Apple's next NeXT: how buying Beats launched a sneak attack on the future of sound

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in iPod + iTunes + AppleTV edited December 2017
When Apple announced it was acquiring Beats in 2014, lots of critics scoffed and some even suggested the purchase was evidence that Tim Cook was just grasping at straws, with a good measure of racist-tinged denigration of the value of the LA-based music firm on the side. Why was the most valuable, competent and profitable tech company on earth prepared to spend $3 billion--by far the most it had ever paid in an acquisition--to get Beats?

Beats

Reading the audio file

Apple has been selling the world's highest-premium, mass market notebooks, phones and tablets--virtually unchallenged in its profitable, high-end market tier--for more than a solid decade now. However, the company increasingly found itself behind the marketing curve in one respect: high quality audio hardware.

Despite being loaded with advanced processors, some of the best displays available and many other exceptional components--such as its excellent MacBook trackpads or the Touch ID that users love so much that many were skeptical that Apple could improve upon it with the new Face ID on iPhone X--Apple's product lineup was beginning to sound flat--literally.

Few were seriously complaining about the sound quality of MacBooks, iPads or iPhone--after all, if you want good sound, you plug in headphones, hook up speakers or use a wireless Bluetooth boombox, right? Who would reasonably expect that a light, thin handheld phone or tablet could play good sound?

At the same time, rivals were seeking to use premium audio as a feature to differentiate their own offerings from Apple's. Amazon's basic Kindle Fire tablet first shipped with stereo speakers back in 2011. That same year HTC announced its first phone featuring a "Beats Audio sound enhancer." In fact, the potential of Beats audio tech to help HTC sell its products had prompted the Taiwanese firm to buy a majority stake in Beats. A few years earlier, HP had also incorporated Beats audio software into its premium Envy laptops.

In contrast, Macs and iOS devices had only basic built-in sound. The first four generations of iPad all only supplied a mono speaker. Even Apple's first stereo tablets (iPad mini in 2012 and iPad Air in 2013) put both speakers on the bottom end, providing little real separation (and particularly bizarre audio out one side when held in landscape).

By 2014, Amazon was offering a lineup of tablets with multiple speakers on each end, and its fanciest Fire HDX tablet sported Dolby's Digital Plus and Atmos technology for immersive audio. Apple, however, had been working behind the scenes to catch up and erase that disparity in audio hardware.

This all happened before

Apple's story of acquiring Beats bears a lot in common with its original acquisition of NeXT in 1997, AuthenTec in 2012 and PrimeSense in 2013; all three of those companies had been working for years with Apple's competitors (including Dell, Motorola and Microsoft, respectively).

But after Apple identified each as a technology firm it wanted to strategically own, those competitors either left to find new partners or were shut off by Apple. Then, after a few years of internal work, Apple relaunched modern updates of the acquired technology in a way that established a huge lead for the company. Apple identified Beats as technology it wanted to own

NeXT became macOS X and later iOS; AuthenTec developed into Touch ID and PrimeSense recently emerged as iPhone X's TrueDepth sensor supporting Face ID. There are a series of other companies Apple has similarly acquired to turn into new hardware features, apps, services or development frameworks benefiting its ecosystem. None have been as large as Beats.

Apple identified Beats as technology it wanted to own at some point prior to its 2014 announcement to buy the company. Just as with NeXT, AuthenTec and PrimeSense, Beats' former partnerships with HTC and HP dissolved, giving Apple full access to the firm's hardware portfolio (mostly headphones and wireless audio speakers) and Beats' streaming music service, which would form the basis of Apple Music.

Since 2014, Apple has also released new versions of Beats' headphones and its Beats Pill speaker, as well as its own Apple-branded AirPods, which share a custom-designed W1 silicon chip with a line of wireless headphone options sold under the Beats subsidiary.

AirPods

An audio refresh

However, another shift at Apple often overlooked since it acquired Beats is the rapid advancement of audio features on iPads, iPhone and Macs. In 2015, iPad Pro introduced four speaker sound that recreated real stereo audio in both orientations. In 2016, new Touch Bar MacBook Pro models introduced a major audio upgrade providing louder, wider sound with twice the dynamic range.

