Apple Impressed by Beats' Ability to Attract Paid Subscribers, Likely to Keep Brand Separate

[Arndroid]

Someone please answer me this..
Spotify's Market Cap is around the 4.5$ billion mark

Apple are buying beats for 3.2$b

Why exactly are they pursuing Beats Music - if Spotify has already established itself?

Just for the hardware?! I understand Irvine and Dre are two they are keen to add onto the board. Otherwise it appears as they are just willing to gobble down the headphone section into their product line..?

Because beats actually makes money and is worth 3.2 billion dollars. Spotify loses money and is not worth four billion dollars.

This particular discussion underlies why most small businesses fail. Most people are absolutely clueless about how businesses work.

Go ahead and research price-to-earnings ratio and let me know if you have any questions why one company who makes hundreds of millions of dollars a year is worth more than a company who loses money.

 

[fmaxwell]

You don't seem to understand how to have a discussion on the internet.

You don't seem to understand that I was having discussions on the Internet back when it was called the Arpanet.

If beats are so terrible, why are people buying them?

People buy terrible things because of good marketing, poor taste, or ignorance about better choices that are available. By your argument, McDonald's must have great food, Windows PCs must be superior products, and Elvis paintings on black velvet must be fine art.

Lots of snobs think they have superior ears, but double blind test will tell otherwise.

You don't need 'golden-ears' to hear that something is wrong with headphones that are -25dB down at 10khz.

I'm in the process of working with an editor at avsforum.com to set up a double-blind test to disprove the notion that CD sampling rates and bit depths sound inferior to so-called high-definition (e.g., 96K/24-bit) recordings.

Your anger is misplaced. It's just headphones man.

I have seen too many companies manufacturing and selling superb audio products go bankrupt while customers are lured away with slick marketing (like celebrity endorsements). When I was growing up in the 1970s, there were multiple 'stereo stores' in my area that sold very good quality equipment. They were staffed by intelligent, knowledgeable salespeople who took pride in setting up listening rooms where people could make an informed decision in a relaxed atmosphere.

They are all gone now, driven out of business with the cacophony of mediocrity that is Best Buy.

 

[Arndroid]

Apart from not believing Beats has attracted paid subscribers in any great numbers, I read estimates around 200,000 and those not all yet paid up, when has Apple bought a company to keep separate, as an investment? It's not Berkshire Hathaway, or it didn't used to be. If there isn't some real synergy for the Apple brand, for instance streaming rights which *do* transfer, I don't see how this acquisition makes sense and I have trouble believing it.

How about apple sells the most headphone needing devices in existence and beats sells headphones.

Does anyone need more than that? Really? It is not a thermostat company.

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How would it help Apple's to acquire a company that produces headphones that are reviled because of their boomy, sloppy, loose bass, muffled treble, and high distortion?

Have you ever compared the Monster Beats headphones to respected, high-quality brands like Sennheiser, Beyerdynamic, or AKG? Just look at the frequency response graph. It will make you understand why Andre Young did not put his real name on them.

Image​

Most people don't care about audio nerd graphs. Beats outsells all other high end headphones , combined, by almost a three to one margin.

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No official confirmation (that video doesn't count, could easily be a prank), almost a week since first surfacing of the rumour and uncertain justification for purchase (and lack of precedent - Apple has never yet bought another brand and kept it as a separate entity) = probably BS IMHO. I guess we'll see eventually...

Not sure if you have been paying attention but the breadth and depth of this particular rumor makes it most likely to happen/

 

[WilliamLondon]

...

Apple isn't out to sell hardware.

...

You really don't get it I see, your post was a long winded explanation demonstrating a huge misunderstanding of Apple and what it is all about.

They are actually a hardware company not a systems company or whatever else you want to declare them to be; all those other services such as iTunes, the App Store, iCloud, their OSes, the Apps they build (and sometimes sell) are all about one thing -> making their hardware more valuable so they can continue to command premium prices for devices in a market where other manufacturers make little to no money (and quite often lose money).

The main purpose of those services isn't about making money (directly), that's simply a nice (albeit very nice) side benefit. If Apple hardware didn't exist, none of those services would exist, and none would continue. They are all ancillary services, meaning they are there to support Apple's main business, which is to make as much profit from hardware.

If it were more about services and the revenue each of those services produce, you'd see them placing more of a focus on software and getting their software ported to every platform out there.

