Wednesday, January 28, 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

 
Youngster battles brain cancer a 2nd time

By Susan Winlow | From Page: A1, 1 Comment | Gallery

2 Solano road projects get green light

By Kevin W. Green | From Page: A1

 
 
Rush Ranch seeks docents

By Kevin W. Green | From Page: A2

Health officials report 1st Solano flu death

By Kevin W. Green | From Page: A3, 5 Comments | Gallery

 
Kroc Health Fair offers free screenings

By Amy Maginnis-Honey | From Page: A3

 
Vanden to host science fair

By Bill Hicks | From Page: A4

Woman with Solano ties caught up in tax fraud case

By Jess Sullivan | From Page: A4

 
Fairfield police to offer parenting class

By Ian Thompson | From Page: A4

Frazier schedules coffee in Suisun City

By Ryan McCarthy | From Page: A4, 2 Comments

 
Vacaville police to offer law enforcement academy

By Ian Thompson | From Page: A4

 
 
Coalition members review tobacco control report card

By Kevin W. Green | From Page: A5

 
 
American Legion Post schedules head-shaving fundraiser

By Kevin W. Green | From Page: A6

Vacaville Toastmasters welcome guests

By Amy Maginnis-Honey | From Page: A6

 
Chipotle fundraiser to benefit Armijo newspaper

By Amy Maginnis-Honey | From Page: A6, 3 Comments

 
Dramas, thrillers lead week’s box office openings

By Amy Maginnis-Honey | From Page: B8

 
Suisun City police log: Jan. 24, 2015

By Susan Hiland | From Page: A12

Fairfield police log: Jan. 26, 2015

By Susan Hiland | From Page: A12

 
Fairfield police log: Jan. 25, 2015

By Susan Hiland | From Page: A12

Fairfield police log: Jan. 24, 2015

By Susan Hiland | From Page: A12

 
Suisun City police log: Jan. 26, 2015

By Susan Hiland | From Page: A12

Suisun City police log: Jan. 25, 2015

By Susan Hiland | From Page: A12

 
.

US / World

Gold nuggets stolen in smash and grab

By The Associated Press | From Page: A7

 
Officials lose track of billions in funding

By The Associated Press | From Page: A8, 1 Comment

Bill would treat e-cigs the same as regular cigarettes

By The Associated Press | From Page: A8

 
CSU chancellor looks to increase graduation rates

By The Associated Press | From Page: A8

 
NTSB: Systemic flaws in safety oversight of gas pipelines

By The Associated Press | From Page: A14

Catholic church in San Francisco to phase out altar girls

By The Associated Press | From Page: A14

 
Military has wide discretion on Bergdahl charges

By The Associated Press | From Page: A14, 1 Comment

Gunmen storm Libya hotel, killing American, 9 others

By The Associated Press | From Page: A14

 
Famed civil rights protesters to have arrest records erased

By The Associated Press | From Page: A14

Secret talks in Jordan try to win release of hostages

By The Associated Press | From Page: A14

 
‘Wicked storm': Blizzard drops 2 feet of snow on New England

By The Associated Press | From Page: A14

 
.

Opinion

 
 
.

Living

Community Calendar: Jan. 28, 2015

By Susan Hiland | From Page: A2

 
Today in History: Jan. 28, 2015

By The Associated Press | From Page: A2

Horoscope Jan. 28, 2015

By Holiday Mathis | From Page: B6

 
We live close to my nephew but he chooses to remain distant

By Kathy Mitchell and Marcy Sugar | From Page: B6

 
10 Things: 10 fresh takes on Super Bowl guacamole

By The Associated Press | From Page: B7

 
.

Entertainment

Christina Aguilera to perform ahead of NBA All-Star Game

By The Associated Press | From Page: B8

 
Common, John Legend to perform ‘Glory’ at Academy Awards

By The Associated Press | From Page: B8

Katie Holmes to guest on ‘Ray Donovan’

By The Associated Press | From Page: B8

 
.

