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Old May 9, 2014, 10:21 AM   #1
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Apple's Acquisition of Beats Met with Skepticism, but Jimmy Iovine May Be Key




Since the Financial Times broke the news yesterday, numerous publications are now claiming Apple is in the final stages of acquiring Beats Electronics, a headphone company and streaming music service created by hip hop star Dr. Dre and music industry veteran Jimmy Iovine. The response to the news is mixed, with some experts offering compelling reasons for the deal and other pundits questioning Apple's rationale in pursuing what would be its biggest acquisition to date.

Iovine has strong ties to the music industry and a long history of working with Apple, having met with Steve Jobs to discuss a subscription music service in 2003 and more recently in talks with Apple's Tim Cook and Eddy Cue about the Beats Music service before it launched earlier this year. In a recent interview with The Wall Street Journal, Iovine credits Apple as his inspiration for the idea of the Beats brand.
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"The idea of Beats...to be very frank, I got from Apple," he said, noting the "uniqueness of their blending of technology with popular culture."
If the acquisition proceeds, Iovine may join Apple as a "special adviser" to Tim Cook on creative matters. Iovine would bring to Apple his knowledge of the music business as evidenced in a AllThingsD interview from last year embedded below, and his insider influence that Wall Street Journal sources predict could be used to boost advertising on Apple's existing iTunes Radio.

Apple also would acquire Beats' successful consumer electronics business selling high-margin headphones and its newly launched music streaming service. Apple could bring the Beats hardware brand under the guidance of Jony Ive and use it to create new music product lines and add new channels to sell Apple's products, suggests Re/code. The Beats music service is likely a longer-term investment, allowing Apple to accelerate any plans to offer a streaming music service for its iTunes customers, which number in the hundreds of millions.

Analysts, however, are meeting the news of the high-priced acquisition with both contempt and confusion, noting that such an acquisition is out of character for the Cupertino company. One of the first to weigh in on the deal was Gene Munster, who called the acquisition a "bad idea" in an investor note.
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We are struggling to see the rationale behind this move. Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand and has never acquired a brand for a brand's sake (i.e., there are no non-Apple sub-brands under the company umbrella). Separately, we are not aware of any intellectual property within Beats that would drive the acquisition justification beyond the brand.
Apple pundit John Gruber of Daring Fireball was equally skeptical of the deal, saying "I don't get it."
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On the surface, this doesn't make any sense to me. I can't see Apple keeping the "Beats" brand around for headphones. If Apple wanted to sell expensive high-end headphones, they don't need to spend $3 billion. The Beats streaming service is interesting, but can't Apple do that on its own, as an expansion of the iTunes Music Store and iTunes Radio?
According to the original Financial Times report, Apple's acquisition of Beats could be announced as soon as next week. Negotiations are still ongoing with some final details yet to be ironed out, allowing for the possibility that "talks could still fall apart."

Article Link: Apple's Acquisition of Beats Met with Skepticism, but Jimmy Iovine May Be Key
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Old May 9, 2014, 10:23 AM   #2
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Hahahahaha oh Apple
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Old May 9, 2014, 10:25 AM   #3
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Preemptive me thinks.
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Old May 9, 2014, 10:25 AM   #4
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This forum is filled with Beats haters, so I am not surprised that the news is hurting our ears.

Be that as it may, it make no sense to me whatsoever.
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Old May 9, 2014, 10:26 AM   #5
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If true, this literally has to be the worst acquisitition i can think of.

I hate Beats with a passion - all style, no substance.

As a longtime (20+Years) Apple user, I don't want this kind of philosophy (further?) taking over Apple - all about fashion and brand. Angela Ahrends, Beats etc.

Just make a damn good product and it sells itself by merit. Stop the fluff.

Kids get off my lawn. I know.
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Old May 9, 2014, 10:26 AM   #6
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I love it. Because outsiders "don't get it", or "are not aware of any intellectual property within Beats that would drive the acquisition justification beyond the brand", that automatically makes it a bad idea.

The most troubling is Munster's "investor note". How about not saying *anything* until there's more info about it, Gene? It's not like you're manipulating stocks or anything like that....
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Old May 9, 2014, 10:28 AM   #7
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(i.e., there are no non-Apple sub-brands under the company umbrella).

Despite being spun off from Apple, how about FileMaker?
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Old May 9, 2014, 10:28 AM   #8
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Apple isn't dumb

Analysts might not see it and I don't see the reasoning either. But Apple isn't stupid. They don't buy companies willy nilly. There is a specific reason they bought Beats...it's just not apparent yet.

It could be avoidance of a patent issue.
It could be a technology Beats has under development.

