back to article Rap chap tapped for $3 BEELLION: Apple buys Dr Dre's Beats

Apple, ending weeks of speculation, has confirmed it will acquire Dr Dre's Beats Electronics for $3bn (£1.79bn). The iPhone maker on Wednesday issued a formal announcement revealing it will shell out $2.6bn in cash, and an additional $400m in payments that will vest over time, to bring Dre and company on board. The final price …

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  1. taxman

    WTF?

    Most expensive hearing loss tool paid for. Is this a tax loss thing?

    As for music streaming.... surely the geeks employed by Appfelsaft could have aye Tunes do this...hang on. Doesn't this exist already?

    Jeez. 3 Bs!!! Looks like mushrooms are back in favour.

    1. dan1980

      Re: WTF?

      Music download service buy competing music download service.

      The other thing to note is both companies sell a product at a premium over competing options and have proven that people will pay over the odds for their device. I mean, think of the cross sell at Apple stores.

      1. Anonymous Coward
        Anonymous Coward

        Re: WTF?

        The King of the Lossy Codec purchases a bass-boosting acoustic-disruption hardware biz for $3 billion.

        What's to lose? Besides 10%-20% more of the musical quality.

        1. Slabfondler

          Re: WTF?

          Um, not exactly...Apple's proprietary, and, until recently, closed-source codec is lossless - Apple Lossless Audio Codec or ALAC for short, or even better - ALE (Apple Lossless Encoder).

          You must be confusing that with the codec sharing the same .m4a extension (and the same container) which is Advanced Audio Coding, the successor to mp3, not developed by Apple at all, but a consortium including Sony, Dolby and Nokia along with Bell Labs and the Fraunhofer institute. Though to be fair to your comment that is the default codec on pretty much every Apple device out there.

        2. SuccessCase

          Re: WTF?

          "The King of the Lossy Codec purchases a bass-boosting acoustic-disruption hardware biz for $3 billion."

          And that is precisely why Apple are buying Beats (apologies BTW, but this is in large part a repost of a post I made earlier, but is even more relevant to this article). Agree on the base-boosting acoustic-disruption line (but that doesn't change their popularity does it), but your line on the "lossy codec" says it all: The tech world has been caught on the hop by the popularity of Neil Young's PONO kickstarter project. Ultra-high def audio is proving a bigger draw with consumers than anyone imagined would be the case (the science case for it is not at all clear and more than a little contentious). Apple have a penchant for pushing standards to new levels and always seek to reduce the number of connections and simplify. They were the first to drop optical drives from their laptops. They were the first pushing FireWire. They moved from Intel to Power PC and back in their Mac/MacBook line and now look likely to move to ARM. They always move on and never fear burning some of their existing market to get to where they consider the leading edge to be.

          I predict they are about to go all in on ultra-HD-Audio. The 3.5 inch headphone jack is now the oldest connector on their devices. They will probably replace it with a connection via the lightening port. Overnight 3.5 inch headphone connections will appear old fashioned and low tech. There will be a wave of upgrades. Apple sell half their kit via the Apple Stores where they can play kingmaker with which head-phone brand is given most prominence. Beats will needless to say have the new connector type. Users will still be able to plug in with a 3.5mm cable (via an adaptor for Apple kit and an alternative cable in the box with the Beats cans). But many consumers are nevertheless going to have at the back if their minds that they should go for the new standard; That 3.5 mm jacks have had their day. They will offer instant "quality" upgrade via their iTunes iCloud service (where tracks are streamed so can be upgraded to higher quality non-lossy bitrate for "free") and needless to say the Beats streaming service will offer the same. Even those who are dubious of the value of ultra-HD audio will have a nagging feeling they no longer have the best if they don't have it - that is simply human nature.

