To this day I still see very little evidence that spending $3B on Beats was worth it. If there is any increase in the "other" line on Apple's financials it's due to Watch, not Beats headphones.
this comment form bug is killing me
Ireland said:
I disagree. I think it was a good purchase. It allows Apple to play in the sandbox of creating new audio accessories without fiddling with the Apple brand too much. And the Beats brand suits music wearables and speakers better.
It's 24 days worth of Apple profit; not a major investment from Apple's POV and it allowed them to get buy a lot of talent in the music world that understood the steaming business somewhat.
As to the culture clash, as an outsider it's tricky to know what's actually going on there, really.
And from a pure monetary POV I see them getting that money back easily with ownership of the most popular and profitable headphone brand. I think it could have been a far worse 1.0 release. It happened pretty quick and allows them now to iterate.
My one contention is Apple should have learned from Ping and Connect should have instead being an automatic filter-able Twitter stream of the artists from users music collection or something. Other than something simple like this it should probably not exist.
One concern I think is these improvements appearing to be iterating in public and Apple making changes after public complaints. If they're going to continue doing that then the iteration needs to happen more than once a year.
To this day I still see very little evidence that spending $3B on Beats was worth it. If there is any increase in the "other" line on Apple's financials it's due to Watch, not Beats headphones. And it sure seems there was/is a definite culture clash Iovine and the Beats team in LA and Apple employees in Cupertino. Was it not possible to get a streaming service off the ground without Jimmy Iovine? I find that hard to believe. Unless Eddy Cue isn't the master deal maker he's made out to be.
Tim mentioned at the time of the acquisition that the Beats acquisition was $1B in annual accretive revenue, i.e. each year Beats brings in $1B to Apple. At that rate, the (mainly hardware) sales alone would likely pay off the acquisition price in three years-or 2017. I see value in that.
To this day I still see very little evidence that spending $3B on Beats was worth it. If there is any increase in the "other" line on Apple's financials it's due to Watch, not Beats headphones. And it sure seems there was/is a definite culture clash Iovine and the Beats team in LA and Apple employees in Cupertino. Was it not possible to get a streaming service off the ground without Jimmy Iovine? I find that hard to believe. Unless Eddy Cue isn't the master deal maker he's made out to be.
Tim mentioned at the time of the acquisition that the Beats acquisition was $1B in annual accretive revenue, i.e. each year Beats brings in $1B to Apple. At that rate, the (mainly hardware) sales alone would likely pay off the acquisition price in three years-or 2017. I see value in that.
$3 billion? Still view this as a ridiculous acquisition.
Assuming all 13 million subscribers pay $10/month Apple Music (built on the Beats platform) is generating $1.6B in revenue annually - which alone would probably justify the price. For comparison Apple Music has a little less than half the subscribers of Spotify which is valued at $8-9 B. Further Apple sells a lot Beats hardware which at a high margin. Beats hardware alone is arguably a several hundred million to billon dollar business. $3B by most metrics is a reasonable price.
Yes. Beats was estimated by Tim to bring in $1B per year. I imagine with the additional marketing and sales muscle, beats hardware brings in much more revenue that that. then, on top of hardware, you can add the profit from the Apple Music subscription revenue.
Those interested in the benefits of the Beats acquisition might also note that Beats was probably one of the strongest brand identities of any company from the last decade. Look at all the young athletes who will wear colorful Beats headphones to interviews and photo shoots simply as a fashion statement. Beats is resonant with communities and demographics that Apple has yet to strongly connect with. And when you look at all of the marketing videos Apple has produced in the last 24 months it is very clear that they are ready to reach out to those underserved communities.
Music and musicians have been the primary driver of Apple's overall business for a long time. The functionality of iPod and iTunes were what first caught mainstream attention; the prevalence of ProTools probably had a lot to do with the decent hardware that became available, and the glowing Apple logos emanating from every DJ booth in the world gave the youth a clue that spending $2000 every year on a laptop was a good way to turn your passion into a high-paying job. Not to mention that the iTunes Store was the predecessor of all "cloud services" and the technology developed therein has been leveraged to excellent effect.
