apple-beats-music-1100x1100

As was reported to be in final talks a few weeks ago, Apple has officially closed on a deal to purchase Beats Electronics for $3B. Apple announced the deal in an official press release:

Apple® today announced it has agreed to acquire the critically acclaimed subscription streaming music service Beats Music, and Beats Electronics, which makes the popular Beats headphones, speakers and audio software. As part of the acquisition, Beats co-founders Jimmy Iovine and Dr. Dre will join Apple. Apple is acquiring the two companies for a total of $3 billion, consisting of a purchase price of approximately $2.6 billion and approximately $400 million that will vest over time.

“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” said Tim Cook, Apple’s CEO. “That’s why we have kept investing in music and are bringing together these extraordinary teams so we can continue to create the most innovative music products and services in the world.”

“I’ve always known in my heart that Beats belonged with Apple,” said Jimmy Iovine. “The idea when we started the company was inspired by Apple’s unmatched ability to marry culture and technology. Apple’s deep commitment to music fans, artists, songwriters and the music industry is something special.”

The deal marks the largest acquisition ever made by Apple including its $400 million deal in 1996 to purchase the company NeXT which brought Steve Jobs back to the company (adjusted for inflation, that deal would measure around $600 million in 2014)…

In announcing the acquisition, Apple’s leadership spoke with The New York Times about the deal with Beats.

Beats Electronics, of course, is the maker of a wide range of audio equipment including headphones, earphones, speakers, and car audio systems, although the company is most commonly recognized for it’s brand of high end consumer headphones and speakers.

The company has previously had relationships with Monster and HTC, and its headphones and portable speaker line has maintained a large presence at Apple Retail Store locations throughout its success. The business is said to bring in $1B a year.

IMG_2696

The company also launched a music subscription service (which I’m concerned may go away) in late January to compete with the likes of Spotify, Pandora, and even Apple’s iTunes Radio, although that service is young and has reportedly only added about 200,000 subscribers since launch.

phones-1024x779

Aside from proven marketing success and a fresh music subscription service, the Beats Electronics deal offers up the music industry expertise of record producer Jimmy Iovine and hip-hop artist Dr. Dre, both of whom are founders of the Beats company and rumored to appear at WWDC next month and take leadership roles at Apple.

BowAp_HIQAE6UeW.png-large

Apple to Acquire Beats Music & Beats Electronics

CUPERTINO, California—May 28, 2014—Apple® today announced it has agreed to acquire the critically acclaimed subscription streaming music service Beats Music, and Beats Electronics, which makes the popular Beats headphones, speakers and audio software. As part of the acquisition, Beats co-founders Jimmy Iovine and Dr. Dre will join Apple. Apple is acquiring the two companies for a total of $3 billion, consisting of a purchase price of approximately $2.6 billion and approximately $400 million that will vest over time.

“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” said Tim Cook, Apple’s CEO. “That’s why we have kept investing in music and are bringing together these extraordinary teams so we can continue to create the most innovative music products and services in the world.”

“I’ve always known in my heart that Beats belonged with Apple,” said Jimmy Iovine. “The idea when we started the company was inspired by Apple’s unmatched ability to marry culture and technology. Apple’s deep commitment to music fans, artists, songwriters and the music industry is something special.”

Iovine has been at the forefront of innovation in the music industry for decades, and he has been an instrumental partner for Apple and iTunes® for more than a decade. He has produced or collaborated with some of the most successful artists in the history of the iTunes Store®, helping make it the world’s number one music retailer. Iovine and Dr. Dre are sound pioneers, artists and entrepreneurs.

Beats Electronics has brought the energy, emotion and excitement of playback in the recording studio back to the listening experience and has introduced an entirely new generation to premium sound entertainment. Beats Music was developed by a team of people who have each spent their entire career in music and provides music fans with an incredible curated listening experience.

“Music is such an important part of Apple’s DNA and always will be,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services. “The addition of Beats will make our music lineup even better, from free streaming with iTunes Radio to a world-class subscription service in Beats, and of course buying music from the iTunes Store as customers have loved to do for years.”

In just five years since launch, the Beats “b” has become the brand of choice in the music and sports worlds, and is the market leader in the premium headphone market. Music superstars including Lady Gaga, Lil Wayne and Nicki Minaj have designed their own customized Beats headphones and speakers. Fashion designers and street artists such as Alexander Wang, Futura and Snarkitecture have collaborated on special limited products, while renowned athletes including LeBron James, Serena Williams and Neymar use Beats as a critical part of their training and game day process. Beats has quickly become part of pop culture in the US and with the acquisition the Beats product lineup will be offered in many more countries through the Apple Online Store, Apple’s retail stores and select Apple Authorized Resellers.