          Further I believe Apple will publish the standard for others in the industry to be able to use the connector. Which they may well do, if reluctantly. At the very least Apple will succeed in muddying the waters re USB. This will simultaneously help them in their problem with the EU, who are soon to mandate a common connector for mobile devices. Apple will not want it to be mini USB 3 because it is a turd compared with their physical socket design and they way in which it isn't appropriate for headphone connections (where users often grope to insert the cable, sight unseen) will illustrate their point. When other companies have to compete by moving away from USB 3 to Apple's design or their own new design, the fact Apple are right on this will have been made clear. Apple will gain a small advantage over other companies playing catchup to implement a new standard and will have the appearance of being industry leading. Some companies will stick with 3.5mm audio connectors and hold the line there is no discernible difference (and they will most probably be entirely correct), but their sales will suffer anyway because with new standards out there the 3.5mm will simply start to feel old and new kit using it will suffer from the, albeit technically unjustified, whiff of premature redundancy.

          If Beats is going to encounter, over the next two to three years, a huge spike in revenue in large part due to upgrade purchases, and also due to new ultra-HD customers being attracted to buying (albeit bass heavy) "quality" kit, it makes sense for Apple, who will be creating the conditions for that upgrade revenue spike, to own the company.

          1. Sorry that handle is already taken. Silver badge

            Re: The Surprising Popularity of Neil Young's PONO Kickstarter

            Popularity != quality. Even better, popularity on Kickstarter != product!

            Dan has some sober and impartial words to say about PONO. He then cops some abuse for his trouble.

          2. ukgnome Silver badge

            @SuccessCase

            TL:DR

            1. SuccessCase

              Re: @SuccessCase

              "@SuccessCase

              TL:DR"

              Thank you for letting me know that. And I wish I could care more, I really do, I just don't.

          3. Kristian Walsh Silver badge

            @SuccessCase

            Sorry, that's an Apple-fan's fantasy. First, Beats are not large enough to move a market. Second, iOS's market share and mindshare is no longer large enough to move a market. Third, Every audio maker who was bitten by Apple ditching the 30-pin dock will just walk away from a proposal to change. Look at how poorly the "Lightning" connector has been adopted by accessory makers compared to the 30-pin. And that was just swapping one proprietary connector for another.

            Are you really expecting the industry to lock out the 99% of consumers who don't exclusively use their headphones on an iPhone or iPad?

            By far the most likely reason Apple bought Beats is simple: Despite repeated efforts, Apple has near-zero presence in the subscription streaming market at a time when music sales are plummeting fast in favour of these services. Rising App Store revenue has been masking the decline, as iTunes and AppStore are normally reported as a combined figure, but break out the music sales and you see that they have been falling steadily for years. The graph in this article illustrates this very clearly: http://9to5mac.com/2014/05/28/declining-itunes-sales-underline-need-for-apple-to-launch-a-streaming-music-service/

            1. SuccessCase

              Re: @SuccessCase

              "iOS market share and mindshare is no longer large enough to move a market."

              Just why is it app vendors still predominantly write for iOS first ?

              "By far the most likely reason Apple bought Beats is simple: Despite repeated efforts, Apple has near-zero presence in the subscription streaming market at a time when music sales are plummeting fast in favour of these services."

              It's a standard term in music industry contracts, that they have to be renegotiated in the event of a change of owner. So no banana. Yes they will want to take over Beats subscription streaming, but it isn't really anywhere in user numbers, so again no banana.

              1. Anonymous Coward
                Anonymous Coward

                Re: @SuccessCase

                To be fair there is not much which you can only get on iOS that I miss with my Andriod...

                But, don't forget this isn't about getting people to make your apps. This is getting all devices using a headphone socket to stop and use some stupid connector which reduces sound quality. I can't see Cyrus (nor any other decent Hi-Fi maker) dropping their headphone socket, which is after their DAC, and replacing it with a digital socket so a cheap, crappy external DAC (which is what will be in most headphones) can be used to generate a far lower quality signal.

                And of course means all headphones now have to be powered...

              2. Kristian Walsh Silver badge

                Re: @SuccessCase

                "Just why is it app vendors still predominantly write for iOS first ?"