People love to say that Beats headphones aren't the best at that price, but they do sound great, and they have the durability, portability, and comfortability to edge out just about anything else when the wearer is going out in public. It's a beautiful brand that refuses to compromise on either form or function - much like Apple. When you can create high-grade hardware in incredible quantities, just a few years after entering a saturated market, and generate unmatched visibility for your icons and logos and colors and ad-hoc spokespeople, while filling a series of needs that has exponentially ratcheted up (as people listen to more music and have access to high-definition stuff on the go), I don't think you need to really fret about the price of the acquisition.
Apple and Beats should be using AIrPlay to build complete whole home wireless speaker systems, and licensing AirPlay to TV, Audio, and Phone Manufacturers so that any device can airplay to any speaker in the realm of the home.
Tim mentioned at the time of the acquisition that the Beats acquisition was $1B in annual accretive revenue, i.e. each year Beats brings in $1B to Apple. At that rate, the (mainly hardware) sales alone would likely pay off the acquisition price in three years-or 2017. I see value in that.
That was gracious. Top line, revenue; bottom line, profit. Revenue does not necessarily bring in profit, but it does bring in cash flow-one indicator of a healthy company. The profit margins on Beats hardware products are significant (maybe 50% plus?), equaling perhaps a half billion dollars a year in net income (profit). The profit on Apple Music is more modest, owing to the profit sharing agreements with the artists, labels and publishing rights holders.
Thought you were done crying about the Beats deal months ago.
Yeah, if the Other category makes any money it's due only to Apple Watch not Beats, ever. /s Beats hardware alone makes over a $1Billion a year. Heck, one year they made over a billion with $0 in advertising. If that isn't valuable or worth $3 billion then nothing ever will be to the anti-Beats critics. Heck, I can't help but grin when someone wearing Beats headphones pulls out an android.
Apple could have built a streaming service on their own but Iovine IS the master deal maker. It surprises me how many people don't know who he is on tech sites. You always complain that Eddy Cue has too much on his plate and it affects quality but suggest he make all the deals at Apple Music too?
Hey I'm just going by Apple's earnings call where Luca said the increase in "other" category was over 100% Watch. That means iPod, Beats and accessories are down sales wise. Notice too that Apple rarely talks about Beats headphones and rarely features them on the front page of apple.com.
It may be more likely that the over 100% increase of "Other" from Watch can be explained more by a precipitous decline in iPod than in Beats.
Hey I'm just going by Apple's earnings call where Luca said the increase in "other" category was over 100% Watch. That means iPod, Beats and accessories are down sales wise. Notice too that Apple rarely talks about Beats headphones and rarely features them on the front page of apple.com.
It may be more likely that the over 100% increase of "Other" from Watch can be explained more by a precipitous decline in iPod than in Beats.
Perhaps but let's face it Apple bought Beats at its peak. And considering Apple hardly ever talks about Beats headphones or advertises them on the front page of apple.com I think it's safe to say they're not a big part of Apple's business (or they might even be in decline).
Anyone who has been dealing with M&A should be able to confirm that such an "intentional clash" is what everyone fears most and is avoided at all costs due to the unpredictability of the outcomes, eg key people leaving you'd wanted to stay. And no, just because it's a clash it will not give birth to something ground breaking.
What at you do if you want to infuse fresh ideas and blood you either replace people without further ado, or you lead it into a constructive discourse, not a clash.
Still no word on those rumoured high-res (24bit) music streaming and download options. And if that recent iPhone 7 part leak is real...the one that seems to indicate the headphone jack is staying. Apple might not see the point of offering such an option as a value added reason to drop that headphone jack in the first place. Still there is Qobuz, Tidal and a number of other download sites where you can get this option. Its just that its pain in the arse to get those high-res files to work on an iPhone or iPad! On a Mac (and most Android devices nowadays too) its built-in as standard.
