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Why Apple Would Acquire Beats Electronics for $3.2 Billion?

By - Source: The Financial Times | B 24 comments

Apple may be interested in the Beats Audio subscription service.

The Financial Times reports that Apple is offering $3.2 billion USD to acquire Beats Electronics LLC, the audio company founded in 2006 by hip-hop producer Dr. Dre and Interscope-Geffen-A&M Records chairman Jimmy Iovine. Sources claim that the deal is expected to be announced as early as next week, but they also caution that there are still some issues to iron out, and the deal could possibly fall apart.

According to the report, a finalized deal means that Apple will acquire Beats’ just-launched Beats Audio streaming music service, and the company’s audio equipment arm, which includes branded headphones and other audio products. The Beats management team will also report directly to Apple CEO Tim Cook. Apple already sells Beats audio products in its Apple stores.

Rumors of Apple jumping into the streaming subscription business have been around for years, but so far the company is only relying on the sales of its music sold through iTunes. Meanwhile competitors have sprouted up such as Spotify and even Google’s own All-Access on Google Play Music, showing that customers are willing to spend a monthly fee for an all-you-can-eat music buffet. The subscription service market raked in $1.1B in 2013, according to a recent report by the IFPI.

In September 2013, Apple launched iTunes Radio, an ad-supported service available to iTunes customers. Like Pandora, users can skip a limited numbers of tracks, create stations and purchase music from those stations in the iTunes Store. Apple also has an iTunes Match service, which for a monthly fee will match the customer’s non-ITunes library with high-quality audio files. These subscribers can get iTunes Radio without ads.

So far Apple has not launched an unlimited music subscription, which is why the deal with Beats Electronics seems more like a definite deal instead of unnamed sources blowing smoke. HTC originally purchased 50.1 percent of Beats back in August 2011, but sold half of that back to Beats in July 2012, and the other half in September 2013. Beats Audio was then launched in January 2014, a service that HTC originally wanted exclusively to rival other phone manufacturers.

If the talks is true and Apple acquires Beats Electronics, the company will have more control over the accessories it sells in the brick-and-mortar stores not to mention an already-established music subscription service. According to Apple executives, the Apple brand needs a revamp anyway.

Both Apple and Beats have declined to comment.

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Top Comments
  • 21 Hide
    pills161 , May 9, 2014 9:34 AM
    Beats are pure crap and the only reason they sell so well is because they have Dre's name behind them and there are so many gullible sheep out there who will pay for the overpriced headphones "these Beats be bangin yo they from Dre, word!". They will make a good home at Apple for sure.
  • 19 Hide
    atavax , May 9, 2014 8:44 AM
    why am i not surprised? those brands seem like a perfect match for each other.
Other Comments
  • 19 Hide
    atavax , May 9, 2014 8:44 AM
    why am i not surprised? those brands seem like a perfect match for each other.
  • Display all 24 comments.
  • 7 Hide
    5tormy , May 9, 2014 9:07 AM
    Apple. Beats. Both healthy snacks are they not? ;) 
  • 21 Hide
    pills161 , May 9, 2014 9:34 AM
    Beats are pure crap and the only reason they sell so well is because they have Dre's name behind them and there are so many gullible sheep out there who will pay for the overpriced headphones "these Beats be bangin yo they from Dre, word!". They will make a good home at Apple for sure.
  • 6 Hide
    lpedraja2002 , May 9, 2014 10:08 AM
    I've seen these headphones but never heard them myself. I know many audiophiles don't like them. Would like to compare one with my Sennheiser HD 428.
  • 0 Hide
    Amdlova , May 9, 2014 10:25 AM
    my friend have one :)  one month and died. first right side and before the left side. plus when shipped on the original box the HV phone broken and lost the guarantee.
    If you wanna buy a good thing get Sennheiser, akg, shure...
  • 9 Hide
    gm0n3y , May 9, 2014 12:15 PM
    Quote:
    why am i not surprised? those brands seem like a perfect match for each other.

    So true. Both overpriced relying more on marketing than product quality.
  • 7 Hide
    makaveli316 , May 9, 2014 1:12 PM
    The funny thing is those chinese dudes are selling them for 1/3 of their original price and the quality is exactly the same.
  • 2 Hide
    agentbb007 , May 9, 2014 1:13 PM
    I sure hope my next iPhone doesn't come with dr dre beats...
  • 4 Hide
    knowom , May 9, 2014 2:02 PM
    Sounds like the perfect yuppie ******* marriage. Apple will buy them then jack up the price another 25%-50% on all ready overpriced audio equipment.
  • 0 Hide
    Blazer1985 , May 9, 2014 2:50 PM
    Because they needed some spare cash for the coffee machine ^_^
  • 8 Hide
    Camikazi , May 9, 2014 3:25 PM
    Quote:
    If Samsung was buying Beats 99% of the people's comments would be change 180 degrees..lol

