Tuesday, March 31, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Apple hopes to lift street cred with $3B Beats buy

By
From page B5 | May 29, 2014 |

CUPERTINO — Apple is striking a new chord with a $3 billion acquisition of Beats Electronics, a headphone and music streaming specialist that also brings the swagger of rapper Dr. Dre and recording impresario Jimmy Iovine.

Wednesday’s announcement comes nearly three weeks after deal negotiations were leaked to the media. It’s by far the most expensive acquisition in Apple’s 38-year history, a price that the company is paying to counter a threat posed to its iTunes store.

The price consists of $2.6 billion in cash and $400 million in Apple stock that will vest over an unspecified time period. The deal is expected to close before October.

With $1.1 billion in revenue last year, Beats is already making money and will boost Apple’s earnings once the new fiscal year begins in October, Apple CEO Tim Cook said in an interview.

“We have known these guys forever,” Cook said of Iovine and Dre. “We’ve dated, we’ve gone steady and now we are getting married. This relationship started a decade ago, so we know there is an incredible cultural fit. These two guys have a very rare set of skills. It’s like finding a particular grain of sand on the beach. It’s that rare.”

Iovine, 61, and Dre, 49, will both become key executives in Apple’s music divisions, though Cook said their roles haven’t been determined yet. Cook indicated Beats’ music streaming service was the main selling point in the deal, though the headphone line also is expected to continue growing, too.

Although he believes most technology companies are “culturally inept,” Iovine said he believes Apple will empower Beats to realize its goals of improving the sound of digital music and creating playlists tailored for each subscriber.

“To complete our dream, we needed a company like (Apple),” Iovine said in an interview. “We couldn’t finish this on our own.”

The growing popularity of music streaming services such as Pandora and Spotify has been reducing sales of songs and albums, a business that iTunes has dominated for the past decade. U.S. sales of downloaded songs slipped 1 percent last year to $2.8 billion while streaming music revenue surged 39 percent to $1.4 billion, according to the Recording Industry Association of America.

Although Apple broke into streaming with the launch of iTunes Radio last September, the service has not been as popular or as lucrative as the company expected, according to two people familiar with the matter. The people were not authorized to speak publicly about the matter and spoke on condition of anonymity.

ITunes Radio has 40 million listeners will continue as a free service with ads while Beats Music will try to tap into the more than 800 million accounts to sell more subscriptions to its customized service. Beats Music currently has more than 250,000 subscribers, Cook said. That’s well below the more than 10 million paying customers that Spotify’s streaming service boasts.

Apple is counting on the Beats acquisition to boost its cachet with teenagers and younger adults as it tries to remain a leader in digital music – an industry that looks much different than when Apple reshaped the scene with the 2001 debut of the iPod.

“Apple suddenly has regained its cool,” said Sony Music CEO Doug Morris, who was one of the first recording executives to embrace iTunes at Iovine’s urging more than a decade ago.

Beats was founded in 2008 by Dr. Dre, whose real name is Andre Young, and Iovine, a longtime recording industry executive who is stepping down as chairman of Universal Music Group’s Interscope Geffen A&M Records to join Apple. It now dominates the luxury headphone market. Its equipment is also a big seller in Apple’s stores.

Operating from its Culver City, California, headquarters, Beats commands 62 percent of the $1 billion U.S. market for headphones priced above $100, according to NPD Group.

The purchase marks Apple CEO Tim Cook’s biggest strategic break from the way the Cupertino, California, company was led under co-founder Steve Jobs, who died in October 2011. Jobs favored smaller acquisitions and didn’t believe subscription music plans would be popular. Before Beats, Apple’s biggest acquisition had been its $400 million purchase of NeXt Computer, a company that Jobs founded after being ousted from Apple in the 1980s.

Cook said he never considered what Jobs would have thought about the Beats’ acquisition during the negotiations. Jobs “told me to do what was right,” Cook said. “And I am 100 percent certain this is what is right. This is one of those things that we will look back upon and say it was meant to be.”

Morris, who considers Iovine to be his best friend, believes Cook is making a smart move that will give Apple even more credibility in the music industry.

“It’s a game changer because Jimmy is that kind of guy who can change a game,” Morris said. “I am not saying he is Steve Jobs, but he is a guy with new ideas and he really knows how to build the bridge between music and technology.”

But some analysts question whether Beats will be a good fit for Apple, which makes most of its money selling hardware such as iPhones and iPads.

Forrester Research analyst Frank Gillett says Apple would have been better off developing its own headphones in-house and expanding into music subscriptions through iTunes.

“It’s hard to understand why Apple would have to spend $3 billion on a nascent streaming service and a line of bass-heavy headphones,” Gillett says.

