Apple’s deep ties with Jimmy Iovine key driver of Beats deal

“When news spread last week that Apple Inc. (AAPL) was near an acquisition of Beats Electronics LLC for $3.2 billion, Beats co-founder Dr. Dre appeared in a video boasting of becoming the ‘first billionaire in hip hop,'” Adam Satariano reports for Bloomberg. “Apple executives, by contrast, were characteristically silent.”

“The differing reactions underline the seemingly odd cultural fit between the world’s most valuable company and a celebrity-fronted Santa Monica, California-based provider of headphones and online music. Beats executives are known to throw lavish parties and have musicians traipsing through at all hours, while Apple is an engineering haven for coders and designers,” Satariano reports. “Yet underneath those surface differences, the two companies are more aligned than it might appear, with deep ties to one another. Beats co-founder Jimmy Iovine, a longtime producer and executive, was friendly with Apple co-founder Steve Jobs and is a big supporter of the company’s efforts in music. Apple, meanwhile, has cultivated extensive relationships in the music business and its iTunes team is populated with former radio promoters, music writers and other industry veterans. The familiarity may help Apple more quickly reap the benefits of a deal once it’s completed.”

“Apple became interested in doing a deal with Beats after executives were impressed by Beats Music, the online music streaming service unveiled earlier this year, which was rapidly converting users into paying subscribers, said a person with knowledge of the talks, who asked not to be identified because the discussions are private,” Satariano reports. “The negotiations between the two companies heated up recently, with Iovine and Dr. Dre seen around Apple’s Cupertino, California-based campus in the past week, said the person. A deal could bring Iovine into Apple’s fold reporting to CEO Tim Cook, said the person, who asked not to be identified because the discussions are private. Beats will probably remain an independent brand, the person said.”

“With a deal with Apple to be announced as early as this week, Iovine could become a billionaire. He owns 25 percent of Beats, and with proceeds from the deal and millions of dollars collected from more than five decades producing artists such as U2 and Fleetwood Mac, he’ll have a net worth of $1 billion, according to the Bloomberg Billionaire Index,” Satariano reports. “Dr. Dre, meanwhile, is projected to collect $640 million if a deal is completed, according to data compiled by Bloomberg.”

Much, much more in the full article – recommended – here.

Related articles:
Removal of Dr. Dre video about Apple-Beats deal likely means acquisition is real and imminent – May 10, 2014
Game changer: Apple buying Beats could radically transform the digital music business – May 9, 2014
If Beats deal happens, Apple is acquiring a fad, not quality, and that is troubling – May 9, 2014
If Apple’s really buying Beats, here’s hoping it’s brilliant in a way which isn’t immediately obvious – May 9, 2014
The reason for Apple’s $3.2 billion interest in Beats? Spotify – May 9, 2014
Apple buying Beats Electronics: Its best idea since the iPad? – May 9, 2014
Why would Apple want to blow $3.2 billion on Beats Electronics? – May 8, 2014
Apple in talks to buy Beats Electronics for $3.2 billion – May 8, 2014

18 Comments

  1. Beats are a passing fad. 3 years from now, the kids would only be talking about how cheap and lame-ass beats headphones were and only posers would show them.

    Of course, kids will try that with everything – they keep trying to do it with Apple, but the truth wins out, and ultimately, Apple has prospered because the quality was undeniable.

    Regardless of the streaming advantage, regardless of the management or marketing benefits that this deal gives Apple, they have still associated themselves with a company that “makes junk”. This is the place where most fans feel hurt and confused – more than any racial issue.

    Unless they upgrade the beats product or shut down the beats hardware line, this will be forever the moment when Apple could no longer defend its reputation for not making “junk”.

        1. I think the point is someone to get content for Apple (in this case music)… Apple has shown that they do know a little about making audio devices. (their earbuds are pretty good).

          But we’ll see… and in any case, they can afford to buy almost any company they want anyway…

      1. Making better headphones is not exactly a secret. It’s not as if Beats tried but just couldn’t figure it out. They wanted to spend a certain amount of money, and got what they could for that price. Apple might be able to better negotiate, but the engineers won’t have much to do with that.

        1. It’s got nothing to do with the price, there are better sounding ‘phones available for the same price. Beats are what they are for their target market. Does the name not mean anything to you?
          They appeal to those whose music of choice is bass/beat heavy; hip-hop, electro, garage, various flavours of dance…
          It certainly wouldn’t be difficult for Apple’s acoustic engineers to alter the characteristics of the ‘phones to appeal to those who enjoy more evenly biased music, like acoustic, indie rock, etc.
          I use an app called EQu on my phone to tweak my earphones to my tastes, for example a pair of Etymotic ER6i’s, which are very bass-light, but neutral, with EQu the bass has been put back, and I wear them all the time now. Using that, I’m pretty sure I could make a pair of beats ‘phones sound perfectly fine listening to other sorts of music; it’s only altering a curve.
          What I can see Apple doing now they’ve got beats is leaving them for their chosen market, after all it’s a big money-spinner, but now Apple have the ability to market their own higher-end headphones with a more neutral qualities.
          This could be a big deal for Apple, they’ve only ever had earbuds and the vastly improved EarPods, now they have headphones to play with, and I think that’s really exciting.

        1. I quite agree with that. I’ve read a lot of “Beatz suck because audiophile websites don’t rate them very high” in the past few days, but as you point out, Beatz was not going for that. Every time I read “oh, they’re JUST a fad” about the hardware, I also think this misses the fact that people like them as much for the bass as anything else.

    1. That’s what I am hoping DC, although the series of reports complete with visits to Apple HQ is making those hopes seem more like wishful thinking.

      While Apple can afford to blow a few $B on an acquisition like this without serious damage, I don’t like the tone that it sets for the direction in which Apple is changing. I have no problem with Tim Cook charting his own course and not trying to be like SJ, but it needs to be a good course. If this Beats deal actually goes through, I sincerely hope that it has the results that Apple management anticipates.

  2. The music subscription opportunity is interesting especially if Beats are making money out of the operation. Tying that in with Apple’s customer base could be huge.
    The other aspect is connections with the industry. Maybe having Apple get involved in developing and signing up musicians under their own label.
    Still 3.2B is a lot of cash.

    1. But it’s NOT cheap! Basic beats ‘phones are£160, going up to £250, that’s not cheap, by any standards.
      The top-end ones don’t sound too bad, as it happens.
      Music snobs hit on beats ‘phones because they’re designed for people, mostly young people, who prefer bass-heavy music, and bright colours.
      A bit of tweaking with a decent app like EQu, taking the bass down and improving vocals and top-end, and beats sound just fine.
      A version with the same folding design, a flatter response, and an Apple logo would sell really well, because Apple have never had their own headphone manufacturing.
      Instead of all the childish whining and snivelling about this, people should be excited at what Apple can do with their own headphone facility.

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