Subject to regulatory approvals, Apple expects the transaction to close in fiscal Q4.

Formally established in 2008 as the brainchild of legendary artist and producer Dr. Dre and Chairman of Interscope Geffen A&M Records Jimmy Iovine, Beats Electronics (Beats) comprises the Beats by Dr. Dre family of premium consumer headphones, earphones, and speakers as well as patented Beats Audio software technology and streaming music subscription service Beats Music. Through these offerings, Beats has effectively brought the energy, emotion and excitement of playback in the recording studio to the listening experience and has introduced an entirely new generation to the possibilities of premium sound entertainment.

Beats Music is a subscription streaming music service that focuses on providing a personalized music experience for each user through a unique blend of digital innovation and musical passion. Programmed by a trusted team of well-respected music experts with over 300 years of experience across all genres, Beats Music delivers the right music for any situation, any time, and any preference, personalized to your tastes. The result is an artist-friendly digital music service that does more than simply offer access to music, but one that establishes an emotional connection to it as well.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

46 Responses to “Apple confirms Beats purchase for $3 billion, expects to close the deal in fiscal Q4”

  1. macmann1980 says:

    Could not be more disappointed.

    • jrox16 says:

      Beats is great for a simple reason…. it’s bringing a better music experience to a great many people. They don’t have to be the best headphones and audiophiles don’t have to buy them. Those “best headphones” are ones that don’t look nice enough for the average consumer to wear around. Beats are far from the worst headphones and most average consumers won’t know the difference, they are using the shitty little white earbuds for gods-sakes! But a good looking fashionable set of better headphones (far better than little white earbuds) will get regular folks to use them, and therefore they serve their purpose.

      But more importantly….

      And how do we know Apple won’t inject it’s technological powers and resources into Beats to make those headphones much better?? I bet you they will and then you’ll have both, great sounding headphones, which look “cool” and already have the brand recognition which makes people want to own them. Apple is diversifying here, which is very important because 53% or so of their revenue comes from one source, the iPhone. That’s not good. After Apple uses her resources to improve Beats to be good enough to make audiophiles happy, they will sell tons more of these at high margins and diversify their revenue a little bit, while maintaining the aura of being a company very into music tech.

      This is a brilliant acquisition.

  2. I guess that video cost them 200 milli off the deal… RATS! *snaps finger* LOL

  3. I really appreciated the reference to The Chronic.

  4. ibtrackin says:

    I just can’t believe Apple couldn’t spend a third of that and make a product better than that. People didn’t buy Beats for the sound, it’s the Branding. And even though they’ll be beats, and the sound may stagy the same, i don’t see people buying them because it’s Apple now. I know Beats have patents on the Frequency they play at, but 200,000 user on the Beats app is a joke. why spend 3 billion.. so retarded

    • Ryan Pesso says:

      They spent that much for Jimmy Lovine and Dr. Dre. They are culturally aware people who have loss of talent and could have a lot to offer for apple. Long term wise, this could be a very smart purchase

    • A recognized brand that is seen as cool.
      Number one seller of headphones in the world.
      Two executives that know a lot about the music industry.
      A streaming service that’s available on several platforms.

    • jrox16 says:

      They know what they are doing, I’m sure we’ll see how this helps Apple in time.

    • So, If you read closely, it clearly states that the headphone side of the “Beats” music business carries a $1B dollar return each year. With that information and a mindset of business as usual, the deal is sealed and returning money back into the coffers in 3years. However as we all know it will not be business as usual, as Apple is one of if not the best in the business with advertising products (with third party assistance of course) and getting product platforms to increase in sales and revenue while keeping quality as a main focus. With that said, I could see the investment purchase returned and profiting within the next 14-16mo’s. Last thought, “Beats” is a fairly small company in the big scheme of things and the design costs as well as manufacturing costs are based on size of orders and size of a company to be able to demand the lower costs to increase margin. Overall the acquisition looks great for Apple.

      Ps. Think outside the box, Apple still looking at possible TV (we can only hope). The money isn’t in the TV it is in everything else one would purchase with the TV. Think HT speakers, cables and everything else. Plus Lovine’s pull in the industry.

  5. I don’t want to be one of those guys, but the only thing “high end” about Beats headphones is the price.

  6. Not going to lie. This is disappointing.

    • jrox16 says:

      Why? I’m pretty sure the top executives at the worlds biggest consumer tech company know what they are doing and know why they are buying Beats better than us mere mortals. It’s much more than just headphones. $3 billion for Apple to spend on a profitable major brand like Beats in nothing when you have Facebook spending $19 billion (!!!) for Whatsapp…. a text messaging APP and Google buys thermostats for $3.2 billion. Beats, Dre, and Lovine fit in perfectly for a decent price.

