Beats Breakdown: Apple Paying $2.5B for Beats Electronics, $500M for Beats Music

Discussion in 'MacRumors.com News Discussion' started by MacRumors, May 29, 2014.

  1. macrumors bot

    MacRumors

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    Apple yesterday announced plans to acquire both Beats Electronics and Beats Music for a combined total of $3 billion, but a new report from The Wall Street Journal breaks those numbers down further.

    As it turns out, Apple is paying slightly less than $500 million for the Beats Music streaming service, with the bulk of the money ($2.5B) going towards the purchase of Beats Electronics, which includes the company's popular line of headphones and speakers.

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    At yesterday's Code Conference, Beats co-founder Jimmy Iovine revealed that the service has 250,000 subscribers in the United States, a small number compared to Spotify's 10 million worldwide listeners. Beats Music's relatively modest size explains why it was so much cheaper than the company's Electronics division, which pulled in $1.5 billion in sales in 2013 according to a source that spoke to The Wall Street Journal.

    Leveraging iTunes and iTunes Radio, Apple may be able to grow Beats Music significantly in the coming months. Apple's existing streaming music service, iTunes Radio, has a total of 40 million listeners and via iTunes, Apple has sold 35 billion songs. The company also has more than 800 million iTunes accounts, most with credit cards attached, along with a wealth of data on customer listening habits.

    "We think all of those things, when you put them all together, it's on steroids with us together," said iTunes Chief Eddy Cue.

    Under the terms of the deal, Beats co-founders Jimmy Iovine and Dr. Dre will both be joining Apple to work under Cue, while marketing head Phil Schiller will oversee the Beats headphone business. Apple CEO Tim Cook has called Iovine and Dre's talent and skills "really unique" and "very hard to find." He also stated that Apple felt Beats Music was the first music service to "get it right" through the use of human curation.

    Following regulatory approval, Apple's purchase of Beats is expected to close during the fiscal fourth quarter.

    Article Link: Beats Breakdown: Apple Paying $2.5B for Beats Electronics, $500M for Beats Music
     
  2. macrumors 68000

    ghsNick

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    #2
    Looks like it WAS for the hardware then.
     
  3. macrumors 6502a

    stiligFox

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    Wow, I was thinking they wanted it pretty much for the streaming service, and the hardware sort of just came with the deal.

    Makes me really wonder what Apple has up their sleeve for the future...
     
  4. macrumors regular

    Lapidus

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    #4
    Too bad, streaming seems way more interesting.
     
  5. macrumors 6502a

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    #5
    Somehow I feel this marriage isn't going to last.
     
  6. macrumors 68000

    Kariya

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    #6
    These prices are based on individual valuations not on what Apple 'wanted'. Beats Electronics is far more valuable than Beats Music.
     
  7. macrumors newbie

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    #7
    Anyone notice how the new buzzword 'curation' keeps being used now? What exactly does that mean in terms of streaming services. Sounds like just an attempt to sound clever and visionary.
     
  8. macrumors 6502

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    Well the hardware business is highly profitable.
     
  9. macrumors 601

    goobot

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    #9
    Im trialing the beats app and it has no restrictions at all. Really nice. The only thing I hate is music discovery sucks. It would be really nice to see iTunes radio and the beats app merge into an amazing iRadio app :D
     
  10. macrumors newbie

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    #10
  11. macrumors 6502a

    CrazyForApple

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    #11
    I think this is a good deal all together especially since they are working for Apple now
     
  12. macrumors 603

    MH01

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    #12
    It was the hardware.

    Kudos Beats, you just found the richest sucker to purchase your overpriced headphones, and the silly suckers are smiling like they got a good deal :)

    And most of well played Dr Dre , YOUR mega rich! And damn lucky cook is running the show.

    So apple bought a headphone company that is renowned for having poor sound quality. Given apple in house headphones are nothing to call home about, they are basically not going to improve the sound quality going forward as a result of this spend.

    I hope this is not a stupid attempt to be cooler than Samsung ...... Given how much money Samsung is throwing into marketing .
     
  13. macrumors 65816

    djtech42

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    #13
    Even though this seems to indicate a focus on hardware, it probably just means that the electronics division of Beats is much bigger than the services division. The hardware probably rakes in more money than subscription services.
     
  14. macrumors 68030

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    #14
    Yeah... I'd like to know that too.

    I haven't tried Beats Music streaming yet... does it let you play any song in their catalog? Or do you have to listen to stuff someone else picks?
     
  15. macrumors member

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    #15
    Bla bla.... Actually they're simply paying 3 billions for the great streaming license deals which beats music could realize and apple didn't. And of course for future license deals to be realized by Jimmy Iovine.
     
  16. macrumors member

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    #16
    In some species, the female will end up eating the male after copulation.
     
  17. macrumors 65816

    Four oF NINE

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    #17
    So much for all the comments (too numerous to list) about how

    "Dude, it's NOT about the headphones!"
     
  18. macrumors 68000

    keysofanxiety

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    #18
    curate 2 |kjʊ(ə)ˈreɪt| verb [ with obj. ]
    select, organise, and look after the items in (a collection or exhibition):

    So you're absolutely right, it really doesn't have much context or meaning when talking about buying a company.
     
  19. macrumors regular

    iSteve-O

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    Doubters are proven wrong once again. Congrats Dre! :apple:

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  20. macrumors G5

    Rogifan

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    #20
    Why does this surprise anyone? Beats Electronics was the profitable piece of the business. Of course it was going to be worth more.
     
  21. macrumors newbie

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    Apr 25, 2014
    #21
    Because "Mix Tape" is copyrighted. ;-)

    Basically, what Beats Music does (or tries to do) is be able to make personalized Playlists ("Mix Tapes") on the fly for whatever time of day or mood or activity strikes your fancy, and it will include (along with what you already know and/or own) new music you may not even be aware of or would think to add to the playlist. Each playlist being personally tailored to you at that particular moment in time. The mixture of human "curation" with complex algorithms is the key to Beats Music.

    Add that "technology" to 800 million credit cards that Apple has on file via iTunes, the App Store, etc. and, well… $$$
     
  22. Zerilos, May 29, 2014
    Last edited: May 29, 2014

    macrumors 6502a

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    #22
    This doesn't prove that it wasn't. The headphone side is extremely profitable and the streaming service is in its infancy. Seriously doubt this happens if Beats Music doesn't exist.
     
  23. macrumors 603

    Michaelgtrusa

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    #23
    Big bucks.
     
  24. macrumors 65816

    bpeeps

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    #24
    I am in love with these posts. Reading how upset MR is over how a company runs its business is hilarious.

    Merge Beats subscription with iTunes Match and iTunes Radio and I could see myself using it, actually. Until then, I'm set on owning phys. copies.
     
  25. macrumors 6502

    seamer

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    Jul 24, 2009
    #25
    Surprised it was announced so close to WWDC. Either it was rushed because of the "leak" last week, or it's to support something being announced.
     

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