Apple wants Beats Music, but likely to keep Beats hardware alive after deal - report

Posted:
in General Discussion edited May 2014
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.

Beats Music


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.
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Comments

  • Reply 1 of 168
    pazuzupazuzu Posts: 1,728member
    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.
  • Reply 2 of 168
    awilliams87awilliams87 Posts: 264member
    [QUOTE]Originally Posted by pazuzu View Post

    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.
    [/QUOTE]

    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.
  • Reply 2 of 168
    awilliams87awilliams87 Posts: 264member
    They'll probably let Beats operate independently as it has.
  • Reply 4 of 168
    pazuzupazuzu Posts: 1,728member
    When does Clive Davis join Apple's Board?
  • Reply 5 of 168
    SpamSandwichSpamSandwich Posts: 33,407member
    Then again, didn't this whole rumor originate from Bloomberg?
  • Reply 6 of 168
    This report if you call it that is false and misleading! Does apple need the streaming to compete with pandora and others? Yes, but they will not pay that amount for just the streaming! The hardware is the main objective, it comes with a major sponsorship of athletes from baseball players to basketball players and many UFC fighters who wear these products in the public eye and within their events. No one wears apple headphones coming down for a fight in the UFC. No matter what is said, these are the most notable and fashionable headphones on the market. It doesn't matter about quality of sound when it comes to the bass heads around the world, many people prefer bass over quality anyway. The market for super high end headphones is small compared to the people who buy beats.

    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...
  • Reply 7 of 168
    maestro64maestro64 Posts: 5,036member

    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. 

  • Reply 8 of 168
    solipsismxsolipsismx Posts: 19,566member
    Apple wants Beats Music, but likely to keep Beats hardware alive after deal

    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.

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  • Reply 9 of 168
    inteliusqinteliusq Posts: 111member
    If Apple were to make this acquisition, it would be a strategic business move. Beats is already perceived as a premium brand, which compliments Apple (as a premium brand). Knowing Apple, they would leverage their engineering and design expertise to improve the Beats headphones in both design as well as sound quality.

    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.
  • Reply 10 of 168
    solipsismxsolipsismx Posts: 19,566member
    inteliusq wrote: »
    If this succeeds, Apple would obviously market the Beats headphones to their own customer base of over 400 Million credit card holders.

    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.
  • Reply 11 of 168

     

    Quote:

    Originally Posted by SolipsismX View Post





    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.

  • Reply 12 of 168
    Quote:

    Originally Posted by Maestro64 View Post

     

    "...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?

  • Reply 13 of 168
    justp1ayinjustp1ayin Posts: 212member
    I know more about Dre than Iovine, but Dre fits in with the apple mentality. Running his record label, he believed in releasing a product only when it was perfect (he's worked on his last cd for about 13 years now and refuses to release it because he doesn't feel it's good enough, and did that with many artist). The music might not be what you like but in his genre, he release a ton of number 1 CDs. And as far as the cursing goes, he uses ghost writers, he isn't a rapper, so he just said the words. Maybe thatll make some of you feel better instead of posting how he will buy all that "bling" and waste all his money. (Apparently no one realizes that he managed to come from nothing to having 500 million before this deal)
  • Reply 14 of 168
    chipsychipsy Posts: 287member
    Quote:

    Originally Posted by SolipsismX View Post





    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.

  • Reply 15 of 168
    awilliams87awilliams87 Posts: 264member
    Quote:
    Originally Posted by justp1ayin View Post



    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.

  • Reply 16 of 168
    solipsismxsolipsismx Posts: 19,566member
    chipsy wrote: »
    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.

    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.
  • Reply 17 of 168
    rogifanrogifan Posts: 10,669member
    So. Apple wants the streaming music but the purchase price is all about the brand and headphones.
  • Reply 18 of 168
    apple ][apple ][ Posts: 9,233member
    Quote:



    Originally Posted by justp1ayin View Post



    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.

  • Reply 19 of 168
    justp1ayinjustp1ayin Posts: 212member
    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 was not a good purchase.

    pazuzu wrote: »
    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.

    Is that right?? Lol.
  • Reply 20 of 168
    rogifanrogifan Posts: 10,669member
    inteliusq wrote: »
    If Apple were to make this acquisition, it would be a strategic business move. Beats is already perceived as a premium brand, which compliments Apple (as a premium brand). Knowing Apple, they would leverage their engineering and design expertise to improve the Beats headphones in both design as well as sound quality.

    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.
    How is Beats perceived as a premium brand? Just because their headphones are expensive? I would argue Beats is perceived as an overpriced brand. I don't get why Apple would want to be associated with that.
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