2016 MacBook Pro


Last year's iPhone 7 line similarly began delivering louder, wide orientation stereo audio leveraging the earpiece speaker. It also created sound waves by ditching the legacy audio minijack in favor of wireless audio and digital Lightning audio, mainstreaming both higher quality cabled headphones and the extremely popular new AirPods, which invigorated Apple's standing in wearables. This year's iPhone 8 and iPhone X have also significantly enhanced their stereo speaker's audio quality and loudness.

iPhone 7 stereo speakers


Apple had been building audio products for years; in fact it had rebuilt itself into profitability in the early 2000s during the iPod era, where it revolutionized personal audio playback for consumers around the world, moving listeners from unwieldy CD players, flakey radios, and limited capacity MiniDisc and Flash RAM players to portable hard drives with reasonably great sound quality.

And, of course, over the same period Apple built iTunes and delivered increasingly high quality music downloads and began distributing digital movies with Dolby Digital AC3 5.1 audio for playback on Apple TV. Apple had also developed its own low latency, high performance Core Audio subsystem in macOS, then ported it to iOS, giving its mobile platform strong support for music creation, something that's virtually missing entirely on Android.

However, the acquisition of Beats jumpstarted Apple's flatlined audio hardware ambitions. Whether that was due to an influx of Beats audio technicians or simply a strategic refocusing upon Apple Music as an ecosystem feature, sound reproduction at Apple has greatly improved across its product line since buying Beats.

What's NeXT for Beats

While industry observers historically only saw NeXT as "another OS," AuthentTec as merely a fingerprint sensor, PrimeSense as just a structure sensor and Beats as just a headphone company, each enabled a new leap in capabilities well beyond what bloggers of the day could envision.

NeXT radically improved software development and portability, not just making Macs vastly better and more reliable as conventional PCs but also making it possible to move the Mac platform into the light, thin, battery-optimized mobile world with iOS. More than just a biometric gimmick, Touch ID radically changed the real-world security of mobile devices while enabling entirely new features such as Apple Pay. We're just beginning to see what TrueDepth can do, but its clearly stoking demand for iPhone X.

Apple's new focus on audio quality since the acquisition of Beats is delivering newly competitive features in products like Apple TV 4K, which now supports Dolby Digital Plus 7.1 audio and will introduce support for the newly emerging Dolby Atmos, which presents and interprets realistic 3D soundscapes based on the hardware profile of the speaker configuration.



Beats' popular youth-oriented brand--associated with professional musicians and sports figures--is used by Apple to sell headphones and Bluetooth speakers (or to offer them as an incentive to buy Apple gear, as it has been offering in its Back To School promotions).

There's another product that shows off more of Apple's future intentions for audio: HomePod. It deserves its own article.

Apple's acquisition savvy

Remember that Apple only acquired Beats three years ago. It's already directly generated two solid new hits: Apple Music and AirPods, as well as a portfolio of revamped Beats products and the retooled audio performance across all of Apple's Mac and iOS devices. The significant lead in audio performance that HP, HTC and Amazon were once touting at the beginning of this decade has evaporated away.

That major shift in audio savvy not only demonstrates Apple's incredible competence in selecting, engaging and implementing strategic acquisitions, but also suggests that the company has the ability to do similar things in the future to surpass rivals who have a temporary edge in specific technologies. Apple has been consistently catching up and surpassing rivals, largely driven by well-considered strategic acquisitions.

Acquisitions do not typically go so smoothly. Google's spectacular flubs in paying $15 billion to acquire Motorola and Next, or Microsoft's similar price paid to take over aQuantive and Nokia are incredible examples of what not to do. HP's mega-acquisition of Compaq was also regarded as a huge mistake and massive destruction of value.

With the $15 billion Apple saved by dodging those bullets (and the $90 billion it saved not buying Netflix, as many simpleton analysts keep advising), it has lots of resources available to seek out valuable, underrated new technologies and use them to build entirely new products and services, as well as radical enhancements to its existing offerings, just as it did with Beats for a mere $3 billion.

