Apple wants Beats Music, but likely to keep Beats hardware alive after deal - report
Apple's alleged $3.2 billion bid for Beats Electronics was provoked by the latter's impressive Beats Music subscription service, a Monday report said, while the iPhone maker will also look to help "improve the quality of design" in future Beats headphones.
Apple's interest is said to have been piqued by the rate at which Beats Music was converting free users to paid subscribers, and the multi-billion dollar price tag was made more palatable by the already close relationship between Apple executives and Beats CEO Jimmy Iovine, according to Bloomberg.
Cupertino, Calif.-based Apple is under pressure as sales of digital music downloads suffer thanks to the increasing popularity of music subscription services. Apple's own iTunes Radio streaming service, designed to boost sales of individual tracks, has been portrayed as "underwhelming" with just 1 to 2 percent of listeners making purchases.
Beats Music, meanwhile, is thought to have less than 300,000 paying subscribers but has been well received by consumers and critics for its design and functionality. In addition to a Spotify-like system that allows users to call up any song in the catalog, the service also sports a highly-praised recommendation algorithm.
A deal for Beats is likely to include a position in Apple's senior leadership for Iovine, who former MySpace executive Jason Hirschhorn called one of "Apple's first friends in the music business." Iovine is exceptionally well connected in the music industry and helped launch the iPod and iTunes store alongside late Apple CEO Steve Jobs, herding record labels toward deals with Apple and helping secure product placement for the iPod.
Apple's interest in Beats was first reported last week, with many pundits and Apple watchers writing off the rumors as false thanks to the non-obvious synergy between the two companies. An increasing number of outlets have chimed in with confirmations and corroboration, however, and some say the deal -- which would be by far the largest in Apple's history -- could be formally announced as soon as this week.
Apple's interest is said to have been piqued by the rate at which Beats Music was converting free users to paid subscribers, and the multi-billion dollar price tag was made more palatable by the already close relationship between Apple executives and Beats CEO Jimmy Iovine, according to Bloomberg.
Cupertino, Calif.-based Apple is under pressure as sales of digital music downloads suffer thanks to the increasing popularity of music subscription services. Apple's own iTunes Radio streaming service, designed to boost sales of individual tracks, has been portrayed as "underwhelming" with just 1 to 2 percent of listeners making purchases.
Beats Music, meanwhile, is thought to have less than 300,000 paying subscribers but has been well received by consumers and critics for its design and functionality. In addition to a Spotify-like system that allows users to call up any song in the catalog, the service also sports a highly-praised recommendation algorithm.
A deal for Beats is likely to include a position in Apple's senior leadership for Iovine, who former MySpace executive Jason Hirschhorn called one of "Apple's first friends in the music business." Iovine is exceptionally well connected in the music industry and helped launch the iPod and iTunes store alongside late Apple CEO Steve Jobs, herding record labels toward deals with Apple and helping secure product placement for the iPod.
Apple's interest in Beats was first reported last week, with many pundits and Apple watchers writing off the rumors as false thanks to the non-obvious synergy between the two companies. An increasing number of outlets have chimed in with confirmations and corroboration, however, and some say the deal -- which would be by far the largest in Apple's history -- could be formally announced as soon as this week.
Comments
Of all the deals to acquire - what a joke. Apple should have bought Pandora or Netflix.
Dr Dre is already spending his ca ching- looking to buy Tom Brady's house in Brentwood.
Of all the deals to acquire - what a joke. Apple should have bought Pandora or Netflix.
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I thought so too, but I've changed my mind. They'll probably just let Beats operate independently as it has and just acquire the streaming service.
Apple isn't a dumb company, they know what they are doing. Because this article makes it seem as if apple is desperate to compete with other streaming companies, which is just dumb.
Hardware is the main reason for this buy! People older than 50 won't see the point of it...
This one is a bit confusing to me, if this one does in fact play out, I guess we will have to wait and see how if plays into the larger picture. Some of Apple's acquisitions made sense immediately and others took time to understand the how it plays in the larger picture.
Beats is just a marketing machine, not much different than Apple, but Apple has great product behind them. Beats does not, as a person who has a 20 yrs old studio grade head set which still works great and I pay no where the price Beats headphone cost they are a far better product than Beats.
Headphone use to be rated on the ability to not distort sound, but to day it seems like people are willing to pay a lot more for something the actually distorts sound.
