite of Beats' tremendous commercial success, anyone who knows anything about audio would tend to agree that the quality of the audio coming through their phones simply isn't very good.   

IMO, getting Dr. Dre and Jimmy Iovine isn't enough of a reason.  It's not like urban youths aren't already using Apple products and this was a market they were missing and didn't know how to get.

On the other hand, paying 2x revenue for a consumer products company is not excessive at all and Beats' 2013 revenue was $1.5 billion, which was quite impressive.    That means they probably sold about 10 million headphones in that year.   
My guess is Iovine was pursuing Apple hard and Apple was able to justify it because the headphones make so much money. My biggest issue with the deal is it reinforces the haters meme that Apple products are overpriced inferior products that only sell because of slick design and marketing. Beats headphones aren't popular because they have the best sound quality, they're popular because Iovine and Dre were able to get well known musicians and athletes to wear them. If a young person sees their favorite rapper or basketball player wearing beats they're more likely to go out and buy a pair.
post #21 of 139
Quote:
Originally Posted by sog35 View Post

nope. People don't complain about Apple's headphones

Related note:

Apple headphones are now $14 on Amazon.  Regular price is $30.  Wonder if this is related.

I have to confess I didn't even know Apple had their own headphones!

Edit: Oh sorry, did you mean the buds? I wasn't being facetious, I just never looked as i use high end Pro cans for studio work and earbuds for poolside.
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post #22 of 139
Quote:
Originally Posted by sog35 View Post
 

 

nope. People don't complain about Apple's headphones

 

You mean the free ones that comes with the phone?  Ya- they're worth every penny I paid for them.

 

Skull Candy sucks too.  Ignore that until I google to see if theres a black owner over there so I don't get labeled a racist.

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post #23 of 139
Quote:
Originally Posted by SpamSandwich View Post


Are there more people who were / are opposed to it because of the low quality / overpriced junk product issue?

 

Beats are about a combination of decent tech and style.

Beats is more a designer brand than tech brand.

 

If it was all about the tech than the professional brands would dominate.

 

To make it into the mainstream for wearables you need style.  PERIOD.  No matter how good the product is the general population won't wear something if it looks goofy.

post #24 of 139
Quote:
Originally Posted by Andysol View Post
 

You mean the free ones that comes with the phone?  Ya- they're worth every penny I paid for them.

 

Skull Candy sucks too.  Ignore that until I google to see if theres a black owner over there so I don't get labeled a racist.

 

but you have to admit there are better performing headphones for $30?

post #25 of 139
Quote:
Originally Posted by sog35 View Post
 

 

Beats are about a combination of decent tech and style.

Beats is more a designer brand than tech brand.

 

If it was all about the tech than the professional brands would dominate.

 

To make it into the mainstream for wearables you need style.  PERIOD.  No matter how good the product is the general population won't wear something if it looks goofy.

 

Is it easier for Apple to create the best sounding headphone or the best designed?

 

Would it not be easier to purchase a great headphone (that most people don't even know exists)- and make a style that appeals to the masses?

 

No- they'd rather get a stylish headphone and then redesign the technical aspect to make it better.  Of course, now they'll have to hire engineers specifically focused for that, because both Apple and Beat's current offerings aren't technically excellent.

 

The headphone purchase as a stand alone is a dumb acquisition.

 

 

 

OR- we can just ignore the headphones- and just look at the marketing/talent acquisitions.  In this spectrum- they knocked it out of the park.

They turned the headphone industry on its ear (pun intended).  And dominate the high-end market- even with an inferior product.

Their celebrity marketing is extremely successful where others have failed (looking at you Blackberry).

Their Beats Music deal has seen the best percentage of purchasers of any of the streaming music services.

 

Regardless of how much overrated the headphones are, they are getting an infusion of extremely talented and fresh talent.


Edited by Andysol - 8/1/14 at 9:03am

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post #26 of 139
Quote:
Originally Posted by Wovel View Post


I suppose it is not big enough to be a complete disaster like Google's acquisition of Motorola, Microsoft's acquisition of aQuantive, or (soon) Facebook's acquisition of WhatsApp.

 

Motorola was losing BILLIONS when Google acquire them.  Motorola was a has been and lost massive marketshare when Google bought them.  WhatsApp/aQuantive never made profits.

 

Beats is dominating the high end consumer headphone market (about 70% share) and is making close to $500,000 in profits a year. 

post #27 of 139
Quote:
Originally Posted by sog35 View Post
 

 

but you have to admit there are better performing headphones for $30?

Of course.  But when you're talking in-ear it's pretty negligible.  Over-ear, no brainer- but that's apples-oranges

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post #28 of 139
Quote:
Originally Posted by Andysol View Post
 

Of course.  But when you're talking in-ear it's pretty negligible.  Over-ear, no brainer- but that's apples-oranges

 

So you admit that the style and brand name makes the Apple headphones command a price premium?

 

The same thing can be said about Beats.

Beats is the male version of Louis Vutton bags.  Sure you can buy bags that are half the price with the same quality.  But where you are wearing Headphones everyday you want to look GOOD!

post #29 of 139
Quote:
Originally Posted by SpamSandwich View Post


Are there more people who were / are opposed to it because of the low quality / overpriced junk product issue?

