
Apple Said to Be in Talks to Buy Beats for $3.2 Billion - littlemerman
http://mobile.nytimes.com/blogs/dealbook/2014/05/08/apple-said-to-be-in-talks-to-buy-beats-for-3-2-billion/
======
abalone
This makes even less sense than the Square acquisition rumor.

1\. Apple has the tech and library to do their own subscription service if
they want to. You think they can't do their own licensing deal? They surely
don't need to pay $3B to acquire someone else's.

2\. Apple wouldn't want to operate a cross-platform service. They'd pay a huge
premium to acquire a bunch of Android customers than they'd promptly purge.
Plus, it'd probably invite anti-trust scrutiny.

3\. The argument about Beats headphone quality is moot. Even if it's more than
just marketing / bass-heavy EQ, Apple would not pay $3B to acquire headphone
technology.

None of that makes any sense at all. I have to believe someone thinks Beats
and Square are interesting to Apple because their products have a certain
superficial Apple design aesthetic. But it makes no sense from a business
model standpoint.

Or maybe Apple's doing some kind of next-level mole hunt here to level-up on
secrecy.

~~~
jcampbell1
> You think they can't do their own licensing deal?

When you are the richest guy in town it is hard to negotiate a good deal. It
is probably much smarter to just buy Beats. If they bought Spotify, they would
be stuck supporting Android and Windows customers.

The $3B price probably reflects the current profitability of the headphone
line. For what it is worth, audio brands seem to have staying power. I am not
sure if the quality criticisms are a positive or negative value signal
personally.

~~~
Scorponok
Other services (like spotify) have tended to have clauses in their licenses
saying something like "If you get acquired, the deal is cancelled and you have
to renegotiate it" so that the record companies can prevent exactly this from
happening. I would be surprised if Beats doesn't as well.

That means that it doesn't matter if Apple (or anyone else) buys someone who
already has a deal - the previous terms go away and the record companies get
to start the negotiations all over again.

~~~
k-mcgrady
Don't forget Beats is run by a record label boss. He is extremely well
positioned to make those deals.

------
state
I cannot figure out any way to reconcile the incredibly poor quality of Beats
products with a hopeful future for Apple. Can someone make the argument for
why this is a good idea?

~~~
Cookingboy
They are over marketed a bit and over priced, sure, but just as much as Bose,
B&O and a lot of other premium sound brands.

How do they objectively have "incredibly poor quality"? Do you have a link
that support they have really poor sound quality or bad build quality or
horrible customer satisfaction rate?

~~~
Aqwis
Bose is a damn bad example as a premium brand to compare Beats to. Their
consumer headphones are widely considered to be way overpriced and gimmicky.
The brands Beats should really be compared to are Sennheiser, Shure, A-T,
Denon, Beyerdynamic and the like. Any offerings from these brands at a price
point from $100 and up offer at least as good sound quality as Beats' cans and
for a much lower price, and many of their phones look pretty good as well.

~~~
peterarmstrong
And yet... Bose QC15 are simple, light, comfortable and sound fine. The real
point, however, is that they are amazing at tuning out the outside world, and
thus are fantastic for coding. Their lack of audiophile cred means absolutely
nothing compared to all the above, and if you are in an environment with noisy
children or coworkers you won't want open headphones anyway. So for the actual
use cases of many of us here, QC15 are actually a good choice. Regarding
Beats, I actually have no opinion since I've never tried them, but people who
like them enjoy them...

~~~
sjwright
I'll go one further and assert that in a noisy environment, the Bose QC15 have
the absolute best overall sound quality of any headphone I'm aware of. By a
very, very long mark.

I had a few very sophisticated sets of expensive headphones (plus a headphone
amplifier) and I just don't use them any more. When I don't need to wear
headphones, I'll sit down in my theatre room. When I _need_ to wear
headphones, it's because I'm in an environment with other noises (office,
travel, etc) and the noise cancellation trumps any other cans' refinement.