    Anyone who knows anything knows that Beats are overrated and overpriced so I doubt that would happen since I rarely ever see any good comments about them.
  • 6 Hide
    thesuperguy , May 9, 2014 3:41 PM
    Reading these comments, I feel like an outcast being the audiophile guy who dislikes beats, while also being an apple user.
  • 7 Hide
    fil1p , May 9, 2014 4:00 PM
    Marketing is all that really backs the Beats brand, quality does not. Companies like Sennheiser , Audio Technica, Shure, AKG along with many other brands make much better sound equipment. Those companies have real quality backing their names rather than solely relying on marketing.
    Also while I am not an Apple fan boy I do believe that their products are of quite good quality, significantly better quality than Beats.
  • 4 Hide
    ingtar33 , May 9, 2014 5:27 PM
    so... apple wants to buy an over-hyped piece of overpriced crap? Sounds like a match made in heaven.

    Though I suspect Apple will find the "beats" headphones don't match their quality expectations, i wonder if they'll care (Apple might be overpriced and over-hyped, but at least they make some solid stuff. You can't say Beats makes anything better then crap)
  • -1 Hide
    thesuperguy , May 9, 2014 5:38 PM
    Quote:
    so... apple wants to buy an over-hyped piece of overpriced crap? Sounds like a match made in heaven.

    Though I suspect Apple will find the "beats" headphones don't match their quality expectations, i wonder if they'll care (Apple might be overpriced and over-hyped, but at least they make some solid stuff. You can't say Beats makes anything better then crap)


    Call apple overpriced and I would agree with you, but I feel it is not fair to only give apple this distinction. Take a look at the flagship phones the iphone 5s was meant to compete with. It crushed the htc one and galaxy s4 in many aspects and sold for around the same price. Similarly, the s5 and htc one m8 crush the 5s in many aspects now because they are newer. It is only fair to call all these flagship devices overpriced. That's why the one plus one exists.

    Then of course you have their computer division which truly is overpriced, but that's another story.

  • 1 Hide
    ingtar33 , May 9, 2014 6:27 PM
    Quote:
    Quote:
    so... apple wants to buy an over-hyped piece of overpriced crap? Sounds like a match made in heaven.

    Though I suspect Apple will find the "beats" headphones don't match their quality expectations, i wonder if they'll care (Apple might be overpriced and over-hyped, but at least they make some solid stuff. You can't say Beats makes anything better then crap)


    Call apple overpriced and I would agree with you, but I feel it is not fair to only give apple this distinction. Take a look at the flagship phones the iphone 5s was meant to compete with. It crushed the htc one and galaxy s4 in many aspects and sold for around the same price. Similarly, the s5 and htc one m8 crush the 5s in many aspects now because they are newer. It is only fair to call all these flagship devices overpriced. That's why the one plus one exists.

    Then of course you have their computer division which truly is overpriced, but that's another story.



    frankly i'd take the note3 over all those phones... but that's just me. Yeah, the flagship phone market is pretty overpriced (even the note3)
  • 0 Hide
    back_by_demand , May 9, 2014 11:45 PM
    Beats is a brand, hyped up to look cool but ultimately rubbish compared to other audio companies like Bose. Image conscious but totally shallow and facile, sounds just like Apple so maybe they will go well together.
  • 0 Hide
    thesuperguy , May 10, 2014 8:39 AM
    Quote:
    Beats is a brand, hyped up to look cool but ultimately rubbish compared to other audio companies like Bose. Image conscious but totally shallow and facile, sounds just like Apple so maybe they will go well together.


    Actually beats and bose are often compared hand in hand as being overpriced and reliant on the brand name. Maybe bose is a bit better in that regard but I would have to agree after demoing some of their equipment at a bose store and seeing the prices thereafter.
  • 0 Hide
    brucek2 , May 10, 2014 3:58 PM
    I don't get it as a brand acquisition. Apple is already among the most recognized and most loved brands out there. There are many hum-drum companies who could use a brand like Beats; Apple is not one of them.

    I'm thinking its maybe a combination of - a) access to music deals already in place that will transfer and that Apple couldn't get itself and b) pre-built infrastructure and engr team for streaming that Apple likes and can save some time to market by using instead of rolling its own and c) the real cost is probably much lower but includes a face saving higher tag canceled out by details under the hood.
  • 0 Hide
    abbadon_34 , May 11, 2014 12:53 AM
    While I'd love to rip on Apple, I assume they know Beats is a scam, so whats the real reason? Some sort of payoff? A bribe? Money laundering? I mean it has to be some clandestine op, right? No one pays that money for off the shelf tech and a name?

    Oh, ipod/iphone, right, nevermind.
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