Oh please, they're obviously not buying the users. They're buying a ready-made Spotify competitor and an executive who sits on several relevant boards and has extensive contacts in the industry for obtaining favourable streaming contracts. Simple.
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Apple's Acquisition of Beats Met with Skepticism, but Jimmy Iovine May Be Key
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Oh please, they're obviously not buying the users. They're buying a ready-made Spotify competitor and an executive who sits on several relevant boards and has extensive contacts in the industry for obtaining favourable streaming contracts. Simple.
It makes infinitely more sense that YES they did buy it for the engineers, algorithms, etc rather than for some crummy ear cans.
Heres the front page post pretty much confirming it https://www.macrumors.com/2014/05/09/apple-playing-catch-up-with-beats/
So yes, everyone else is still a dope for thinking it was all about the headphones.
I was not at all interested in this deal until I watched that AllThingsD interview. This acquisition is hardly about the showboat headphone hardware. Sure they may gain some advancements here, it's the icing on the cake. The cake itself is truth behind the need for song curation. If they truly can do what Jimmy is speaking to, Apple NEEDS this to keep iTunes relevant. I'll drink Jimmy's Kool-Aid. I really had no respect for the Beats brand until learning what they are actually trying to do, I don't plan on owning any of their overpriced headphones anytime soon though. I'll stick with my ArsTechnica.
No I understand, just will be interesting what they will use from Beats to add to their Brand? I already use iTunes Radio, no longer sync music to my phone.
BMW? Really? Driven by arrogant middle aged businessmen the world over?
If Apple are really comparable to BMW in coolness then they really do need help.
Haha, I needed a good laugh today. Thank you. This 100%.
Let the multi-billion dollar company do what it wants to do. There is obviously a reason for it. Apple isn't stupid.
That still makes no sense.
Apple's competitors are way ahead of them in the realm of music subscriptions services. THAT is why they were forced to pay through the nose for a subpar company like Beats
That still makes no sense.
Apple's competitors are way ahead of them in the realm of music subscriptions services. THAT is why they were forced to pay through the nose for a subpar company like Beats
So negative.
I think we all know that Apple has struggled to gain traction in the music subscription business. This acquisition is supposed to be of some help. But what you fail to account for is that Beat is a highly profitable company. No matter what you personally think about them or their products, the cost of acquisition is going to be based revenue and earnings. Apple's $3B purchase of Beat (assuming it actually happens) make a lot more sense than the $19B Facebook paid for WhatsApp, or even the $1B they paid for Instagram.
Yeah, I guess he could come up with something. Maybe the beats headphones are such high margin and sell in such volume that just the cash flow justifies this sale price. I think that the current profits from all the streaming music services wouldn't come close to justifying a purchase price like this.
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Well it could just be the margin and cash flow. The headphones have a huge margin. There are very few things out there get a margin like the iPhones. But these celebrity headphones are one of them.
Apple is trying to buy what is seen as "cool" instead of actually doing something cool. And that is sad and uncool.
If the revenue numbers we are hearing are close to correct, $1.2B in revenue at (say) 40% margin comes to around $500M in earnings. Which means Apple's RoI would be about 15%. Not too shabby, especially compared to the very low single digit returns they'd get on the same money held in the cash stash. Unless these numbers are way off, I don't see why anyone (Gene Munster, I'm talking to you) are tearing their hair out.
I think the pundits (and myself) didn't factor in that Beats is just fantastically profitable business selling its fashion forward headphones. But if it is a cash flow acquisition, to a large extent, then that is something new for Apple. That alone is worth some concern.
But there is history of this in tech. The smartest thing AOL ever did was merge with TimeWarner. Two years later and TimeWarner was an even bigger cash producer and AOL was on inevitable path to worthlessness.
By the way. Is it clear that Apple is using cash for this acquisition? They could use stock. Apple doesn't actually have a ton of cash left in the US. They've got this amount. But the US cash is going to stock buybacks.
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What is the cake? Song curation? Fantastic, love it. One of the reasons why I don't use Pandora anymore. I've realized that curated music lists are less repetitive and superior. But you can buy an infinite amount of song curation just by picking talented disc jockeys and paying them a few bucks. (Example, putting together a nice five hour playlist could probably be done by a music expert in a few days; maybe even a few hours. They do this stuff in their spare time as well as on their job. Offer them $5,000 for a couple days work and you are done. Have list updated once a year and buy another new list every couple of months. Repeat over 20 genres. A million dollars would last for years at that burn rate.)
I think this price is driven by the cash flow of the cans. Now Apple may be doing it for the "cake" as you see it. But the cash flow exists and has real value. I suspect you may have something here, but backwards. Apple has to pay a lot to buy the cake (i.e., the headset cash flow), but it really wants the icing. Which is the thing you allude to.
johnnyturbouk
macrumors 68000
A cash flow and cash reserves purchase seems like not a major distinction to me. Whatever free cash they don't spend goes right into the hoard. For accounting and reporting purposes, out of reserves looks a lot prettier. Since it hasn't happened yet we don't know how they will swing it, but I would be awfully surprised if they didn't have enough domestic cash on hand or could not raise it within 30 days or so. The buybacks are being funded mainly from the sale of bonds, was my impression.
As I mentioned before, I hope they don't use stock, but I wouldn't be surprised if they did, maybe in the form of options or RSUs.