~~~
stcredzero
Even Beyerdynamic 770 Pro? I tried active noise canceling in the past, but
found the sound ultimately fatiguing. I prefer passive cancellation now, and
10db is a significant amount of isolation.

~~~
sjwright
Absolutely; the 770 Pro are one of the cans I own (the 80 ohms model). They're
exactly the set I reach for when I want to listen at home with privacy.

In a noisy environment though, they just can't compete. Yes, the 770 Pro have
excellent passive isolation characteristics, but they do absolutely nothing
for low frequencies [0] whereas the QC15 achieves 20db [1]. This makes all the
difference in the world when you're trying to escape into music while flying.

I know what you mean about active noise cancelling being fatiguing. I've been
lured into noise cancellation before, only to be repelled by the strange
feeling of pressure within the ear. I wouldn't have given a moment's
consideration to the QC15 had I not been loaned a pair by a friend. I'm not
going to say the QC15 are perfect for everyone, but to _my ears_ the pressure
phenomenon is pretty much nonexistent. I've worn them for an entire 13 hour
flight without a moment's discomfort.

[0]
[http://www.innerfidelity.com/images/BeyerdynamicDT770.pdf](http://www.innerfidelity.com/images/BeyerdynamicDT770.pdf)

[1]
[http://www.innerfidelity.com/images/BoseQuietComfort15.pdf](http://www.innerfidelity.com/images/BoseQuietComfort15.pdf)

------
astrodust
This seems like a strange thing to acquire. It's not like Apple couldn't make
headphones of that sort if they wanted to, and if they wanted cachet, they'd
probably scoop up Bose or Sennheiser, a name with some actual weight behind
it.

It's amazing that HP's series "With Beats Audio" actually cheapens their
product.

~~~
MichaelGG
I read a thread on Reddit where someone discovered that disabling the
"enhanced audio" feature just screwed up the driver EQ system (setting
"treble" all the way up and "bass" all the way down).

------
lawnchair_larry
So much for Apple's appearance of being a premium brand. Beats products are
junk. Until 2012, they were basically white-labeled Monster Cable products.

~~~
quotient
Yes, it's precisely about appearance. Beats head/earphones are very popular.
They were also in some sort of partnership with HP (and perhaps others?)
previously --- you can find many HP laptops with Beats Audio. This appears to
be a selling point, so combined with the fashionable image of Beats, it makes
sense that Apple would want to absorb this brand.

Also, most people aren't aware that Beats are junk. Many consumers mistake a
strong bass for good audio quality (or even more shockingly, they don't care
about quality, and bass is _what they want_).

~~~
mahouse
Not only HP, but HTC phones, until several months ago.

~~~
lawnchair_larry
Interestingly, HTC bought a majority share (50.1%) in Beats, and slowly sold
it back in pieces. Based on the timing, I wonder if Beats may have had to buy
it back in order to sell to Apple.

 _In August 2013, reports surfaced that Beats ' founders planned to buy back
HTC's remaining minority stake in the company, and pursue a new, unspecified
partner for a future investment.[11][12] On September 27, 2013, HTC confirmed
its plan to sell its remaining 24.84% stake in Beats back to the company for
$265 million, with the deal expected to close by the end of the year.
Concurrently, Beats announced that the Carlyle Group would make a minority
investment in the company"_

------
paul_f
$3.2B? I don't get this at all. What exactly does Apple get out of the deal?
(1) Their brand is much stronger than Beats. (2) They could design and build
high quality headphones if they wanted, the design is quite simple. And (3) if
they wanted a music subscription service, they could easily create one of
their own.

~~~
dragonwriter
> if they wanted a music subscription service, they could easily create one of
> their own.

Actually, they have one. (iTunes Radio)

Of course, the fact that this has to be pointed out to someone arguing how
strong Apple's brand is relative to Beats _might_ illustrate the value they
get from buying Beats better than anything else.

~~~
paul_f
My understanding is iTunes radio is Pandora, not Spotify. Big difference. One
is Internet radio, the other a true music subscription service.