Those interested in the benefits of the Beats acquisition might also note that Beats was probably one of the strongest brand identities of any company from the last decade. Look at all the young athletes who will wear colorful Beats headphones to interviews and photo shoots simply as a fashion statement. Beats is resonant with communities and demographics that Apple has yet to strongly connect with. And when you look at all of the marketing videos Apple has produced in the last 24 months it is very clear that they are ready to reach out to those underserved communities.
Music and musicians have been the primary driver of Apple's overall business for a long time. The functionality of iPod and iTunes were what first caught mainstream attention; the prevalence of ProTools probably had a lot to do with the decent hardware that became available, and the glowing Apple logos emanating from every DJ booth in the world gave the youth a clue that spending $2000 every year on a laptop was a good way to turn your passion into a high-paying job. Not to mention that the iTunes Store was the predecessor of all "cloud services" and the technology developed therein has been leveraged to excellent effect.
People love to say that Beats headphones aren't the best at that price, but they do sound great, and they have the durability, portability, and comfortability to edge out just about anything else when the wearer is going out in public. It's a beautiful brand that refuses to compromise on either form or function - much like Apple. When you can create high-grade hardware in incredible quantities, just a few years after entering a saturated market, and generate unmatched visibility for your icons and logos and colors and ad-hoc spokespeople, while filling a series of needs that has exponentially ratcheted up (as people listen to more music and have access to high-definition stuff on the go), I don't think you need to really fret about the price of the acquisition.
I agree with you in that Beats marketing and image amongst youth culture is unmatched by any other brand in this category. But excellent build and sound quality...no way! Before Apple's acquisition of Beats they were over-priced plasticky crap, and still are to a certain extent. Even though build quality of new models released after Apple's purchase have improved a lot and I expect will continue to do so. But the sound quality is still sub-par with over-emphasis of bass at the cost of the rest of the frequency range. Just compare them to near or equally priced headphones from B&W, Sennheiser, Philips Fidelio line etc... and you can hear the difference, I certainly did!
It would have taken at least a year for Apple to build out a streaming business themself. Buying Beats was a good decision.
13 million subs x $120 a year = $1.5 billion in revenue
This. The album market and the pay-per-track markets are dead or dying. The only way Apple could stay in the game is with a streaming service, and simply buying one (and technically the best, if not most popular, IMHO) was a far better strategy than sinking developer resources into another Ping-style pit.
iTunes has also been a hub of music “mindshare” for the entire iPod-era. Beats bought the company a new lease on that slice of pop culture relevance.
Here’s hoping that Apple Music UI overhaul is successful. Spotify is trash, just a retread of iTunes before iTunes went to hell, but I got a look at the Tidal desktop client the other day and was a little shocked by how good it is. Who knew?
P.S. I'm betting heavy that iTunes will be replaced with a new Apple Music app in OS X 10.12. The new pattern established with Maps, Photos and Notifications is “big new apps in iOS first, OS X one year later.”
Tidal is one of the best services out there, both operatively and sound quality wise, as is another French based service called Qobuz. They're both better than Music at the moment.
To this day I still see very little evidence that spending $3B on Beats was worth it. If there is any increase in the "other" line on Apple's financials it's due to Watch, not Beats headphones. And it sure seems there was/is a definite culture clash Iovine and the Beats team in LA and Apple employees in Cupertino. Was it not possible to get a streaming service off the ground without Jimmy Iovine? I find that hard to believe. Unless Eddy Cue isn't the master deal maker he's made out to be.
I wish the fighting had led to Cue's departure. He's the real weak link in the e-suite.
One concern I think is these improvements appearing to be iterating in public and Apple making changes after public complaints. If they're going to continue doing that then the iteration needs to happen more than once a year.
Iterating is one thing but this is talk of a redesign. More than one redesign once per year is pushing it.
$3 billion? Still view this as a ridiculous acquisition.