Next: Apple's HomePod isn't about Siri, but rather the future of home audio.
Soli
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Comments

  • Reply 1 of 47
    And Siri (even though some don’t like “her”)
    racerhomie
  • Reply 2 of 47
    You have literally no proof that AirPods and HomePod technology was borne out the Beats purchase. It's pure conjecture; Apple typically is developing technology for many years before it sees the light of day, and suggesting that they didn't have a capable audio team before Beats came on board is rubbish. It's also worth noting that many audiophiles and tech reviewers have/had/and do pan Beats products for average or middling audio quality when compared to other brands. This article is simply conjecture and seems to be another DED Apple love fest.
    hammeroftruthrusswBubbaTwoelijahgtallest skilbigcountryentropysbaconstangrevenantrazorpit
  • Reply 3 of 47
    You place headphone technology on par with structured light technology? Headphones have been around a long time. There are far more challenging research areas in electrical engineering than audio.
    elijahg
  • Reply 4 of 47
    You have literally no proof that AirPods and HomePod technology was borne out the Beats purchase. It's pure conjecture; Apple typically is developing technology for many years before it sees the light of day, and suggesting that they didn't have a capable audio team before Beats came on board is rubbish. It's also worth noting that many audiophiles and tech reviewers have/had/and do pan Beats products for average or middling audio quality when compared to other brands. This article is simply conjecture and seems to be another DED Apple love fest.
    Amen!!

    in reality, Pre Apple Beats hardware blows. Just ask anyone who bought Powerbeats, watched them break or fall apart and have Apple ship them to their repair facility in Elk Grove. They end up replacing them and then they do it all over again in 3 months. 

    Apple could give 2 turds for Beats hardware. They wanted the streaming music and Jimmy Lovine. That is what was worth 3 bill to Tim, not the overpriced pos hardware. 

    Now that Apple is making Beats hardware, some of the newer stuff is much better quality (Beats X). They didn't have to buy Beats to make it though, they could have made it without the Beats name. 

    Airpods have no distinguishable attributes that they ever came from any Beats DNA. Same for the Homepod. Beats external speakers have always been crap. That's why they didn't sell very well. Heck Apple throws in a pair of $300 headphones every summer if you buy your college kid a new Mac. You don't see them doing that with any Apple audio products. 

    Sorry DED, I have read and enjoyed your articles since the old RD days, but this time your points don't add up. 
    BubbaTwoelijahgentropysbaconstangcgWerksphilboogieksecadm1airnerdgatorguy
  • Reply 5 of 47
    3-4 years back Apple hired former SSL and Sony Oxford DSP genius Peter Eastty as head of SoC Audio Processing. They also hired Dana Massie formerly of Waves Audio. These were cutting edge hires that said Apple was serious about audio.
    jahbladerusswelijahgbaconstangphilboogieadm1airnerdpatchythepiratecornchip
  • Reply 6 of 47
    ciacia Posts: 43member
    At the bottom of the article is says Google spent $15 billion buying Motorola and Next, I believe you meant to say Motorola and Nest.
    StrangeDays
  • Reply 7 of 47
    Apple could have added premium sound to its existing products but Beats allows Apple to charge $500. I stopped buying Apple products when they introduced dongles as a means to milk the consumer.
    aylkairnerd
  • Reply 8 of 47
    Apple could have added premium sound to its existing products but Beats allows Apple to charge $500. I stopped buying Apple products when they introduced dongles as a means to milk the consumer.
    Since they never did that, I presume you are still buying and enjoying Apple products.
    StrangeDaysjahbladeNameo_radarthekatjony0watto_cobra
  • Reply 9 of 47
    You have literally no proof that AirPods and HomePod technology was borne out the Beats purchase. It's pure conjecture; Apple typically is developing technology for many years before it sees the light of day, and suggesting that they didn't have a capable audio team before Beats came on board is rubbish. It's also worth noting that many audiophiles and tech reviewers have/had/and do pan Beats products for average or middling audio quality when compared to other brands. This article is simply conjecture and seems to be another DED Apple love fest.
    You lost bro?? Ever read a newspaper? Welcome to the concept of an opinion columnist. 
    jahbladed_2LordeHawkphilboogiemacguijony0watto_cobra
  • Reply 10 of 47
    This is conjecture.