~~~
baddox
They've got iTunes Match and iTunes radio, which are both similar to but just
slightly to either side of Spotify.

~~~
leemcalilly
I use iTunes Match and iTunes radio, and still use Spotify to be able to
search and play any song I want without having to buy it.

------
jackgavigan
I'm puzzled by this. If it's about a streaming service, why not acquire
Spotify?

Could it be about patents? Beats got custody of all the intellectual property
when they divorced Monster.
[https://www.google.com/?tbm=pts&hl=en#aq=f&aqi=&aql=&hl=en&q...](https://www.google.com/?tbm=pts&hl=en#aq=f&aqi=&aql=&hl=en&q=%22Beats+Electronics+LLC%22&tbm=pts)

------
pcurve
I think this is pretty damaging to the Apple brand.

I'm afraid this will end up costing Apple more billions down the road as it
creates uncertainty about their growth strategy.

------
k-mcgrady
The comments in this thread are similar to the comments in any Facebook
related post on HN. Arrogant. People who likely haven't used the product for
more than a few minutes have a concrete opinion on it. You may think Beats
suck but they sell $500m of headphones per year. People clearly like the sound
they produce even if you think it's shit and overpriced.

~~~
cheald
Beats was made popular by the Monster Cable marketing machine, who is
specifically known for selling well-marketed overpriced crap. Claiming that
they're good because they sell is silly.

~~~
k-mcgrady
It depends on how you define 'good'. They may not be good for listening to
certain genres and they may not have a very balanced sound which a lot of
audiophiles desire, but the sound they produce is clearly a sound people want
and that is proven by how well they sell. They are not an impulse purchase,
they are ridiculously expensive. If people really hated the sound most of them
wouldn't buy Beats even with the marketing and fashion aspect.

~~~
w1ntermute
> the sound they produce is clearly a sound people want

Most people are easily fooled when it comes to audio quality and have no idea
what sound they "want", so they have to judge the quality of the product on
the basis of marketing/branding and design instead. That's exactly what's
happening with Beats.

And it is entirely sustainable because (in the mainstream) headphones are
first and foremost a fashion accessory, and neither Beats wearers nor the
observers are know a thing about what good audio quality is. As long as they
look hip wearing Beats in the eyes of mainstream observers (a phenomenon that
doesn't show any signs of abating), it'll continue to fly off the shelves.

As someone else commented above, the job of quality headphones is to reproduce
the recorded signal as faithfully as possible - a flat frequency response. If
you want enhanced base (for example), that should be done in the software
equalizer, _before_ the signal gets fed to the hardware. On an objective
level, the audio quality of Beats blows. There's simply no other way to put
it. Of course, this is all irrelevant to the unwash^H^H^H^H^H^Huneducated
masses.

------
gmisra
The history of Beats is itself fascinating: [http://gizmodo.com/5981823/beat-
by-dre-the-inside-story-of-h...](http://gizmodo.com/5981823/beat-by-dre-the-
inside-story-of-how-monster-lost-the-world)

------
kepano
Fun fact: Beats' industrial design lead is Robert Brunner, Jony Ive's
predecessor as Director of Industrial Design at Apple.

~~~
beltex
Interesting. Brunner tried to hire him several times apparently.

[https://www.youtube.com/watch?v=GqJVHe6LN4E](https://www.youtube.com/watch?v=GqJVHe6LN4E)

[http://en.wikipedia.org/wiki/Robert_Brunner](http://en.wikipedia.org/wiki/Robert_Brunner)

------
MaysonL
If this comes to pass, I will have to agree with those who have been saying
that Cook should be canned.

------
fjk
The article mentions only Beats Electronics. I think this acquisition becomes
a lot more interesting if Beats Music is part of the deal.