Assuming all 13 million subscribers pay $10/month Apple Music (built on the Beats platform) is generating $1.6B in revenue annually - which alone would probably justify the price. For comparison Apple Music has a little less than half the subscribers of Spotify which is valued at $8-9 B. Further Apple sells a lot Beats hardware which at a high margin. Beats hardware alone is arguably a several hundred million to billon dollar business. $3B by most metrics is a reasonable price.
Definitely not worth the $3 BILLION acquisition.
They should have bought out Sennheiser or another "Real Premium" brand and avoided these shenanigans.
It's like Apple merging with a KIA w/ fart can exhaust car brand when they should have partnered with Mercedes / Porsche / Ferrari.
FYI Beats are trash.
In the audio world - Beats are "shiny plastic" and inferior components to begin with.
Totally doesn't fit the Apple high-quality culture and this is why they are having problems.
While I agree $3 billion is a lot, and that they likely overpaid to acquire Beats - it is roughly 1% of their overall savings. Not sure why everyone is so focused on the advantages they expected to get from the purchase either. This was likely a strategic buyout of a very competitive service. Better to fold them into their own umbrella than to have to compete with them on the market. Considering the potential of the streaming music industry, $3 billion now may well be a drop in the bucket in the future.
How did they overpay? This is a cash/profit generating business. It's likely already paid for itself (or close to paying for itself).
Man, I wish somebody would actually not repeat total nonsense like that.
Wow, that's the first time I've seen Jimmy Iovine's name dropped on AI since he double-talked Tim Cook into overpaying for Beats. What did Apple expect when it mixed inner city rap impresarios with Silicon Valley wire-heads? Harmony and a good fit? Was the bad fit and disharmony really "intentional" or is that Apple's 20-20 hindsight PR spin? I bought every product Apple released until Beats. I didn't even try the "free" trial of Apple Music, which wreaked havoc with many users music libraries. It apparently wasn't very good out of the gate so now it's being relaunched. BTW, did anyone see that Pandora millennial commercial? Very poignant.
So, a company being paid back in a few years is, "overpaying"; it's a good thing you're not buying any businesses yourself then.
Comments
http://www.investopedia.com/ask/answers/122214/what-difference-between-revenue-and-profit.asp
Yes. Beats was estimated by Tim to bring in $1B per year. I imagine with the additional marketing and sales muscle, beats hardware brings in much more revenue that that. then, on top of hardware, you can add the profit from the Apple Music subscription revenue.
Music and musicians have been the primary driver of Apple's overall business for a long time. The functionality of iPod and iTunes were what first caught mainstream attention; the prevalence of ProTools probably had a lot to do with the decent hardware that became available, and the glowing Apple logos emanating from every DJ booth in the world gave the youth a clue that spending $2000 every year on a laptop was a good way to turn your passion into a high-paying job. Not to mention that the iTunes Store was the predecessor of all "cloud services" and the technology developed therein has been leveraged to excellent effect.
People love to say that Beats headphones aren't the best at that price, but they do sound great, and they have the durability, portability, and comfortability to edge out just about anything else when the wearer is going out in public. It's a beautiful brand that refuses to compromise on either form or function - much like Apple. When you can create high-grade hardware in incredible quantities, just a few years after entering a saturated market, and generate unmatched visibility for your icons and logos and colors and ad-hoc spokespeople, while filling a series of needs that has exponentially ratcheted up (as people listen to more music and have access to high-definition stuff on the go), I don't think you need to really fret about the price of the acquisition.
It may be more likely that the over 100% increase of "Other" from Watch can be explained more by a precipitous decline in iPod than in Beats.
What at you do if you want to infuse fresh ideas and blood you either replace people without further ado, or you lead it into a constructive discourse, not a clash.
I call this a CYA statement.
Tidal is one of the best services out there, both operatively and sound quality wise, as is another French based service called Qobuz. They're both better than Music at the moment.
Iterating is one thing but this is talk of a redesign. More than one redesign once per year is pushing it.
Man, I wish somebody would actually not repeat total nonsense like that.