To misunderstand this isn't uncommon, but it does lead to a great many misconceptions about Apple and a lot confusion regarding its business decisions, much of it accumulated in the posts on these very forums. ;-)

They aren't going to shift focus to being more like Google or Amazon, both of whom are about producing low quality, cheap (no profit) hardware which are nothing more than portals to each of their stores. Apple builds its store to support its high quality and more expensive devices. These companies have completely opposite business models, and what you're suggesting is that Apple is moving in the direction of Amazon or Google where its business decisions are shifting to be more about placing increased focus on the revenues of the store than the hardware to which it owes its very existence. Nothing could be further from the truth.

 

[Arndroid]

1) they won't sell 10m pairs of $300 headphones
2) even if they did, that math would only work if the profit margin on those earphones was 100%. It's high, but not 100%.
3) many people believe the nest and whatsapp acquisitions were wildly overvalued, so I'm not sure that's the best defense of this one.

I suspect this price puts beats at a 10x-15x multiple on earnings. In this day and age that is astounding. For years hsx years anything under 20x was considered a solid investment.

To make it clear a 10x multiple on earnings means you can expect to make back your investment in ten years. This gives you an annual return of 10% on your investment.

From a financial investment standpoint the best purchase and the whatsapp purchase were absolutely insane.

This, not so much. In fact this is one of the only conservative financial investments any of the big tech firms have made.

Most of the time these companies just gamble on acquisitions.

I will say it is about 5 to 1 in favor of beats netting apple 20 billion before whatsapp nets Facebook 3.2 billion.

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Wondering if Beats headphones are still popular?
(I don't see them a lot on the streets any more
— but they very well could be all the rage elsewhere).

Have Beats posted any headphone sales figures? ... Recently? ... Ever?

They own about 70% of the $100 and up headphone market.

This makes audio nerds turn hulk

 

[Michaelgtrusa]

Quote [People buy terrible things because of good marketing, poor taste, or ignorance about better choices that are available. By your argument, McDonald's must have great food, Windows PCs must be superior products, and Elvis paintings on black velvet must be fine art.]


I'm with you hear.

 

[Arndroid]

You don't seem to understand how to have a discussion on the internet. If beats are so terrible, why are people buying them? Lots of snobs think they have superior ears, but double blind test will tell otherwise. People buy beats because they see people wear them, they are available everywhere, and they don't know any better. As bad as beats might sound, they are probably better than 90% of headphones we had growing up. Yes I made that number up. Your anger is misplaced. It's just headphones man.

Being an audio nerd is much like being a big foot expert. One is focused on something that is not an actual thing. There is a reason why most people don't care about these alleged microscope audio differences, they don't exist. As you note it is pretty easy to disprove. I just don't get the rage. Pretend like this audio snobbery was actually a real thing with value, what difference does that make? Beats makes enough money to justify the purchase on that alone.

Yes business nerds > audio nerds

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I know plenty of people who use and like Apple's earbuds and would never in a million years use Beats, at least not the big gaudy over the ear style. I hope plans on improving Beats offerings in terms of both build and sound quality and not just milk the existing product.

I suggest you look at beatsbydre.com. They have more than one product.

Given apple has sold hundreds of millions of headphones, I wonder how much money apple has spent on headphones in their history. I suspect the total is way more than 3.2 billion dollars.

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The big picture is that YouTube WON the Streaming war, Spotify is a close 2nd.

Beats was just a way for Jimmy Iovine to make a quick buck, because being 4th place in streaming and hemorrhaging cash is NOT a business model.

Cook = / = Jobs

Beats makes lots of money, spotify loses money/

 

[CosmoFox]

You don't seem to understand that I was having discussions on the Internet back when it was called the Arpanet.



People buy terrible things because of good marketing, poor taste, or ignorance about better choices that are available. By your argument, McDonald's must have great food, Windows PCs must be superior products, and Elvis paintings on black velvet must be fine art.



You don't need 'golden-ears' to hear that something is wrong with headphones that are -25dB down at 10khz.

I'm in the process of working with an editor at avsforum.com to set up a double-blind test to disprove the notion that CD sampling rates and bit depths sound inferior to so-called high-definition (e.g., 96K/24-bit) recordings.



I have seen too many companies manufacturing and selling superb audio products go bankrupt while customers are lured away with slick marketing (like celebrity endorsements). When I was growing up in the 1970s, there were multiple 'stereo stores' in my area that sold very good quality equipment. They were staffed by intelligent, knowledgeable salespeople who took pride in setting up listening rooms where people could make an informed decision in a relaxed atmosphere.