                They don't.

                http://www.developereconomics.com/reports/q1-2014/ : "Android continues to dominate Developer Mindshare with 71% of developers that target mobile platforms developing for Android."

                iOS developers may be more loyal to that platform, but that's natural, as the iOS market contains a lot of old Mac developers who hit the big-time when iPhone's App Store opened. Their preference for iOS does not change the fact that it is that Android which is targeted by more developers than any other platform. (For tablets, iOS is still the preferred platform, but not by enough to redress the balance, and we are talking about headphones which are primarily a phone accessory).

                The flaw of your argument regarding a new "super headphone" connector is that there is no part of it that requires Apple to acquire a headphone maker. All they'd have to do is bribe/incentivise an existing maker like Beats to produce headphones with your super-duper connector, make some themselves and an sell an exorbitantly priced adaptor for good measure.

                Apple don't care about setting a standard. I'd go further and argue that the last thing Apple wants to become is a de-facto standard -- that opens you up to monopoly complaints, and you get sued and eventually have to licence your technologies on a FRAND basis (which usually means not earning much from them).

                As I said, though, the days when Apple could move a market like this are now gone - iOS has a good share of a mature market, but it's static; it isn't making any new conquests anymore, and a lot of the companies that invested in the iOS accessory market never made their costs back.

                I believe that you live in the USA. This is where Apple's market share is the healthiest in the world (thanks largely to a carrier pricing model which makes iPhones the best value of all options), and it can distort your perception of how the platform is doing overall (Apple has always been strongest in the US: even when Apple was in the shitter in the late 1990s, I remember that we were still selling reasonably well into the US market). The situation in Europe is very different, where fairer pricing has made Android is dominant, and iOS is even outsold by Windows Phone(!) in a few markets, notably Italy.

                And regarding the bananas, I'll just assume that you were offering me a nutritious fruit that's rich in potassium, rather than calling me a monkey.

          4. Anonymous Coward
            Anonymous Coward

            Re: WTF?

            Not sure why people are down voting you. I could indeed see Apple phasing out the 3.5mm jack for something more proprietary. It's the oldest trick in the book and Apple have never been frightened to dump connectors that don't fit their world view whilst pushing their own.

            1. Kristian Walsh Silver badge

              Re: WTF?

              They wouldn't have needed to buy a headphone maker to do this, though...

            2. Bullseyed

              Re: WTF?

              I think most people downvoting him are doing so because the post is long and reading is hard for them.

              I'll actually go as far as saying I would LIKE if my phone (Samsung) had one less port on it. I'm concerned about the little rubbery flap on my otterbox wearing out from use though.

              I think they'd have to reassess where that port is though. The headphone jack usually goes on top so it is easier to wear headphones with phone in pocket. I think Apple's is on the bottom though?

              I wonder how long it is before we go bluetooth for all headphones though?

              1. Anonymous Coward
                Anonymous Coward

                Re: WTF?

                trouble is Bluetooth headphones require power ie battery. I have a pair of sennheiser pxc360 BT's they're good but the battery doesn't last that long

              2. LDS Silver badge
                Joke

                Re: WTF?

                " The headphone jack usually goes on top so it is easier to wear headphones with phone in pocket"

                Do you have issue putting a phone in a pocket the other way? Usually I put a phone in my trouser pocket with the phone bottom up, because when I put or get it it's much more natural this way... or do you believe it won't work if you put it in the other way? LOL!

          5. Wilseus

            Re: WTF?

            >[Apple] moved from Intel to Power PC and back in their Mac/MacBook line

            From Intel to Power PC? That's news to me.

            1. SuccessCase

              Re: WTF?

              Oh gawd did I write that? I lived through it too, so actually know they were on Motorola first but was forgetting the dates and thought they went briefly to Intel before going to Power PC. Now thinking about it, I remember it was just a lot of *talk* about them going to Intel, (and there was also a lot of talk about PowerPC trouncing the Intel architecture, so of Windows converting to PowerPC). It didn't happen though, not because Power PC wasn't superior. Risk did offer real advantages, but because Intel effectively introduced Risk philosophy behind a kind of facade and basically kept ahead of the performance curve through shear money and scale talking.