The enormous number of people who like the current design of Beats precisely because they emphasize what they want (heavy bottom) clearly disagree. And changing the design for a broader spectrum isn't exactly rocket science. 

For perspective, remember that the single biggest thing that Barry Gordy did at Motown (other than have a ridiculous stable of talent) was doing the final mix on car speakers. Tuning the product to the target user is as old as time.

And now having subscribed to Beats service, I still don't think the deal was about the tiny market of 'can' headphones.

post #30 of 139
Quote:
Originally Posted by sog35 View Post
 

 

but you have to admit there are better performing headphones for $30?

Hell yes.

 

Nuforce NE-600X are $14/pair at Amazon. The version with the inline microphone are $30/pair.

 

I use the RHA MA450i earphones (includes inline mic and remote), those are $50/pair. RHA also has two lower models at $40 and $13.

post #31 of 139
Quote:
Originally Posted by sog35 View Post
 

 

So you admit that the style and brand name makes the Apple headphones command a price premium?

So you admit that Apple could have bought Shure and made it more stylish and the brand name Apple and command a price premium?

 

It isn't about the headphones!

If it was- its a ridiculously dumb acquisition.

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post #32 of 139
Quote:
Originally Posted by kent909 View Post

Now that it is official, maybe soon the point of this will come out.

 

The point is that Apple now controls the majority of the headphone market. I'm not sure how that's not a significant enough "point" by itself. 9/10 people I see with headphones are wearing Beats. Apple can now improve the product as they see fit, but they already have the marketshare and brandshare. 

post #33 of 139
Quote:
Originally Posted by sog35 View Post
 

 

So you admit that the style and brand name makes the Apple headphones command a price premium?

 

The same thing can be said about Beats.

Beats is the male version of Louis Vutton bags.  Sure you can buy bags that are half the price with the same quality.  But where you are wearing Headphones everyday you want to look GOOD!

 

Beats can't even be mentioned in the same breath as Louis Vuitton, so don't waste your time with an inane comparison like that.  Beats might have been the male version of Coach bags.  Maybe.  

Apple could have designed their own headphones if that is what they were after.  They weren't.  They were after Jimmy and his relationships with the industry + Beats music, which is pretty decent as a standalone service.  Hardly worth the 3 bln price tag in my opinion.   But it's a drop in the bucket when you have as much money as Apple, and my shares haven't suffered.  So I'm ok  :-D

post #34 of 139
Quote:
Originally Posted by rulebreaker View Post

How long until Beats HP Laptops are killed off?

I understand that a multi-year contract exists, so that would still be in effect for HP. And remember: HP used to sell iPods.

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post #35 of 139
Welcome. Can't wait to hear The Dr. on earnings calls¡

Glad the initial 'saga' is over. Caint wait for the complainers to eat crow.
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post #36 of 139
Quote:
Originally Posted by SpamSandwich View Post

Are there more people who were / are opposed to it because of the low quality / overpriced junk product issue?

I expect there will be changes but regardless, Apple would never produce an audiophile level reference quality pair of cans. Too expensive and too niche and much better left to specialist companies. You may not like the Beats headphones but from where I'm sitting they are not a bad Apple mainstream fit (though probably too expensive). 

Quote:
Originally Posted by sog35 View Post
 

There a bunch of people who hate this deal for a simple fact that it caters to the urban/hip hop community.

I think the future of Beats Music / Apple is way broader than hip hop. In fact, head over to beatsmusic.com and you'll see. Personally I am excited to see where this goes.

post #37 of 139
It'll be interesting to see if Apple brands their future base in-ear headphones as Beats (with a design change) to further add value to the hardware being sold or if they keep Beats as a separate accessory. My guess will to keep them separate.

I like the acquisition. I have a hard time believing that combining the design and technical capabilities of Apple with a well known accessory maker will not add up to a lot of future high margin sales. My bet is two years from now it will be clear that Apple made the right move from a hardware standpoint. The part I still have a hard time with is them paying $500M (if true) for the subscription music piece. I tried it out for a month then went back to Spotify as it was severly lacking in features.
post #38 of 139
Quote:
Originally Posted by GQB View Post
 

And now having subscribed to Beats service....

And?? 

 

I am looking forward to this but its not available where I am. I am expecting family plans will be available to all and sundry in time, but I am curious about the Beats Music experience.

post #39 of 139
Quote:
Originally Posted by tjlucero View Post

It'll be interesting to see if Apple brands their future base in-ear headphones as Beats (with a design change) to further add value to the hardware being sold or if they keep Beats as a separate accessory. My guess will to keep them separate.

I am curious about this, too. I wouldn't be surprised if Apple moves all its music services and products (not professional tools) over to the Beats brand in the future.

post #40 of 139
Quote:
Originally Posted by SpamSandwich View Post

Are there more people who were / are opposed to it because of the low quality / overpriced junk product issue?

Like it or not, it's a done deal.
It's already worth more than three billion at this point.

Deal with it.
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