I am not sure if paying for Beats music subscribers if worth that kind of money. Look over the last 15 yrs how many music delivery systems that existed and how people keep jumping from one to another. Consumers have no sticking power with music delivery, because there is no cost to change.
I would image so if the reports of Beats owning the majority of the high-end headphone market and making $1.4 billion in revenue and $250-300 million in profits in 2013. Note that 300,000 Beats Music subscribers at $10 per month is only $36 million per year in revenue.
After [@]Dick Applebaum[/@] kept talking about the Beats app I decided to DL it. I'm not a fan, but I'm also not a fan of any rented music service. I had hoped that I could choose a song and then have it build playlist from it but I didn't see such an option. I do like Genus Playlists in Apple's iTunes and Music app so I'd like for Beats' humanized algorithm to be added to it, but I'm likely not willing to pay for a service to get it, even if it worked exactly how I wanted it to.
Also, their web-based player visually looks nice but unfortunately you need to use mobile version to start the process and it doesn't appear to show any of their automated playlists in that view… both of which I consider a shortcoming. The web app unfortunately still requires Adobe Flash, too, even thought it only looks to use Flash for pooling the music in the background.
PS: [@]sapporobabyrtrns[/@], you may not like the sound quality of their headphones but that doesn't mean it, and the quality of the HW, can't be made better under Apple. As an example, here's an early example of Authentec's fingerprint reader. I think you still had to slide the finger from to bottom along a straight line.
If this succeeds, Apple would obviously market the Beats headphones to their own customer base of over 400 Million credit card holders. A pair of Beats headphones at $200 each, sold to 1 million paying customers equals $200 million. 10 Million units at $200 each equals $2 Billion. 100 million units at $200 each equals $20 Billion.
Looking at the numbers, and the fact that Apple doesn't sell premium headphones in this market, this acquisition makes total business sense.
Apple is primarily a hardware company, and the premium headphone market where people are willing to spend $600 for headphones is what Apple would be after. With Beats, Apple is acquiring an established brand that is already priced at over $200; which will leverage Apple's own reputation as a maker of quality hardware when Apple take the Beats headphones to another level. Apple has the resources and the economies of scale to acquire and license high quality audio technology from headphone manufacturer's such as Sennheiser.
If Apple does make this acquisition, I am looking forward to seeing what headphone designs and technology that Apple will produce; that Apple may have already designed for production far in advance.
Beats will just be the platform.
In the last earnings call I recall Tim Cook saying something along the lines of Apple having 800 million iTunes accounts, most of which are tied to the credit cards. That would mean over 400 million CCs on file, as you say, but I would bet that number is significantly higher than that.
Quote:I would image so if the reports of Beats owning the majority of the high-end headphone market and making $1.4 billion in revenue and $250-300 million in profits in 2013. Note that 300,000 Beats Music subscribers at $10 per month is only $36 million per year in revenue.
After @Dick Applebaum kept talking about the Beats app I decided to DL it. I'm not a fan, but I'm also not a fan of any rented music service. I had hoped that I could choose a song and then have it build playlist from it but I didn't see such an option. I do like that Genus Playlist feature in Apple's iTunes and Music app so I'd like for Beats' humanized algorithm to be added to it, but I'm not I'd want to pay for a service to get, even if it worked exactly how I wanted it to. Also, their web-based player visually looks nice but unfortunately you need to use mobile version to start the process and it doesn't appear to show any of their automated playlists in that view… both of which I consider a shortcoming. The web app unfortunately still requires Adobe Flash, too, even thought it only looks to use Flash for pooling the music in the background.
PS: @sapporobabyrtrns, you may not like the sound quality of their headphones but that doesn't mean it, and the quality of the HW, can't be made better under Apple. As an example, here's an early example of Authentec's fingerprint reader. I think you still had to slide the finger from to bottom along a straight line.
Hey Dude. You could be correct. Apple could make things better in the hardware arena, however in the sound department, Beats has a long way to go... The above is my listening gear of choice. Shure SE 846's, Sony PHA-1, custom ear buds.
"...as a person who has a 20 yrs old studio grade head set which still works great..."
What is the manufacturer/model of your headset?
I would image so if the reports of Beats owning the majority of the high-end headphone market and making $1.4 billion in revenue and $250-300 million in profits in 2013. Note that 300,000 Beats Music subscribers at $10 per month is only $36 million per year in revenue.