    • rahhbriley says:

      Seth, this could explode…hope I’m not opening a can of worms….
      As a long time reader of 9to5, I’m curious about your comment on the surface level and a bit deeper. I didn’t expect the editors of 9to5 to be excited, but I didn’t expect you to be disappointed either.

      I don’t assume your opinion is a knee-jerk reation. I assume you’ve thought fairly deeply on the issue…Can I ask why/what you specifically don’t like?

      Here are a string of semi-rehtorical questions that come to mind when I read that you’re disappointed:
      -How much of your dislike is due to the price tag? Other than dirt-cheap, at a lower, reasonable price, would it have not been disappointing?
      -Do you believe they can eventually get their return on investment?
      -Do you think they will kill the Beats brand, eventually? Not as a product name, but as a brand specifically.
      -Do you think it is a distraction?
      -Do you think they could have built their own strong streaming service, in a decent time frame? Did they need to?
      -Do you think there is any validity to Apple becoming a quasi-label of sorts with this acquisition and Iovine coming on board? If so, do you think they would try to extend that to Video at some point? Do you think Iovine adds value for Apple? (not necessarily in regards to the price tag)
      -Do you believe in Smart headphones?
      -Do you think there is much more to this deal than meets the eye?

      Overall, I think this deal COULD add value to the Apple ecosystem. I’m not sure how much Beats was needed to start a streaming service. I’m curious to see what Iovine can add to Apple. Mostly, I’m interested in what this means beyond the obvious, and what Beats could enable Apple to do in the future.

      • I think that Apple doesn’t think it can build a brand as strong as Beats which, let’s face it, is all it is. The headphones are mediocre. The streaming service is great but not technologically speaking anything that isn’t being done by a number of players.

        They bought Beats for the Brand demographics. And it is sad they didn’t think they could do it themselves

    • zammitluke says:

      Tell me again about the better business decisions that you make for your internationally recognised multi-billion dollar company…

  7. As I’ve said before on various things; unless you run a multi-billion dollar enterprise, don’t make judgements on why Apple is doing what it is. There will be a very sound reason behind it. I imagine Peter Oppenheimer and his team wouldn’t have OKed it if it was going to be bad for the company.

  8. hmurchison says:

    This is awesome! Guys imagine where Apple’s going to take music now that Iovine is onboard! Headphone sound quality is easy to fix. You buy the right speaker, place it in the right housing, build the right crossover network and voila. Good sound. It’s not Rocket science

    I want to see what ideas Apple has for subscription. My guess is the major rollout won’t happen until next year. Excited.

  9. iPadCary says:

    You guys still want Cook around?!? #TimMustGO

    • hmurchison says:

      Yes. Spending 2% of the companies money isn’t outlandish.

    • Tell us more about the trauma you had during your childhood.

    • irelandjnr says:

      Your bullshit is not working. You must go, away.

      • iPadCary says:

        Ask yourself this: Disney paid almost as much for Star Wars. STAR. WARS. Is this Beats nonsense is both as valuable as Star Wars AND will provide as much an ROI as Star Wars?!? And as far as Apple being the #1 tech company means they know what they’re doing 100% of the time goes, I have two words for that: Word1-Ping & Word2-iMaps. But never mind me, let’s see the shareholders reaction at the opening bell tomorrow morning ….

    • Tallest Skil says:

      Bad company decision. But your entire presence here is worse.

      • iPadCary says:

        Shut up, dummy. lol

      • Tallest Skil says:

        This is the extent of your capacity to hold an argument.

      • jrox16 says:

        Beats is great for a simple reason…. it’s bringing a better music experience to a great many people. They don’t have to be the best headphones and audiophiles don’t have to buy them. Those “best headphones” are ones that don’t look nice enough for the average consumer to wear around. Beats are far from the worst headphones and most average consumers won’t know the difference, they are using the shitty little white earbuds for gods-sakes! But a good looking fashionable set of better headphones (far better than little white earbuds) will get regular folks to use them, and therefore they serve their purpose.

        But more importantly….

        And how do we know Apple won’t inject it’s technological powers and resources into Beats to make those headphones much better?? I bet you they will and then you’ll have both, great sounding headphones, which look “cool” and already have the brand recognition which makes people want to own them. Apple is diversifying here, which is very important because 53% or so of their revenue comes from one source, the iPhone. That’s not good. After Apple uses her resources to improve Beats to be good enough to make audiophiles happy, they will sell tons more of these at high margins and diversify their revenue a little bit, while maintaining the aura of being a company very into music tech.