Yukari Iwatani Kane, the author of “Haunted Empire,” an inside look at Apple since co-founder Jobs’ death, also sees a disconnect.

“Culturally, Beats is the complete opposite of Apple,” Kane says. “It’s known for being loud and bold and in your face. It doesn’t fit with Apple’s understated, discerning brand.”

Having visited Apple on a regular basis since he first met Jobs more than a decade ago, Iovine said he has no qualms about joining Apple.

“This is not a big company to us,” Iovine said. “We can roller skate in the halls here. Dre and I have been working together for 22 years. We are not about to go somewhere where we are going to fall.”

Dre was more sedate Wednesday than he was in a celebratory video posted online declaring him as hip-hop’s first billionaire after news of the Apple talks leaked earlier this month. “To be able to do something that could potentially change the world, I’m thrilled.”

The Associated Press

The Associated Press

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

Records detail shooting victim’s court history

By Jess Sullivan | From Page: A3, 14 Comments | Gallery

 
 
Free Healthier Living workshops begin this week

By Kevin W. Green | From Page: A5

Frazier to deliver keynote at Solano EDC event

By Kevin W. Green | From Page: B10

 
25th annual Rush Ranch Open House on April calendar

By Ryan McCarthy | From Page: A2

 
Helen Mirren film set for debut

By Amy Maginnis-Honey | From Page: B9 | Gallery

 
Authorities release names of Sunday crash victims

By Amy Maginnis-Honey | From Page: A5, 1 Comment

 
Saturday Club schedules Shower of Flowers event

By Amy Maginnis-Honey | From Page: A5

WIB to host regional career fair

By Kevin W. Green | From Page: B10 | Gallery

 
Group plans Haiti missions fundraisers

By Amy Maginnis-Honey | From Page: A5, 2 Comments

Travel presentation ready to roll in Vacaville

By Amy Maginnis-Honey | From Page: A5

 
.

US / World

 
 
Ex-FBI agent sentenced to 10 years in Afghan kickback scheme

By The Associated Press | From Page: B2

 
BNSF railroad adds new safety rules for crude oil trains

By The Associated Press | From Page: B2

 
California leaders routinely use private email

By The Associated Press | From Page: B2, 1 Comment

 
Endangered bighorn sheep moved to Yosemite, Sequoia parks

By The Associated Press | From Page: A10 | Gallery

An apple a day may not keep the doctor away, study says

By The Associated Press | From Page: B2

 
Church van crashes into canal, killing 8 and injuring 10

By The Associated Press | From Page: B2

 
Tennessee pastor, son who saved 3 boys among Carnegie Heroes

By The Associated Press | From Page: B2

Pentagon chief considers easing of enlistment standards

By The Associated Press | From Page: B10

 
NSA: Car smashes into police vehicle at Fort Meade; 1 dead

By The Associated Press | From Page: B2 | Gallery

Former Israeli Premier Olmert convicted in corruption case

By The Associated Press | From Page: B2

 
Prosecutors: Co-pilot treated for suicidal tendencies

By The Associated Press | From Page: B2

Guinea shuts border with Sierra Leone in effort to end Ebola

By The Associated Press | From Page: B2

 
Saudi-led forces strike Yemen rebels, blockade ports

By The Associated Press | From Page: B2

Iran nuclear talks near deadline; differences remain

By The Associated Press | From Page: B2

 
Prosecution rests its case against Boston Marathon bomber

By The Associated Press | From Page: B2

.

Opinion

Rebuild Gaza to avert next war

By Former President Jimmy Carter | From Page: A13

 
Reid’s US Senate legacy: Obstruction

By Jennifer Rubin | From Page: A13, 4 Comments

State moves up national school spending chart

By Dan Walters | From Page: A13

 
.

Living

Community Calendar: March 31, 2015

By Susan Hiland | From Page: A2

 
.

Entertainment

NBC, Cirque du Soleil bringing ‘The Wiz’ to TV, Broadway

By The Associated Press | From Page: B9

 
Animal Planet lives wild with its new programming slate

By The Associated Press | From Page: B3

 
Attorney: Robin Williams’ wife wants to keep wedding tuxedo

By The Associated Press | From Page: B3

Eliane Elias enjoys musical homecoming on new CD

By The Associated Press | From Page: B3

 
5 things to know about new ‘Daily Show’ anchor Trevor Noah

By The Associated Press | From Page: B3, 1 Comment | Gallery

 
TVGrid March 31

By Daily Republic Syndicated Content | From Page: A11

.