              1. Monty Cantsin

                Re: WTF?

                Um, the PowerPC processors were the ones that were made by Motorola (and IBM) that apple used to use (they used Motorola's 68k processors before that). Apple then switched to Intel in 2006, and are still on Intel processors to this day.

                Also, it's RISC, not Risk.

              2. JW 1

                Re: RISK

                Geeky board game, yes. What you're looking for is RISC (Reduced Instruction Set Computing). Since you spelled it wrong twice you lose some credibility especially after such a tediously long post. And yes tl:dr.

    2. Anonymous Coward
      Anonymous Coward

      Has

      Hasn't someone pointed out to Apple that Beats headphones are mediocre? Style over substance? Show but no go?

      Still it fits in nicely with their philosophy, after all it's all about marketing and not the product.

      1. g e

        Re: Has (Style over substance)

        You answered your own question

      2. Anonymous Coward
        Anonymous Coward

        Re: Has

        hahahaha yep should fit well with Apple. Beats headphones are toilet, if you want decent headphones go for Sennheiser.

      3. JDX Gold badge

        re:fits in nicely with their philosophy, after all it's all about marketing and not the product.

        Every business is about making money

        Music is an area where style has ALWAYS been at least as important as substance

      4. John Bailey

        Re: Has

        "Hasn't someone pointed out to Apple that Beats headphones are mediocre? Style over substance? Show but no go?"

        But you can see the logo from ten feet away.. What else matters?

    3. Tom 38 Silver badge

      Re: WTF?

      As for music streaming.... surely the geeks employed by Appfelsaft could have aye Tunes do this...hang on. Doesn't this exist already?

      They've not bought it for the headphones, they've bought it for the streaming service.

      They haven't bought the streaming service for its technology nor customers (although the latter helps). What they've mainly bought it for is to get access to contract terms that the music labels would give to Beats, Rhapsody and Spotify, but would not give to Apple.

      1. Bullseyed

        Re: WTF?

        "What they've mainly bought it for is to get access to contract terms that the music labels would give to Beats, Rhapsody and Spotify, but would not give to Apple."

        I agree, but what stops them from pulling those contracts? They may have outs in them or may just not renew after expiry. Risky move that shows how desperate Apple is.

    4. JDX Gold badge

      Re: music streaming.... surely Appfelsaft could have aye Tunes do this...

      G+ is technologically as good as FaceBook. OSXLinux are at least as capable as Windows. WinPhone8 and Lumia devices are on a par with their competitors... yet in all cases it is hard even for multi-billion dollar behemoths to carve a decent place in the market. Brand is very important.

  2. Mike Lewis

    A marriage made in Heaven?

    Newsflash: company making overpriced computers buys company making overpriced headphones.

    1. Adam 1 Silver badge

      Re: A marriage made in Heaven?

      That is ridiculous. Apple haven't been a computer company in years.

      1. boltar Silver badge

        Re: A marriage made in Heaven?

        "That is ridiculous. Apple haven't been a computer company in years."

        Hmm, well technically a smartphone is just a small - albeit powerful - computer with a mediocre cellphone bolted in so in reality they are , they just prefer to give the impression they're a "lifestyle" company now. Quite how using a phone or a tablet is a lifestyle I haven't yet worked out. Does anyone pick up a landline phone and think "Heeey laaadies, arn't I cool or what?". No. So whats the deal with cellphones? Don't get it.

      2. Adam 1 Silver badge

        Re: A marriage made in Heaven?

        Technically a TomTom is a computer too...

        But AAPL is not trading where it is because of their worth as a company that sells computers.

        1. boltar Silver badge

          Re: A marriage made in Heaven?

          "Technically a TomTom is a computer too...

          But AAPL is not trading where it is because of their worth as a company that sells computers."

          Yes it is a computer , but you don't generally download and run disparate programs - sorry "apps" - on a satnav unless its been hacked. Smartphones are pretty much general purpose computers unlike satnavs.