    Apple needed to differentiate their laptops more - especially with the 16GB RAM limit on pro laptops - so the Touch Bar and the speakers were some nice features to add regardless of Beats. Apple had better sound technology prior to Beats as well. the AirPods are also Apple's design and better than the Beats X. The HomePods had nothing to do with Beats. Apple had developed a different home speaker a long time ago. but this is new Apple tech and of course, it's going to be better. Beats didn't have amazing tech or engineering. that's all Apple. Beats at Apple is simply a brand.

    I doubt there was much of a "racist tinge"  to the criticism either. Most of what was going around had to do with the fact that Beats software was lame, the products inferior, and what appeared to be little upside for so much money spent. 

    You could argue that Andre Young's "ear" was a good buy - but for how much? And there are others with a great ear for sound as well.

    Beats was an OK buy. It brought some connections, some cultural relevancy amongst a demographics it may have felt it could do better in, but also brought some confusion and a lack of focus, causing the usual apple simplicity to take a nosedive - most prominently seen in the launch of Apple Music, which was a mess. 

    It also brought some opinions on users that were unfavorable with users - ie. curation is great and all, but you have to make sure the user can easily alter what the company THINKS someone wants. 

    Beats had nothing to do with the future of sound. Apple had been making progress here for a long time running - and as they identify areas to improve, it is only natural that they do what Apple does - make the best there is.

    Beyond that, let's remember that the Beats purchase came at a time when Tidal was formed as nothing more than a coup attempt to strike at Apple's music success. Many artists and those who felt attached those artists were publicly in support and misleading attitudes such as "Apple is interfering with artistry" - when all they were doing was protecting their contracts and not allowing rival organizations to steal their content - were making headlines. 

    Beats was a political move and a cultural one, not a technological one.

    If you like it, cool. Personally, I think it's OK. Not great. Not horrible. A good business move in some ways.

    but let's not kid ourselves and pretend it was some technological tour de force with foresight that Nostradamus could only dream of.

    This guy's articles are usually right on the money and full of factual research when he stays out of politics. Not so here, but everyone deserves to have a few misses.
    edited November 2017 baconstangwonkothesanephilboogieNameo_airnerdpatchythepirategatorguycornchip
  • Reply 11 of 47
    Apple could have added premium sound to its existing products but Beats allows Apple to charge $500. I stopped buying Apple products when they introduced dongles as a means to milk the consumer.
    Cool story bro. Meanwhile, my friends who use the new MBP don't use any dongles on a regular basis (tho they do have a couple in their bag for certain use cases). What are they doing wrong?? How is it they aren't getting milked?? And you do realize USBC is a standard port, and you can buy adapters from any company on Amazon, right?
    LordeHawkracerhomiejony0cornchipwatto_cobra
  • Reply 12 of 47

    I doubt there was much of a "racist tinge"  to the criticism either. Most of what was going around had to do with the fact that Beats software was lame, the products inferior, and what appeared to be little upside for so much money spent. [...]

    Beats was an OK buy. 
    1) If you didn't see the "racist tinge" you didn't spend time on MR or AI. Plenty of old white guys apparently have a problem with rap and laid that directly at the feet of Dr. Dre.

