Eddy Cue, Jimmy Iovine, Apple, Beats Music, Code Conference

With most agreeing that Apple was mostly interested in the talent behind the Beats Music streaming service rather than the headphone business, there has been lots of speculation about just how much that part of the business is worth. According to a new report from The Wall Street Journal, it’s actually around $500 million of the total $3 billion ($2.6B in cash and $400m in equity) that Apple paid for the company.

The report notes that the $500 million valuation for the streaming service unit of Beats is actually considered generous considering the young service’s still small subscriber base. It has just 250,000 paying subscribers at $10/month contributing to the $1.3 billion the business as a whole brought in during 2013:

Apple Inc. is paying slightly less than $500 million for the Beats Music streaming service, and more than $2.5 billion for Beats Electronics in its $3 billion deal, according to people familiar with the matter. The breakdown between the two portions of Beats Electronics LLC offers insight into Apple’s thinking for the most expensive acquisition in its history.

If you were to value the Beats streaming service by itself based on just subscriber numbers, it would be worth around $100 million, according to the report:

The valuation of the $10-a-month streaming service, which counts 250,000 paying subscribers, is generous based on its subscriber numbers. Spotify AB, which has 10 million subscribers world-wide, raised $250 million in November at a valuation of $4 billion, or $400 per subscriber. By that measure, Beats would be worth $100 million.

The report adds that sources claim Apple never contacted Spotify to make a potential deal during the discussions to purchase Beats, and that’s not surprising given Apple executives have made it quite clear the deal was for talent behind the Beats Music unique human-powered curation system rather than subscriber numbers or profits.

(Image: Recode)

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5 Responses to “Beats Music streaming service worth less than $500M of $3B Apple paid for whole company”

  1. I think if Apple wanted a streaming service, then they would have just bought Rdio. I’ve always thought Rdio fell in line with Apple’s feel, especially since Rdio had the blur effect before iOS 7. So there’s moe to it than streaming, and the answer probably lies with Iovine.

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  2. It’s all about Jimmy Iovine, the best deal maker in the music industry

    IMO they bought Beats to secure Iovine to get deals with music/movie companies, the kicker they have Beats brand to sell the cheapest Apple phone ever made, yes theirs more to it but I think this is the core of it

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  3. Hilarious, Apperently those fools at wallstreet haven´t seen this http://www.macrumors.com/2014/05/13/beats-music-subscribers/

    but nevermind.

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  4. Wish they had bought Spotify instead.

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