~~~
abat
Supposedly (according to Recode.net) Beats music only has around 200,000
subscribers and most of them are free trial users from a AT&T deal. Doesn't
sound a like a service Apple would want.

~~~
goatforce5
Perhaps they have favourable licensing deals for music content that would
survive the acquisition....

~~~
frankdenbow
Its doubtful that the deals would automatically transfer over to the acquirer.
Would have to be re-negotiated

------
bobbles
I really think people are underestimating the streaming service they could be
acquiring here.

Currently even as an iTunes Match subscriber, if I hear a song on iTunes radio
I still need to go and purchase the song if I like it.

Potentially the deals Beats currently have mean I could just tag that song as
one I like, and each time I listen to it some amount of revenue is split
between the label and Apple.

Acquiring beats would undoubtedly mean they also acquire their licencing
contracts, which seem to have been traditionally difficult for Apple in the
past.

~~~
pohl
Even if they're not interested in the subscription service model, there may be
something here that can improve iTunes Radio's song selections:

 _" The service uses a personalization system combining recommendations based
on listening habits and algorithms with human curation and playlists from
music professionals, including other "guest" curators, such as Rolling Stone,
Rap Radar, and Pitchfork. Song searches prioritize the original, master
recordings of songs over other versions (such as covers). A feature known as
"The Sentence" allows users to generate playlists by filling four blanks in a
sentence with words describing various activities, moods, and genres."_

[http://en.wikipedia.org/wiki/Beats_Music](http://en.wikipedia.org/wiki/Beats_Music)

------
ChuckMcM
_" Apple is in talks to acquire Beats Electronics for about $3.2 billion,
according to a person briefed on the matter."_

I guess there is some disagreement about whether or not Beats is "worth"
$3.2B. Such stories, on the eve of an acquisition, are always about trying to
get the price raised it seems. Would be interesting if Apple walks away from
the deal at this point.

------
Braveatom
The major labels have a love/hate relationship with iTunes. It brings in loads
of cash, but it's a monopoly and the majors have little to no control (on
price and promo, compared to retail).

So I wouldn't be surprised if the labels are being somewhat difficult to Apple
about streaming rights - they'll dominate, and once again the labels lack
control.

This deal could get round that somehow?

Add to that that I think the labels have vested interests in Spotify and very
favourable deals, (while cautious of the streaming model) and it makes sense
to not let another player in just yet, especially one like Apple.

Apples service is one that'll ride roughshod over everything, installed
instantly on 100's of millions of devices with an iOS update - Sounds like a
good use of their money to get that sooner rather than later.

I haven't used Beats headphones but if their tech could be used to perceivably
improve idevice's and laptops built in speaker audio it's a win there too.

I'll believe it when I see it though.

------
robg
If true, seems like a submarine into wearable technologies.

Apple building mood sensing tech for personalized streaming service is a bit
creepy. Apple adding mood sensing tech to a huge, young, existing, user base
is broadly exciting.

H/T:
[https://news.ycombinator.com/item?id=7718083](https://news.ycombinator.com/item?id=7718083)

------
winslow
In my eyes, this paints Apple as just another "big company" making
acquisitions that don't make sense. Maybe they are going to bundle all ipods
with beats...? Not sure where they are going with this unless it's for the
music service licensing agreements.

~~~
Tyrannosaurs
Which would be great if the iPod wasn't a decline market.

They can put them in with iPhones (adapted to include hands free) but I'm not
sure how much that would influence people to buy an iPhone over something
else.

------
scelerat
...because music is the next big thing on the horizon?

Does Apple have an answer to Nest? To Tesla? To Comcast?

I understand Beats is a powerful brand, with a youthful and enthusiastic
customer base, and they've entered the streaming space with some panache.
Apple already knows how to do music. Is this what they're focusing on? It
seems like a distraction and not a terribly advantageous one.

