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A report last Thursday by The Financial Times on Apple’s alleged $3.2 billion purchase of Beats Electronics, LCC. – potentially Apple’s most pricey acquisition to date – has taken the technology industry by surprise.

And as pundits continue to assess the rationale behind Apple’s purported move, Bloomberg on Monday ran a revealing story explaining that the two firms share more commonalities than meets the eye, despite a world of difference in terms of corporate culture.

Moreover, Apple apparently intends to keep Beats hardware around while improving upon the design of the startup’s pricey headphones…

A person with knowledge of the talks said Apple became interested in a Beats deal after its executives “were impressed” by Beats Music.

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.

Apple is said to keep Beats as a separate brand.

The deep ties between Apple and Beats start with Jimmy Iovine, 61 years old, who co-founded Beats Electronics and owns a 25 percent stake in the venture. Another of the four Beats co-founders: hip-hop star Dr. Dre, who semi-officially confirmed the deal in a video boasting of becoming the “first billionaire in hip hop”.

Apple and Beats are “more aligned” than appears on the surface, Bloomberg explains.

Iovine was Steve’s friend and one of Apple’s first friends in music.

Iovine helped recruit music labels and artists to support the iTunes Store at its start. He also had Apple’s iPod music players placed inside music videos by artists including 50 Cent, Eminem and Mary J. Blige.

He was a “big supporter” of Apple’s efforts in music.

Iovine became an early advocate for Apple’s iTunes Store after getting a personal demo from Jobs before the service debuted in 2003.

At the time, the music business was being ravaged by illegal song downloads. Iovine instantly saw iTunes as the industry’s best way to create a legal way for downloading music, he said in an interview last year at the All Things Digital technology conference.

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.

The article states that Apple plans to work with Beats to “improve the quality” of Beats headphones design in future versions.

Steve Jobs and Jimmy Iovine (Getty Images 001)
Apple’s late co-founder and Beats’s Jimmy Iovine. Photo: Getty Images.

As some have noted, Steve Jobs curiously owned a Beats headphones: a thief who raided Steve’s house in August 2012 stole, among other items, a Monster Beats by Dr. Dre headphones.

From the SF Examiner report (emphasis mine):

Along with Jobs’ wallet, which had a single dollar inside, several of the tech legend’s most recognizable innovations — such as iPods, iPhones and an iMac — were stolen, according to the cited report.

Some $60,000 in Tiffany jewelry and a bottle of Cristal Champagne were reportedly taken, along with a Ninja Blender and Monster Beats by Dr. Dre headphones.

Indeed, Jobs was one of the first people Iovine visited to get his take on the Beats headphones ahead of the public debut, Bloomberg states. The story quotes Peter Csathy, CEO of entertainment law firm Manatt Digital Media Ventures, as opining:

These aren’t strange bedfellows at all.

Steve Jobs really drove the relationship with the music industry. The executives at Apple and Beats know each other very well, and there’s a comfort level there.

The New York Post heard from sources that Iovine will be joining Apple as a special adviser to Tim Cook on creative matters.

Should this deal come through, Iovine could become Apple’s top guy for content deals, methinks. Currently, Apple’s deals with record labels and Hollywood are being negotiated by its SVP of Internet Software and Services, Eddy Cue.

Beats Music 2.0 for iOS (iPad screenshot 001)

Among the reasons pundits cite to rationalize the rumored deal:

  • Apple wants Beats’s pricey audio products that enjoy a commanding 70 percent share of the headphones market
  • Apple will use Beats Music technology to make an on-demand iTunes streaming service (not very likely as it would need to renegotiate Beats streaming deal with labels) or keep Beats Music as a separate brand, a risk-free strategy to gauge demand
  • It’s all about Iovine, not Beats’s overpriced headphones and streaming music
  • Apple simply wanted to keep everyone else from buying Beats
  • Put your own joke here

No matter how you look at it, with this acquisition Apple could potentially gain one of the industry’s top executives, in addition to the company’s wearable technology expertise, design prowess, the vibrant brand that resonates with young audiences and  risk-free access to a high-margin new category – all without ever diluting its own brand.

In the worst case scenario, Apple could be buying talent, some streaming technology, headphones and non-transferrable music streaming rights.

And what do you think?

Would the Apple-Beats deal make sense and, if so, why and how?

  • jp2002

    betas jimmy lovine? beats i believe, for the pic description.

  • Virus

    Wonder if they change the beats by dr dre to beats by apple

    • Butch Danes

      Beats by Apple featuring Dr. Dre.

      • Sean Clark

        Can we get Pitbull in there?

      • Jeremy

        Ew no. He’s not my cup of tea

      • Mo Lillaney

        Beat by Michael Jackson

      • Steven Code

        Just beat it

    • Omar Sharif

      Beats by Cook

      • Creavite

        Beats by Dr. Cook.

      • Mo Lillaney

        Apple Beats by Samsung ***zingggggggggg**

    • Capirexz

      iBeats by Apple for sure.

    • White Michael Jackson

      Beat by Chris Brown

  • Tom

    And quality? That’s their biggest problem…

    • Toukale

      Not according to the sells numbers. Man, the world must sucks since most are buying things I find to be crap.

      • Mo Lillaney

        the sad part is 99% of people out there are followers, legions of peons who will buy something because of others, or the impression it gives to others. So there is a strong social connection to the product, it gets that Apple aura of excitement when people pick them up and try them on… they look good, sound good enough for most people, and deliver low frequencies well enough for people to enjoy them. Its a tastefully designed product, and anything which makes a fashion statement costs more money… Buy headphones that are purely designed around audio for the same cost, and you’ll get better sound, no fashion statement, and no recognition that you’re wearing something expensive in public.