My guess is there's a patentable headphone technology Beats is working on in secret that is a game changer.
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Old May 9, 2014, 10:29 AM   #9
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The only thing Gene Munster would get was is Apple bought the tv division of Sony.

Nonetheless, I don't get this deal either. It's a lot of money for nothing.
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Old May 9, 2014, 10:29 AM   #10
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Really why should a company worth billions of dollars acquire another company before consulting MR forum posters first?
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Old May 9, 2014, 10:30 AM   #11
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Originally Posted by DrFu79 View Post
If true, this literally has to be the worst acquisitition i can think of.

I hate Beats with a passion - all style, no substance.

As a longtime (20+Years) Apple user, I don't want this kind of Philosophy (further?) taking over Apple.
I agree with you. However, I have to think that Apple's officers, board-members, and others didn't make this acquisition on a whim. I doubt they took spending 3 billion dollars lightly.

However, I still don't see the point...yet.
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Old May 9, 2014, 10:30 AM   #12
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The Beats headphone headband is as flat as iOS7. I'm pretty sure that's the reason they bought it. iHop is next.
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Old May 9, 2014, 10:31 AM   #13
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I am having a problem seeing how Apple benefits from this deal. Ive can design better looking headphones. Beats will only wane in popularity as time goes by. I doubt the streaming service has technology that Apple badly needs that they are willing to grossly overpay for. From the article, this basically sums up how I feel, "Separately, we are not aware of any intellectual property within Beats that would drive the acquisition justification beyond the brand.".
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Old May 9, 2014, 10:31 AM   #14
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...Wall Street Journal sources predict could be used to boost advertising on Apple's existing iTunes Radio.
OMG, I hope not. What I want is to pay a monthly or annual fee to play my iTunes stations 24/7 without any advertising. I already get way too much advertising.
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Old May 9, 2014, 10:33 AM   #15
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Here Apple goes down that path MS took.

Not forward thinking at all.

Guess that money's burning a hole in the wallet. Cook doesn't have the vision to do anything except apologize to the world that his company is successful and building solar power stations and making tv ads about it to plead for their acceptance.
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Old May 9, 2014, 10:34 AM   #16
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I have always defended Tim Cook's Apple but this one has me puzzled and doubting. Apple can easily make their own minimalist headphones or music service or whatever. $3.2 billion is a lot to pay for a company that is basically just a name, where every product they make can easily be duplicated (unlike a Mac, for example, with the platform harnessing millions of man hours of accumulated software engineering over the last few decades).

This acquisition honestly reminds me of one of those way overvalued tech purchases that crappy companies like Facebook routinely make.
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Old May 9, 2014, 10:34 AM   #17
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Google buys Nest and Apple buys Beats. What has the world come to? Embarrassed as an Apple user.
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Old May 9, 2014, 10:34 AM   #18
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Maybe to gain control of the beats music app, instead if competing just buy it and merge it with itunes radio
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Old May 9, 2014, 10:34 AM   #19
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Originally Posted by 0xyMoron View Post
Really why should a company worth billions of dollars acquire another company before consulting MR forum posters first?
Honestly, if history is any guide, based on the extreme negative feelings about the potential deal around here, I'd say it's likely to be a quite profitable one for Apple longterm.
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Old May 9, 2014, 10:35 AM   #20
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Perhaps Apple is looking to use this to further differentiate iPhone as a premium brand and win the "cool factor", which some say they are letting slip, back from Android.

Personally I don't think Beats are premium or cool, or even particularly good products, but I guess there's the perception they are amongst a certain target demographic.
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Old May 9, 2014, 10:35 AM   #21
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Here Apple goes down that path MS took.

Not forward thinking at all.

Guess that money's burning a hole in the wallet. Cook doesn't have the vision to do anything except apologize to the world that his company is successful and building solar power stations and making tv ads about it to plead for their acceptance.
I would rather see Apple spend $3.2 billion on solar projects than buying a silly overvalued headphone marketer.
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Old May 9, 2014, 10:36 AM   #22
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no one person's worth 3 billion.
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Old May 9, 2014, 10:37 AM   #23
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Wow, Steve Jobs would have never let this happen.
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Old May 9, 2014, 10:38 AM   #24
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If there is any truth to this rumor it must be that Apple wants the Beats subscription music service and the headphone hardware comes with the deal.

That being said wouldn't it be telling if Apple had to spend 3.2b to acquire Beats music? They are a much larger company with more resources and over a decade of experience dealing with record labels.

There is no reason why Apple should not be able to create it's own Spotify competitor.
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Old May 9, 2014, 10:38 AM   #25
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OMG, I hope not. What I want is to pay a monthly or annual fee to play my iTunes stations 24/7 without any advertising. I already get way too much advertising.
You already can, with iTunes Match.
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