      3. Bullseyed

        Re: A marriage made in Heaven?

        Then why do iPad shipments count in most PC marketshare reports?

  3. Mitoo Bobsworth
    Unhappy

    "canned statement"

    Says it all, really - canned p.r. & marketing to follow. Be mindful of highly processed goods, folks - not good for your health. An Apple is best when it's fresh.

  4. Zack Mollusc

    Pffft! Idiots!

    I am working on an awesome new technology which will make streaming obsolete, it involves using some of the gigabytes of storage usually used for selfies and tracking cookies to instead store digitised music.

    1. Dave 126 Silver badge

      Re: Pffft! Idiots!

      How can you fit millions of music tracks into mere Gigabytes of space?

      1. Zack Mollusc

        Re: Pffft! Idiots!

        The same way streaming fits millions of tracks into a 500MB data allowance.

        1. dan1980

          Re: Pffft! Idiots!

          @Zack

          I think he means the choice of millions of tracks.

          I don't stream - I like to own and rip my own CDs and I supplement that with radio (FM) - however I do see the value in streaming.

          Think of it this way - you are only playing, at most, a handful of tracks at a time. All the other tracks you have that you are not listening to right now are really only there so you can choose them. So, with a local solution, you have a choice limited by your storage capacity. With streaming, you have a choice limited by the storage capacity of the streaming service, which is fairly guaranteed to be larger than yours.

          What tracks are actually available is a different matter of course, but the conversation seemed to be around storage.

          Of course, on a small data plan that's not really do-able!

          1. Michael Wojcik Silver badge

            Re: Pffft! Idiots!

            Think of it this way - you are only playing, at most, a handful of tracks at a time. All the other tracks you have that you are not listening to right now are really only there so you can choose them.

            I only play one track at a time, but who knows what you crazy kids get up to.

            I have my MP3 player1 with 300 tracks or so on it, and it's set to play through the lot, then go back to the beginning. If I didn't want to hear it, why would it be on there?

            1Since I generally only listen to music while I'm driving or working on the house, I prefer to use an extremely cheap standalone MP3 player for this purpose, rather than any more-useful device. But yes, my pocket-telephone is also a gramophone. And a telegraph machine! Also it tells the time. It's quite ingenious really.

        2. Bullseyed

          Re: Pffft! Idiots!

          Personally I'm really divided about this. I have tons of storage space on my phone's SD card, but tend to use streaming services. Mostly because I don't know how to buy the type of music I listen to (EDM mostly, not able to be found on store shelves) but also because the ads are unobtrusive for the most part so the music is free to stream. But my data rate is not free, but is a sunk cost.

          First world problems.

  5. Dave 126 Silver badge

    >Apple makes it official: $3 BEEELLION for Beats

    >Add 'billionaire' to list of things you may have forgotten about Dre.

    This deal doesn't make Dr Dre a billionaire, accordng to his hare in Beats.

    Headline writer is not the article writer.

    1. emmanuel goldstein

      here hare here

      1. Vladimir Plouzhnikov

        As for all their tempting ideas, well Hare didn't care. The lost spectacles were

        his own affair. And after all, Hare did have a spare a-pair. A-pair.

  6. Mark 85 Silver badge

    Ah.. one word..

    Quote: "Music is such an important part of all of our lives and holds a special place within our hearts at Apple,"

    He obviously means <cough> PROFIT!!! <cough>

    Sometimes I wish they say what they really mean...

    1. dan1980

      Re: Ah.. one word..

      @Mark 85

      "Sometimes I wish they say what they really mean..."

      Really? Most of the time I just wish they'd all shut up and go away.

  7. Frank N. Stein

    Wow. I should've created some badly designed brittle headphones with bass boost, first. I could've been this Beelion_aire..

    1. Anonymous Coward
      Anonymous Coward

      You'll need to be a ghey rap star first.

    2. Anonymous Coward
      Anonymous Coward

      All you need are two dustbin lids, hey presto, you have a Beats headset.

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