They are all gone now, driven out of business with the cacophony of mediocrity that is Best Buy.

You are not understanding my posts properly as I never said people are buying them because they are good.

Your test will fail. Most people cannot differentiate between a good v0 rip, and "high definition" recordings.

 

[ksuyen]

Someone please answer me this..
Spotify's Market Cap is around the 4.5$ billion mark

Apple are buying beats for 3.2$b

Why exactly are they pursuing Beats Music - if Spotify has already established itself?

Just for the hardware?! I understand Irvine and Dre are two they are keen to add onto the board. Otherwise it appears as they are just willing to gobble down the headphone section into their product line..?

Spotify ownership does not extend to their music catalogue. Apparently Beats Music does if we believe the recent hearsays.

 

[mazz0]

How entirely unApple! So there'll be iTunes, with iTunes Radio, /and/ Beats? I don't buy it. Maybe iTunes Beats? Meh, I dunno, still doesn't sound right.

The headphones maybe, or maybe they'll sell that section on.

 

[Mockenrue]

Also, if we are talking about the Beats Streaming service it is picking up a lot of MOG users, which are mainly audiophiles since MOG was the first service with 320k streaming. The AT&T family plan also insures a wide range of ages.

Count me as one of those early, proud, audiophile MOG subscribers. But it was clear that they were on a downward trend for some time, so I jumped ship when Spotify came to the US with the same streaming quality, more interface options, and a brighter future. I was an outspoken MOG fan, but was long gone by the time Beats Music launched.

 

[deconstruct60]

iTunes Radio is not a true competitor for Spotify's subscription model so I'm not sure what you're getting at.

" ... Free

Everything you want from music.

Completely free
.....
Made possible by ads
... "
https://www.spotify.com/us/

Spotify uses ads to pay for a sizable subset of music. Not exclusively but neither does iTunes Radio.

 

[Rogifan]

Before this rumor surfaced was anyone saying that Apple needed to get into the overpriced headphone market?

What if Apple has decided that in order to grow they need to reinvent themselves as a fashion company? That's basically what Beats is.

http://stratechery.com/2014/apple-buying-beats/

https://medium.com/p/ef40bb2cd162

 

[fmaxwell]

You are not understanding my posts properly as I never said people are buying them because they are good.

Then what was your point when you asked "If beats are so terrible, why are people buying them?"

Your test will fail. Most people cannot differentiate between a good v0 rip, and "high definition" recordings.

If they can't hear a difference, I win!
My goal is to disprove their claims that they can hear a difference between 96/24 and 44.1/16 sampling.

Re-read what I wrote to you earlier: "I'm in the process of working with an editor at avsforum.com to set up a double-blind test to disprove the notion that CD sampling rates and bit depths sound inferior to so-called high-definition (e.g., 96K/24-bit) recordings."

 

[yinz]

How would it help Apple's to acquire a company that produces headphones that are reviled because of their boomy, sloppy, loose bass, muffled treble, and high distortion?

Have you ever compared the Monster Beats headphones to respected, high-quality brands like Sennheiser, Beyerdynamic, or AKG? Just look at the frequency response graph. It will make you understand why Andre Young did not put his real name on them.

Image​

They are 'reviled' by the internet. Real people buy them. That's why they are a business. It would help Apple because beats is a strong brand and has good people that are strong in marketing their products, something Apple had been good at the turn of the century.

No, I have not made the comparison. I don't use beats for headphones. They are quite expensive. I use audio-technica. You are really showing your narrow perspective with these comments. You are so focused on what the internet tells you and how beats headphones performs, but fail to see the brand power, marketing, and services beats provides. You also fail to see that beats sounds in mobile dominates and is raved about from many critics and users alike (ala HTC One).

How can beats help Apple? Well, it can do this by appealing to the masses. People buy beats not for the quality of the sound, but because it is a fashion statement. What Samsung and other smart watch companies are failing at is their appeal to fashion. All of those smart watches make you look geeky. Beats can change that. The iWatch doesn't have to be a geek toy, but rather a fashion statement. But, of course, this is all speculation. You shouldn't pay too much attention to me. I am part of the internet after all.

 

[CosmoFox]

Then what was your point when you asked "If beats are so terrible, why are people buying them?"



If they can't hear a difference, I win!
My goal is to disprove their claims that they can hear a difference between 96/24 and 44.1/16 sampling.