      • Carlos Gomes

        Funny enough is that also 99% of people say exactly the same about other people.
        So.. yeah.

  • charliez

    So they can charge even more for an overpriced and mediocre product?

    • Toukale

      And somehow it hurts your feelings people are spending their hard earn money on things that make them feel good.

      • charliez

        I didn’t even mention buy who buy them. To each their own.

      • Mark Seah

        actually charliez is correct….ppl into ear/headphones know tht beats are overrated and overpriced, it is not “sour grapes” tht ppl say when they cant buy expensive stuffs….but a known fact abt beats products…they are popular coz of dr dre himself…otherwise, juz a very mediocre product compared to other brands

    • Rowan09

      Mediocre to you, but obviously not to the rest of the world who’s buying them like hot cakes.

      • charliez

        People buy a lot of mediocre things just because they don’t know better.

      • Sean Clark

        And what makes you the authority on what is and isn’t mediocre? It’s a fashion piece as much as a pair of headphones. A lot of people will not use them in an environment that will provide a discernible difference in the music quality.
        They aren’t my cup of tea. Regardless of sound quality these types of headphones are too expensive for me. I’m sure these headphones are great for some people.

      • Rowan09

        I agree. I don’t really listen to music through headphones, so I use my iPhone headset when working out and driving at work.

      • charliez

        Well the fact that I’m a musician might help. I’ve had and reviewed tons of headphones and I can tell you when they are mediocre.

        And if you buy a pair of expensive headphones for how they look…well, I can’t help you there.

      • Sean Clark

        You clearly aren’t the target audience. Beats is not going for audiophiles who want no compromises in sound quality. That market has been firmly established. They instead pushed for a demographic that normally does not purchase high quality headphones. Their goal was to produce a product that looked cool. Audio quality is second to design. A lot of people find the trade-off to be worth it.

        They’re like the LE Jordan Airs that will never see a basketball court. To the players, it seems ridiculous, but they’re still looking at the shoes like sports equipment.

      • Rowan09

        I agree. I never found Jordan’s to be good shoes to play basketball in.

      • Sean Clark

        I’m not trying to tarnish the brand and I wouldn’t be surprised if they make great shoes, but I’m guessing that Drake edition basketball shoes were not necessarily designed with performance first in mind.

      • Rowan09

        70% of the market?

      • charliez

        70% of the market will buy what’s on TV. It’s all about good marketing.

      • Rowan09

        Yes marketing gets people to give it a try, but if you retain customers it’s because your product is good. Marketing is the reason we buy 90% of a product. My brother has the headphones and he loves them, but I hear some people say they’re only good for bass.

      • charliez

        Well the headphones are not HORRIBLE or BAD, just mediocre taking into account how much people pay for them, so anyone who doesn’t know better will still buy them. ( Not judging anyone, I myself have bought tons of mediocre things because I didn’t do my research ).

      • Rowan09

        I understand. Some people owned Bose headsets and got rid of them for Beats. It’s all preference because some people may think these are a steal for the price. Mediocre is always defined by what’s out in the market and for the price I guess it’s good.

      • Toukale

        Don’t waist your time, he does not get it. Since those headsets don’t pass his like test, then everyone else who likes them are wrong, tasteless and uninformed. God forbid people like different things. My biggest issue with people who thinks this way, is why does it matter to them what people chose to spend their hard earn cash on? It’s like those people are taken money our of their pockets to do those purchase.

      • Andrew Roth

        It’s all in the branding. Actual quality doesn’t matter.

      • Rowan09

        That’s a lie. The brand attracts people, but quality keeps them.

      • Andrew Roth

        I can agree with that but once somebody buys it, that’s a sale. Even if they decide it sucks, that’s still one sale for the numbers.

      • Rowan09

        Yes but owning 70% of the market isn’t a gimmick. If I purchase Beats and they suck I will tell my friends, family, etc and they will lose out on sales.

  • momerathe

    *Apple* is going to improve their headphones? considering Apple was flogging the leakiest, tinniest airbuds on the market for the longest time (disclaimer: I haven’t tried the new version), Beats headphones must be worse than I thought.

    • Fırat Çiftçi

      You should try the newest version. It’s really good.

    • sosarozay300

      the new ones are actually nice in sound quality but they hurt my ears

  • Omar Sharif

    The only thing that needs improvement in Beats headphones are their quality , not their designs

  • Toukale

    When are people going to get the best does not equate to selling the most. Like it or not beats sells and are profitable which more than I can say for all the so call streaming services, they are all bleeding money. The only one’s who harp on quality are a few nerds and a lot of folks who knows nothing about that business. Wake the f** k up, you are in the minority. It’s like a movie critic telling the rest of us a movie sucks. It’s usually the opposite, Most people go to a movie to be entertained, if it is entertaining then most folks will give it a thumb up. It’s amazin that research prove in a blind test most people can’t tell the difference between those headsets.

  • Mo Lillaney

    Tempos by Tinie Tempah har har har

  • Christopher Dominguez

    Beat by Chris Brown

  • Dante Arellano

    Stupid cook wait too long for new stuff than in the end is the same thing I love apple but they are slow down the tecnogy it will takes 10 years for see something really amazing from apple seems like they don’t care about people needs or ask for

  • Neil Sardesai

    Using Beats to improve Apple’s headphones seems like a step backwards…

  • Mark Seah

    what can apple do with their overrated and overpriced headphones ? should have bought more quality by buying audio technica, boses etc.