        This is a brilliant acquisition.

  10. drtyrell969 says:

    Couldn’t develop a headphone with that much money in new R&D I suppose. Again, that would require an ounce of innovation and invention still exists in Apple engineering. What was I thinking?!?!? Carry on with your acquisition of yesterday. Can’t wait for the revived Newton.

    • irelandjnr says:

      They are purchasing the brand and the industry expertise behind the Beats music curated music app. They can improved the hardware themselves quite easily. The Beats brand is fresh, new and cool and they can do lots of things with it.

    • Yeah. Because you and the rest of the trolls know how to run a company approaching a trilion dollar value from your damp, sticky basements.
      On the Internet, you might not be able to tell what is making the posts (dogs or otherwise) but it sure is simple to tell who is an ________ (insert derisory term), and they’re usually telling us how hopeless Apple is. Btw, you forgot to mention the Pippin, the 20th anniversary Mac, the (beautiful) Cube and sundry other market failures that must have been missing from your troll list, or were you too busy posting on the other apple based sites and forgot? Are you really an analyst for a financial publication?
      I’ve read as much bs as I can take for today, over and out.

  11. Seriously? Why do people hate on this deal?
    Do the math, how many years, does at take Apple to get their ROI in this case?
    3 – 4 years if we assume that they’ll keep their $1B revenue.

    On top of that Iovine and Dre is completely worth the 3 billion – think about their connections and their influence in the music industry. They are in somewhat way connected to all trendsetters, jet setters and so on.
    Beats is a status symbol, fresh, new comers and for the creative/sporty person – exactly what Apple was back in the days with the Mac.

    Furthermore, if you combine Apple success and brand with the above about Beats, you’ll get the strongest brand nowadays. Completely smashing Samsung and their “the next big thing is here” strategy.

    They have so much to give each other.

    Smart move for Apple which will let them be ahead around 3 – 4 years more.

    /Jonas / JamesSuperior

  12. This has nothing to do with anything mentioned here. Samsung was about to acquire beats after licensing their tech for their devices for several years. Apple HAD to stop that from going ahead. No choice. Samsung acquiring beats would have been a serious blow to Apple.

  13. I think one aspect is being greatly overlooked. iTunes Radio is only available on Apple products and on iTunes for Mac & PC. It is missing a sizable chunk of streamers who use Windows and Android phones.

    Beats is available on all major OS’s and phones. And Apple wants to charge $100/year for the service. So, basically, they get to make money off those “cheap” Android and Windows phone users without having to make an “Apple” app for those platforms. Win-Win, assuming they keep Beats streaming audio available on those platforms, and then they can entice users to switch to Apple products by having exclusive features.

  14. charismatron says:

    This should be interesting. This is an injection of something completely new into the Apple culture–inside and out–that will fundamentally alter the brand.

    Moreover, with the reported move into the iHome, if you will, Apple is staking claim to new territory that will further change how the brand is perceived.

    Things are certainly in flux in Cupertino, but these folks ain’t stupid, so it should be very interesting to see where these new adventures into tech take everyone involved, and how well Apple can retain its core philosophy of combining technology with the liberal arts.

    Apple’s past is carved in stone, and Jobs is largely responsible for that. The future is malleable, fresh, and unexplored territory. Hopefully the new Apple crew will take Apple where it’s never gone before, and that it will an adventure to the benefit of us all.

  15. wc103 says:

    This deal makes me sick. I hate everything about beats. Apple drives such high quality -beats is all marketing and audiophiles hate them for it. What would Jobs have done ?

    • jrox16 says:

      Relax….. Beats is great for a simple reason…. it’s bringing a better music experience to a great many people. They don’t have to be the best headphones and audiophiles don’t have to buy them. Those “best headphones” are ones that don’t look nice enough for the average consumer to wear around. Beats are far from the worst headphones and most average consumers won’t know the difference, they are using the shitty little white earbuds for gods-sakes! But a good looking fashionable set of better headphones (far better than little white earbuds) will get regular folks to use them, and therefore they serve their purpose. And how do you know Apple won’t inject it’s technological powers and resources into Beats to make those headphones much better?? I bet you they will and then you’ll have both, great sounding headphones, which look “cool” and already have the brand recognition which makes people want to own them. Apple is diversifying here, which is very important because 53% or so of their revenue comes from one source, the iPhone. That’s not good. After Apple uses her resources to improve Beats to be good enough to make audiophiles happy, they will sell tons of these at high margins and diversify their revenue a little bit.
      This is a brilliant acquisition.