Re-read what I wrote to you earlier: "I'm in the process of working with an editor at avsforum.com to set up a double-blind test to disprove the notion that CD sampling rates and bit depths sound inferior to so-called high-definition (e.g., 96K/24-bit) recordings."

I'm not sure what we're arguing about then.

 

[Uofmtiger]

Count me as one of those early, proud, audiophile MOG subscribers. But it was clear that they were on a downward trend for some time, so I jumped ship when Spotify came to the US with the same streaming quality, more interface options, and a brighter future. I was an outspoken MOG fan, but was long gone by the time Beats Music launched.

I tried Spotify and preferred MOG. The artist radio with slider (that plays when an album finished)was more important than any of the Spotify features, since I mainly use my iPhone to stream music and use iTunes for my personal collection. I still have a Spotify account and gave premium another shot, but prefer Beats. Actually, I prefer RDio to both of them, but I am waiting for their catalog to change to 320k AAC before I use their service.

Spotify was much better at marketing, which is why they passed MOG. Beats knows how to market, so putting them with Apple could be a very bad thing for the other services that only have streaming to fall back on (I am not worried about a Google Play). If Siri worked with Beats Music service it would make an awesome combination.

 

[albusseverus]

How entirely unApple! So there'll be iTunes, with iTunes Radio, /and/ Beats? I don't buy it. Maybe iTunes Beats? Meh, I dunno, still doesn't sound right.

The headphones maybe, or maybe they'll sell that section on.

Beautifully stated. You could see a role for the guys as consultants, but buying the company??

Apple doesn't have headphones, but do they need them? Earphones, who cares?

Beats has a good reputation for well picked subscription stations, which IS the point of such a service and I guess iTunes Radio could acquire the Beats brand and service.

I see a future where the iTunes store is broken into media types—books, iOS apps, even music and movies—but it makes sense to keep iTunes for music and music video sales. Even if they're "falling". I'm sure they'll be a healthy business for a long time.

And billions of $s ?? That's the real mystery. My vote is advisors. Possibly curation for a streaming service, but the hardware business would remain separate. Music industry deals with Beats would just evaporate under iTunes. It's Apple and copyright distributors deal with Apple, as Apple.

Apple is already a fashion brand, it just depends how you look at it. It's fashion with substance. What distinguishes Apple, however you view it, is the substance. Hiring someone whose last job was fashion for Sales is a good fit, but Apple was always stylish and fashionable, and a market leader at it.

 

[fmaxwell]

They are 'reviled' by the internet. Real people buy them. That's why they are a business.

To paraphrase Mitt Romney, the Internet is people, my friend. I'm a real person, and I would not buy them. You're a real person and you admit that you would not buy them either.

It would help Apple because beats is a strong brand and has good people that are strong in marketing their products, something Apple had been good at the turn of the century.

Colt 45 Malt Liquor is a strong brand with good marketing, too, but it would not help Dom Pérignon to acquire the Colt 45 Malt Liquor brand and make it a part of the Dom Pérignon family of products.

You are really showing your narrow perspective with these comments. You are so focused on what the internet tells you

You should tone down your accusations. I was buying quality headphones back in the 1970s (Koss Pro 4AAA and Burwen PMB-6, for example). My opinion of Beats is based on having personally auditioned them.

And what does Stereophile Magazine (which I quoted), a print magazine that has been in publication since 1962, have to do with "the Internet"?

and how beats headphones performs

Performance, comfort, and value is what matters when evaluating headphones.

How can beats help Apple? Well, it can do this by appealing to the masses. People buy beats not for the quality of the sound, but because it is a fashion statement.

Apple has built its reputation on products that combine performance with style, not just stylish packaging wrapped around mediocre products -- though the Apple haters have long tried to accuse Apple of the latter.

 

[yinz]

To paraphrase Mitt Romney, the Internet is people, my friend. I'm a real person, and I would not buy them. You're a real person and you admit that you would not buy them either.

Colt 45 Malt Liquor is a strong brand with good marketing, too, but it would not help Dom Pérignon to acquire the Colt 45 Malt Liquor brand and make it a part of the Dom Pérignon family of products.

You should tone down your accusations. I was buying quality headphones back in the 1970s (Koss Pro 4AAA and Burwen PMB-6, for example). My opinion of Beats is based on having personally auditioned them.

And what does Stereophile Magazine (which I quoted), a print magazine that has been in publication since 1962, have to do with "the Internet"?

