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Apple Confirms It is Buying Beats Electronics

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The much publicized Apple beats deal is now official. Apple Inc. (Nasdaq:AAPL) has said it is buying Dr Dre’s Beats Electronics for $3 billion. The deal, which has drawn criticism and praise alike, will see Jimmy Iovine and rapper Dr. Dre work under Apple’s internet services segment headed by Executive Officer Eddy Cue.

The beats deal has been tipped to help Apple regain its music mojo. The company, which revolutionized digital music through iTunes, has been struggling in subscription music – a service that is slowly replacing digital music downloads. The high-end Smartphone maker is now set to pile pressure on the industry leaders, Pandora and Spotify.

The executives from both Beats and Apple said that the former will retain its brand and remain separate from Apple. Beats’ high-end headphones will continue to be sold in Apple stores, alongside Apple products.

Beats Streaming Music and iTunes

Some people may feel that keeping both Beats’ streaming music service and iTunes digital music store and streaming radio service is like duplication of projects. However, the two brands are completely different and will be extremely difficult to merge. So Apple has offered to play it safe by letting Beats continue operating independently.

Apple will be happy to have the legendary music producer Jimmy Iovine on their side. Since the demise of Steve Jobs, the iPad maker has gradually been losing touch with the major labels following the declining sales of albums and individual songs in iTunes music store. There is hope among shareholders and analysts that bringing in a music industry insider will help the company recapture the lost grounds.

According to Apple’s CEO, Tim Cook, Dr. Dre and Iovine are an incredible asset that his company is lucky to find. And while many people are concerned with the $3 billion price tag, Tim Cook is happy to have gotten a music streaming service that allows users to create playlist alongside a rare blend of professionals. The Apple boss praised the duo and was quoted by Forbes as follows:

“These guys are really unique…It’s like finding the precise grain of sand on the beach. They’re rare and very hard to find.”

Perhaps what he is not saying is that the talent the pair has is what iTunes was missing. And because there was no time to breed such talent from inside, so he had to acquire it through the beats deal.

Beats Deal – Apple’s Biggest Acquisition Ever

Apple and Beats have agreed the terms of acquisition as $2.6 billion will be paid in cash whereas the remaining $400 million, which is only $4 million shy of NeXT acquisition in 1996, will be in stock. Until Beats deal came around, Apple has avoided big buyouts, but possibly those days may be all gone. This is Apple under Tim Cook, not Steve Jobs! However, poaching talent has been one area where Silicon Valley firms outdo each other, and Apple just got Iovine on their side!

Beats deal is yet to be officially concluded and it expected to be finalized in this fourth quarter. This will be Apple’s biggest acquisition ever, dwarfing the NeXT buyout that brought back Jobs to “his” company.

Apple-Beats: Not yet a Deal!

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Apple-Beats Deal could be on Shambles after Violation of NDA

Apple-beats dealThere are emerging reports that the much anticipated Apple-Beats deal may not happen as expected. The deal which involved Apple (Nasdaq:AAPL) acquisition of the famous Beats by Dre at a whooping $3.2 billion has stumbled following the violation of a non-disclosure agreement (NDA) by the Beats side of the negotiating table. Apple is said to have been angered by a video by Dr. Dre featuring Tyrese Gibson, in which Dre appear to confirm the deal.

A mutual non-disclosure agreement (NDA) is meant to keep proprietary information of the deal secret, but Dr Dre gave the public a hint. In fact, Tyrese went further to tweet a series of messages connecting to the deal. The messages have since been deleted, but one read:

“How did I end up in the studio with Dr Dre on the night his deal went public that he did with Apple…”

Apple Plays Cards Close to the Chest

Apple is known to operate in shadows and it likes catching the public by surprise. The fact that Apple-Beats deal has been much publicize is said to be affecting negotiations. According to Billboard, the iPhone and iPad maker was not ready to divulge information about the deal to the media, and currently it is not seating well with the publicity surrounding the whole thing.

Other Reasons Why Apple Might Backdown

While there are lots of rumours about the deal, there has been no official communication from either side. It is now emerging that Apple is grappling with how to absorb both rapper Dr. Dre and the legendary music producer Jimmy Iovine.  Apple is used to acquiring start-ups, so Beats has brought a new challenge. The possible options include full-time employees or just consultants.

Another challenge is how to price perhaps the greatest allure, the Beats Music streaming service. The service is not fully owned by Beats Electronics, and it is yet to record known revenues. The service was launched just launched in January, and though it registered over thousand subscribers a day in its early week, its valuation is not yet obvious.

Conclusion

It is unclear as to why Apple and Beats electronics are yet to announce the deal, but it is obvious that they are issues that have slowdown the negotiations. While the Apple-beats deal itself is also a rumour, it is generally good for Tim Cook and his team. Investors have already absorbed the news and most of them believe Apple is responding to slowing iTunes sales, so for the sake of Apple’s stock, the deal must happen. If this deals fails, it will be a major blow to the iPhone maker, with Google Inc.’s (NASDAQ:GOOG) Android continuously growing dominant.