After @Dick Applebaum kept talking about the Beats app I decided to DL it. I'm not a fan, but I'm also not a fan of any rented music service. I had hoped that I could choose a song and then have it build playlist from it but I didn't see such an option. I do like Genus Playlists in Apple's iTunes and Music app so I'd like for Beats' humanized algorithm to be added to it, but I'm likely not willing to pay for a service to get it, even if it worked exactly how I wanted it to.
Also, their web-based player visually looks nice but unfortunately you need to use mobile version to start the process and it doesn't appear to show any of their automated playlists in that view… both of which I consider a shortcoming. The web app unfortunately still requires Adobe Flash, too, even thought it only looks to use Flash for pooling the music in the background.
PS: @sapporobabyrtrns, you may not like the sound quality of their headphones but that doesn't mean it, and the quality of the HW, can't be made better under Apple. As an example, here's an early example of Authentec's fingerprint reader. I think you still had to slide the finger from to bottom along a straight line.
I agree with the premise of your post, it certainly is possible for the hardware and sound quality to improve under Apple. Although the Authentec example you gave is a bit of a misrepresentation. It's not like Apple bought Authentec when there fingerprint scanning technology was at that stage. By the time Apple bought Authentec the actual fingerprint technology was ready, I remember reading an article mentioning that Authentec lobbied the technology to several smartphone manufacturers. In the 8 months or so (which isn't a lot of time) between the acquisition and start of the production of the 5S I imagine some small refinements were made but they probably focused on the seamless integration of the technology rather than drastically improving the technology itself.
Nevertheless I definitely agree with you about Apple being capable of improving upon the Beats hardware.
I just realized that most people are upset cause of racism and nothing else. Apple might have a black guy who curses working as an executive, as opposed to a white guy who drops acid.
That's not true at all. Nice try. It's not like anyone even pointed out the fact that he was "crip walking" in the video. They just feel that Beats is not a good purchase.
Sure, I see your point about the picture I posted and they certainly improved on their own between that time and when Apple bought them, but how much did Apple do to make Touch ID as small, fast and secure as it is? Did AuthenTec's scanner also enable with a capacitive sensor ring? Did AuthenTec's scanner also work that fast? Did AuthenTec's scanner also use a "secure enclave" to store the fingerprint hashes? Did AuthenTec's scanner store the fingerprints or just a hash? Could it be used in as many directions as Touch ID?
I don't know the answer to any of these questions but I do know I haven't seen a single AuthenTec demo that even came close to what Touch ID offers. In fact, I was very skeptical and pleasantly surprised that Touch ID was more convenient (i.e.: faster) than inputting a 4-digit PIN.
With headphones we're talking about relatively simplistic HW. If the sound is too geared for bass (which seems to be the problem with the original headphones, not the variety they have now for various professionals) that doesn't seem to be hard to change. As for aesthetics it's not my thing but the construction always looked good. I haven't read anything about them falling apart quickly, but even if they did Apple could fix that. I would expect Apple to go for accurate sound with premium headphones as much as they go for accurate displays on their devices even if that lack of over saturation does make some think that it's not as good as their competitor's devices.
I just realized that most people are upset cause of racism and nothing else. Apple might have a black guy who curses working as an executive, as opposed to a white guy who drops acid.
Yeah, that's the real reason. You offer a brilliant and well thought out analysis. Anybody who thinks that the Beats deal is questionable and anybody who thinks that Beats headphones aren't good are really just posting from their computers while donning white hoods.
As for me, I'm off to a klan meeting, right after I finish up with this post. I also have a confederate flag as my desktop picture.
Beats has a bad reputation with many people (just read various reactions to this rumor all over the web), and maybe it has something to do with the fact that many people are not impressed by their headphones. And maybe it has something to do with their very long association with Monster Cable which lasted for many years.
I still think that this deal should be called off, even if they were in talks, due to the amateurish and unprofessional video that was leaked. People like to say what Steve Jobs would do, and he's of course no longer here, but I do know what he has done in the past when outside companies leaked details and information about their associations with Apple.
I also find it hilarious that Tim Cook, who promised to double down on security and Tim Cook and Apple, who have been very active in making their voices known about equal rights would choose to associate themselves with a misogynistic homophobe.
I do think that Iovine is talented, Dr. Dre doesn't impress me.
Is that right?? Lol.