Performance, comfort, and value is what matters when evaluating headphones.

Apple has built its reputation on products that combine performance with style, not just stylish packaging wrapped around mediocre products -- though the Apple haters have long tried to accuse Apple of the latter.

I must be wrong, and beats must NOT be making money then. Sorry about that mistake, oh wait, I was not mistaken. They are making money. 'Real people' was a way of saying the majority. The internet is really not the majority of people in the world, at least not your form of the internet (web forums). I'm sorry if this was not clear and my response seemed harsh.

This type of thing really pushes my buttons. Some people (my friends are case in point) always judge products based on what the internet says without any first hand experience of the product. Upon actually testing the product, my friend actually preferred it (the internet 'reviled' product) over his internet-recommended product. It's just frustrating how little of their own opinions people have. With this anecdote, real people (my friend in real life) is completely different from internet people (my friend on the internet).

Again, I'm sorry if my point was not clear. I'm not accusing you of being uneducated in audio equipment. I'm accusing you of being narrow in your thinking. To reiterate, beats is not a company that focuses solely on headphones. You can't judge them based on their build, performance and comfort of headphones alone. I am not claiming to be an expert in this area, nor am I saying you are inexperience int his area. I'm saying that headphones are not the sole purpose of the beats brand.

Besides popular headphones, beats makes note-worthy mobile speakers, but even that is narrow thinking. Beats is also a brand, a marketing powerhouse and a popular choice among people who have the money to buy them. I believe this is what Apple bought, not mediocre headphones.

 

[thefourthpope]

Makes up the guy with $11.87 in his checking account

This was my favorite retort

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There hasn't been a huge amount of revenues coming from rap music in a very long time. I can assure you that Apple is not after this crowd

wish I knew how to post a roll eyes emoticon on my iPhone

 

[StyxMaker]

Not sure how the 90 days free streaming service works.. when I go to the app store it only says 7 days, even though I'm with at&t.



I never thought about subscribing to a rap music service before, not really my thing. Why is Apple doing this?



Why are their headphones popular exactly if they're not superior sounding?

1. As soon as you sign up for your free seven days you'll get a text from AT&T offering you the three months free.

2. It's not a 'rap' music services. They stream all kinds of music. Why would you assume they only stream rap music?

 

[Macist]

iTunes dominated initially because digital music was all about the iPod. The iPod is meaningless now and people buy music via many different services.

Spotify is massive in Europe but if Apple start pushing Beats across their product line it will start to look like the service to beat. They can also retain Android services and make money from it without 'losing face' like that would if they rolled out iTunes on that platform.

Beats is a big brand so I'm sure they'll get it. Over time, perhaps iTunes will be made more of a niche for people that want to own music and they'll push things like higher bitrates and sound quality.

 

[Tech198]

Not for me.

I don't listen to music.

 

[fmaxwell]

I must be wrong, and beats must NOT be making money then. Sorry about that mistake, oh wait, I was not mistaken. They are making money.

Okay, I speak sarcasm fluently. Marlboro cigarettes make money. So Whole Foods would obviously benefit from buying them out and selling them as Marlboro Cigarettes by Whole Foods.

This type of thing really pushes my buttons. Some people (my friends are case in point) always judge products based on what the internet says without any first hand experience of the product.

That's fine, but I listened to Beats headphones first, and then, wondering WTF was going on, started looking online -- where I found others shared my dismay at the sound.

People need some way to narrow down their product choices. There are probably thousands of brands and models and you just can't listen to them all. That's why people turn to publications like Stereophile and The Absolute Sound. And of course people turn to the Internet, especially when formerly great print publications like Audio, Stereo Review, and High Fidelity have gone under.

Beats is also a brand, a marketing powerhouse and a popular choice among people who have the money to buy them. I believe this is what Apple bought, not mediocre headphones.

Well put, and insightful. But my concern is what Apple does with the style-over-substance Beats by Dre headphone brand. If they morph them into accurate, revealing products befitting their prices, the 15"-subwoofer-in-a-Honda-Civic crowd will rebel. If Apple continues the brand as stylish, but expensive, mediocre headphones, then they leave themselves open to charges that they Apple makes overpriced, underperforming products for hipsters. That's a charge that's been levied many times, but has been dulled by best-in-class performance in Apple's computer, tablet, and phone lines.

Time will tell. I hope, for the sake of my AAPL stock, that my concerns are not justified.