    2) Yeah if by an "OK buy" you mean the #1 accessory brand in Apple stores and returning a profit on the investment within a year, sure it was "OK".... Strangely Apple isn't graded on their profit, which is the air corporations breathe, but by any of a number of pointless metrics one can devise to take away from their financial success and army of enthusiastic customers. If enormous profits and consumer loyalty aren't your metrics of success then I implore you, don't quit your day job. Leave the running of smash success to the folks who get it.
    jahbladerandominternetpersond_2LukeCageSoliradarthekatracerhomiejony0watto_cobra
  • Reply 13 of 47
    agree completely and I feel somewhat proud of myself for my notes on the same thing a short while ago!  http://q10a1.blogspot.com/2017/10/beats.html
  • Reply 14 of 47
    jd_in_sbjd_in_sb Posts: 1,479member
    Great article 
    jahbladewatto_cobra
  • Reply 15 of 47
     Very good article and insightful opinion.
    watto_cobra
  • Reply 16 of 47
    There are far more challenging research areas in electrical engineering than audio.
    Boy is that a slippery assumption... working in the pro audio industry, I could point you to over a dozen experts who would take deep exception to this generalization. Differences in engineering problems are much more of type than degree. It's like saying rugby is a far easier sport to play than American football.
    d_2baconstangcornchip
  • Reply 17 of 47
    Been using a dac since my iphone 4 with Shure se 5 and now iphone 7 with se 846 .. went to listen to beats when apple bought and oh my .. really.. and tried Apple Music and oh my ...wound up with tidal masters... you would think apple being a premium product they would offer premium sound ... not so
    baconstangjasenj1
  • Reply 18 of 47
    SoliSoli Posts: 7,847member
    Apple could have added premium sound to its existing products but Beats allows Apple to charge $500. I stopped buying Apple products when they introduced dongles as a means to milk the consumer.
    So Apple removes the antiquated 3.5mm jack which allowed for other, more important HW to be inside an iPhone as well as increasing the capacity of previous comments which has made it better, and then includes Lightning headphones as well as also included a 3.5mm-to-Lightning adapter for those with older wired headphones… but somehow this was all to get people to buy the 3.5mm-to-Lightning dongle that was included with the iPhone. How the fuck does that make sense to you?

    Let's also keep in mind that Apple sells standalone 3.5mm-to-Lightning dongles for $9 where as Google, following Apple's lead, sold their 3.5mm-to-USB-C dongle for $20 until there was enough outrage that they lowered it to $9 to meet Apple's price….but somehow this was all about making huge profits off dongles. How the fuck does that make sense to you?
    radarthekatracerhomiejony0cornchipwatto_cobra
  • Reply 19 of 47
    SoliSoli Posts: 7,847member
    Beats was a political move and a cultural one, not a technological one.
    1) Which issues of governance was Apple tackling when they bought Beats?

    2) What culture are you talking about with a desire to get into a huge popular headphone company they had been selling in their stores for years? Are "people with ears" really a culture?

    3) Despite all your comments, Beats was a brilliant move by Apple. To deny that it hasn't been hugely profitable with your "I think it's OK. Not great. Not horrible. A good business move in some ways" comment means you really have an innate hated for this "culture" you mention or Dr. Dre, or you just don't understand how successful the purchase has been, which seems unfathomable considering your read this website.
    edited December 2017 radarthekatjony0
  • Reply 20 of 47

    I doubt there was much of a "racist tinge"  to the criticism either. Most of what was going around had to do with the fact that Beats software was lame, the products inferior, and what appeared to be little upside for so much money spent. [...]

    Beats was an OK buy. 
    1) If you didn't see the "racist tinge" you didn't spend time on MR or AI. Plenty of old white guys apparently have a problem with rap and laid that directly at the feet of Dr. Dre.

    2) Yeah if by an "OK buy" you mean the #1 accessory brand in Apple stores and returning a profit on the investment within a year, sure it was "OK".... Strangely Apple isn't graded on their profit, which is the air corporations breathe, but by any of a number of pointless metrics one can devise to take away from their financial success and army of enthusiastic customers. If enormous profits and consumer loyalty aren't your metrics of success then I implore you, don't quit your day job. Leave the running of smash success to the folks who get it.
    About that ROI: AFAIR Beats made roundabout the revenue in one year that Apple spent to buy them. Well, revenue isn’t profit, so if i assume some 25% margin, it would mean about four years to break even. Then, for sure there are additional investment costs to be taken into account as well. So I wonder where the ROI within one year comes from. Did I miss anything?
    baconstangadm1elijahgcornchip
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