------
OWaz
It's weird how this April Fools article about Apple buying Beats [1] doesn't
seem ridiculous right now.

[http://lefsetz.com/wordpress/index.php/archives/2014/04/01/a...](http://lefsetz.com/wordpress/index.php/archives/2014/04/01/apple-
buys-beats/)

------
doe88
As I see it it's not for the hardware, but for the streaming service and for
Jimmy Iovine and his connections/knowledge in the music industry. I don't know
how he could fit with Eddy Cue but I think Jimmy Iovine would bring a lot if
he was in charge of the music services in iTunes.

~~~
leemcalilly
Apple saved the music business with iTunes. Why do they need Jimmy Iovine's
connections? I don't see why they need Jimmy Iovine for anything.

~~~
doe88
Because he _is_ the music industry, because maybe the now _mighty_ Apple has
lot of difficulties securing licensing music rights, especially in the
streaming area. Now I don't say it's worth 3.2bn$ (I don't think it's even
worth 1bn$) but at least I think there is more value there than with the
headsets. Anyway spending so much on such a shallow thing would send a wrong
signal in my opinion, for the same amount I would have bought AMD or something
more significant hardware related.

------
NicoJuicy
For all the people that think its worth it.

HTC bought it for 300 million, they sold it as they had no use. Their in the
same market as Apple (and with Sense / HTC, they also could use a music
broadcast service).

They sold it. Now Apple wants to buy it at a much higher level... Doesn't make
any sense.

------
epo
Apple make very smart acquisitions and have a track record in creating markets
where others have failed to do so. They are also good at spotting
opportunities in existing markets.

That said, I think this is a deception to get Samsung to do something costly
and stupid.

------
nashashmi
So where does that leave HTC? They own 50.1% stake. They need cash pretty
quickly. And I think they would continue to want implementing Beats audio in
their phones.

Btw, HTC One audio sound quality is emotionally exhilarating. (Tears)

~~~
paul_f
HTC sold their shares in Beats a while ago. They don't own any now.

------
pbreit
Looks like this thread has been downmodded. Why?

------
thomasf1
I could see one way that would make sense: To fix the iPhone 5C debacle. You
want to reach lower level customers without tarnishing your main brand...

Beats could fit that profile. Just make the colors a bit brighter and the
successor to the 5c cheaper.

Or sicking with the beats brand (style over quality): Why not use 4s internals
;)?

~~~
thomasf1
Now, what works better? iPhone 5c [http://www.extremetech.com/wp-
content/uploads/2013/08/iphone...](http://www.extremetech.com/wp-
content/uploads/2013/08/iphone-5c-color-options.jpg)

\- or -

Beats 5c
[http://i60.tinypic.com/103hnjb.jpg](http://i60.tinypic.com/103hnjb.jpg)

------
oneeyedpigeon
Does this mean we're about to get a new iPod classic? 1,702 days and counting
... [1]

[1]
[http://buyersguide.macrumors.com/#iPod_Classic](http://buyersguide.macrumors.com/#iPod_Classic)

~~~
orkoden
A great opportunity to revive the iPod Classic.

iPod with Beats Audio

------
morkfromork
Beats Music has the worst mobile apps.

------
dylanhassinger
i just got some beats earbuds. they are very clear, i like them

------
37prime
Roughly about 17% of WhatsApp price tag.

Should make us ponder...

------
hadoukenio
12 hours after being posted:

    
    
      Ctrl-F: user acquisition
    

Zero results.

Look at the last couple of massive acquisitions e.g. Facebook buying companies
that made little revenue which made even less sense. Most of the big ones I
can think of were for user acquisition and _not_ product/technology. This
seems like the same type of play.

~~~
bruceboughton
Apple was recently boasting of having nearly 800mn credit cards-enabled iTunes
accounts. Doesn't seem to me they are short of users.

Also, Apple is primarily a hardware + associated services company. They're not
interested in getting users that aren't Apple hardware owners.

