The ‘Beats’ Goes On With Apple

Buyout More Than Headphones: Sub-culture


The ‘Beats’ is expected to groove on with the music as Apple orchestrates the purchase of Beats Electronics. Beats Electronics is known for producing high-end headphones and streaming music. The buzz is all about Dr. Dre, a gangsta rapper from Compton, in south LA. Once this acquisition is sealed, this hip-hop rapper will have topped the Forbes list as the first bone-fide billionaire rapper.

Dr. Dre was born in February 1965, as Andre Romelle Young, who pressed through tough times and became a legendary rapper. His neighborhood in Compton was known for two things: violence and producing hip-hop rappers. In 1988, Dr. Dre debuted an album “Straight Outta Compton” with the group N.W.A. Feeling entrepreneurial, he left the group in 1990 to produce Death Row Records; then went on to create Aftermath Entertainment in 1996. Dr Dre received six Grammy awards, which propelled him upward financially.

It was in 2008 that Dr. Dre, along with music mogul Jimmy Iovine, co-founded Beats Electronics; however, the birthing of this idea began when they ran into each other in 2000, while vacationing. Their forte has been making audio equipment. In 2012, at the London Olympic Games, many sports stars and celebrities were seen sporting the ubiquitous headphones. The intrigue with this acquisition by Apple, is that the smart phone guru would be looking to expand its horizon to the tune of $3.2 billion. Many are asking if this price is worth it, but those who see the value are looking far past the monetary dollars. Apple is looking to buy Beats sub-culture and their streaming music service.

It could be months before the details of this acquisition are known, but it is likely that both Jimmy Iovine and Dr. Dre would be instrumental in holding executive roles. One of them would probably build relationships with labels and publishers, while the other would review the music strategy’s of Apple. This timing would be good for Apple, in that, some of its business relationships on the music side have been dwindling downward.

The World Wide Developers Conference (WWDC) is scheduled for June 2-6, in San Francisco. At this event, Apple discloses its operating platform to give engineers and app developers a first look at what is going on with new developments. Well, it is likely that the Beats is going on with Apple, that’s what!

Kevin Roose, with NYMag, is somewhat skeptical about this deal. He claims that it is too simple and straightforward, because that would make Apple buying a maker of high-margin headphones, which he considers to be silly. But, there are those who feel Kevin is wrong and here are a few of the reasons why:

  • Apple is famous for not doing acquisitions.
  • Worldwide, they are the largest market cap company.
  • Beats is one of the most on fire companies in music.
  • Apple’s model of music is becoming antiquated,and streaming competitors, such as Spotify, could become stifled, just to name a few.

Many analysts  believe that bottomline is that this acquisition would keep Apple relevant within the arena of music.

Tim Cook is the current CEO of Apple. His views are quite different from Steve Jobs. Simply put, Jobs was such a visionary, that he did not see the need for acquisitions. Cook, on the other hand, is travelling in an opposite direction. Cook is committed to returning dividends and stock buybacks to the shareholders to the tune of $130 billion, whereas, Jobs had the tendency to hoard the cash. Cook is also leading the way in improving labor conditions in overseas factories, which he sees as a social responsibility. Jobs was the corporate rebel, while Cook is more traditional. Wall Street is cautiously eyeing Cook to see what he will do next.

Beats Music could become one of the largest streaming services, if pre-loaded onto the iPhone 6. The target price could be as much as $700, according to Jeffries. Jobs was known to be notoriously skeptical of the streaming industry. Iovine, who had a long relationship with Jobs, had tried to convince him on numerous occasions that it was a good idea, but was unsuccessful.

Whether a good idea or not, talks between Apple and Beats are in forward motion. As for Apple’s ability to come up with the $3.2 billion for the acquisition; well, here are the stats: $13.5 billion cash per quarter, flows through the hands of Apple, which breaks down to $1.04 billion in cash per week. Easily, Apple can pay for the acquisition with three weeks of generated cash flow. For the largest market cap company in the world this is an amazing amount.Will the Beats really go on with Apple? Industry insiders wonder, and propose that time will tell.

By Jill Boyer-Adriance

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