Sports

Four No. 1 seeds in the women’s Final Four

By The Associated Press | From Page: B1

 
UConn reaches 8th straight Final Four with win over Dayton

By The Associated Press | From Page: B1

Grizzlies beat Kings 97-83 to end three-game skid

By The Associated Press | From Page: B1 | Gallery

 
Cauley-Stein, Kaminsky, Okafor among Wooden Award finalists

By The Associated Press | From Page: B1

Hendricks’ shutout streak ends, Cubs top Giants

By The Associated Press | From Page: B1

 
Lawrie hits 2 homers as A’s rout Rockies 11-2

By The Associated Press | From Page: B1

Montoya has swagger back, but also shows softer side

By The Associated Press | From Page: B1 | Gallery

 
A year later than expected, Michigan St back in Final Four

By The Associated Press | From Page: B1

Connecticut governor: move ’16 Final Four unless law changes

By The Associated Press | From Page: B1

 
Raiders re-sign free agent defensive lineman C.J. Wilson

By The Associated Press | From Page: B1

2 Alabama players arrested in separate weekend cases

By The Associated Press | From Page: B1

 
Falcons fined, lose draft pick for pumping in fake noise

By The Associated Press | From Page: B1

Racial quotas controversy re-emerges in South African sport

By The Associated Press | From Page: B1

 
NFL suspends Browns GM for texting, team holds onto picks

By The Associated Press | From Page: B1

Kaminsky, Okafor lead 2014-15 AP All-America team

By The Associated Press | From Page: B1

 
Ex-NASCAR driver gets jail after 3-state high-speed chase

By The Associated Press | From Page: B1

Nebraska, winner in 14 of last 15, at front of Big Ten surge

By The Associated Press | From Page: B1

 
McGraw appreciates Notre Dame women’s run more than ever

By The Associated Press | From Page: B1 | Gallery

Gonzaga’s great season ends in Elite Eight but more ahead

By The Associated Press | From Page: B1

 
StubHub files lawsuit against Ticketmaster

By The Associated Press | From Page: B1, 1 Comment

Judge again rules Joe Paterno can’t sue for contract breach

By The Associated Press | From Page: B1

 
Free agent linebacker Lance Briggs visiting with 49ers

By The Associated Press | From Page: B1

Fiancee says she discarded box at Aaron Hernandez’s request

By The Associated Press | From Page: B1

 
.

Business

US consumer spending edges up 0.1 percent in February

By The Associated Press | From Page: B4

 
UnitedHealth bulks up for prescription drug cost battle

By The Associated Press | From Page: B4

Business forecasters boost 2-year outlook for US economy

By The Associated Press | From Page: B4

 
Amazon.com offering to help get jobs done around the house

By The Associated Press | From Page: B4

McDonald’s to test all-day breakfast beginning in April

By The Associated Press | From Page: B4

 
SEC files fraud charges against Lynn Tilton, firms

By The Associated Press | From Page: B4

US university, foundation invested in frozen Chinese stocks

By The Associated Press | From Page: B4

 
Regulators plan to drop case at closed California nuke plant

By The Associated Press | From Page: B4

 
Michigan entrepreneur claiming idea for Heinz Dip & Squeeze

By The Associated Press | From Page: B4 | Gallery

.

Obituaries

.

Comics

For Better or Worse March 31

By Daily Republic Syndicated Content | From Page: B7

 
Garfield March 31

By Daily Republic Syndicated Content | From Page: B7

Crossword March 31

By Daily Republic Syndicated Content | From Page: B8

 
Zits March 31

By Daily Republic Syndicated Content | From Page: B7

Get Fuzzy March 31

By Daily Republic Syndicated Content | From Page: B7

 
Word Sleuth March 31

By Daily Republic Syndicated Content | From Page: B8

Bridge March 31

By Daily Republic Syndicated Content | From Page: B8

 
Sudoku March 31

By Daily Republic Syndicated Content | From Page: B8

Baby Blues March 31

By Daily Republic Syndicated Content | From Page: B7

 
Frank and Ernest March 31

By Daily Republic Syndicated Content | From Page: B7

B.C. March 31

By Daily Republic Syndicated Content | From Page: B7

 
Blondie March 31

By Daily Republic Syndicated Content | From Page: B7

Peanuts March 31

By Daily Republic Syndicated Content | From Page: B7

 
Baldo March 31

By Daily Republic Syndicated Content | From Page: B7

Beetle Bailey March 31

By Daily Republic Syndicated Content | From Page: B7

 
Dilbert March 31

By Daily Republic Syndicated Content | From Page: B7

Cryptoquote March 31

By Daily Republic Syndicated Content | From Page: B8

 
Sally Forth March 31

By Daily Republic Syndicated Content | From Page: B7

Pickles March 31

By Daily Republic Syndicated Content | From Page: B7

 
Wizard of Id March 31

By Daily Republic Syndicated Content | From Page: B7

Rose is Rose March 31

By Daily Republic Syndicated Content | From Page: B7