Sports

Falcon boys drop 69-61 SCAC loss to Bethel

By Marcus Lomtong | From Page: B1 | Gallery

 
Local Report: Armijo boys roll past Napa 69-41

By Daily Republic staff | From Page: B1, 1 Comment

Nadal loses; Sharapova to play all-Russian semi in Australia

By The Associated Press | From Page: B1

 
Belichick and The Beast talk but don’t say much at Media Day

By The Associated Press | From Page: B1

Deflated topic: air pressure in footballs

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

 
Rose’s shot lifts Bulls over Warriors 113-111 in overtime

By The Associated Press | From Page: B1 | Gallery

 
Lynch at Media Day: ‘I’m here so I don’t get fined’

By The Associated Press | From Page: B1

 
Christina Aguilera to perform ahead of NBA All-Star Game

By The Associated Press | From Page: B2

Super Bowl, Tiger make Phoenix center of sports universe

By The Associated Press | From Page: B2

 
Long after Twitter feud, Revis, Sherman pledge respect

By The Associated Press | From Page: B2

The distinctive international flavor of Super Bowl Media Day

By The Associated Press | From Page: B2

 
Serena Williams advances, Venus out of Australian Open

By The Associated Press | From Page: B2

Getting fired from New England led to Carroll’s reinvention

By The Associated Press | From Page: B2

 
Sharks in ‘dogfight’ to secure playoff berth

By The Associated Press | From Page: B2

 
Jury convicts 2 ex-Vanderbilt players of raping woman

By The Associated Press | From Page: B2

 
Rio official says there’s ‘no plan B’ for Olympic sailing

By The Associated Press | From Page: B2

Golfer Allenby stands by story, says truth will come out

By The Associated Press | From Page: B2

 
Tony Stewart returns with a swagger not seen in 2 years

By The Associated Press | From Page: B2

Shooters find not every basketball is same in college game

By The Associated Press | From Page: B2

 
Patrick heads into 2015 in final season with team, sponsor

By The Associated Press | From Page: B2

Manfred hopeful of A’s getting new ballpark in Oakland

By The Associated Press | From Page: B2

 
This date in sports history for Jan. 28, 2015

By The Associated Press | From Page: B4

 
.

Business

US home price gains slow in November on weaker sales

By The Associated Press | From Page: A14

 
FTC clears Albertsons’ purchase of Safeway

By The Associated Press | From Page: A14

.

Obituaries

Clarence E. Morgan

By Nancy Green | From Page: A4

 
Don Johnson

By Nancy Green | From Page: A4, 10 Comments

Dzhon Athanc

By Nancy Green | From Page: A4

 
Julia P. Tan

By Nancy Green | From Page: A4

Woodrow Allen Oakley

By Susan Hiland | From Page: A4

 
Donald Wesley Johnson

By Susan Hiland | From Page: A4

Joseph Phillip Raiff

By Nancy Green | From Page: A4

 
.

Comics

Blondie

By Daily Republic Syndicated Content | From Page: B5

 
Dilbert

By Daily Republic Syndicated Content | From Page: B5

Rose is Rose

By Daily Republic Syndicated Content | From Page: B5

 
Get Fuzzy

By Daily Republic Syndicated Content | From Page: B5

Wizard of Id

By Daily Republic Syndicated Content | From Page: B5

 
Peanuts

By Daily Republic Syndicated Content | From Page: B5

Zits

By Daily Republic Syndicated Content | From Page: B5

 
Garfield

By Daily Republic Syndicated Content | From Page: B5

Sally Forth

By Daily Republic Syndicated Content | From Page: B5

 
For Better or Worse

By Daily Republic Syndicated Content | From Page: B5

Pickles

By Daily Republic Syndicated Content | From Page: B5

 
Beetle Bailey

By Daily Republic Syndicated Content | From Page: B5

Baby Blues

By Daily Republic Syndicated Content | From Page: B5

 
Frank and Ernest

By Daily Republic Syndicated Content | From Page: B5

B.C.

By Daily Republic Syndicated Content | From Page: B5

 
Baldo

By Daily Republic Syndicated Content | From Page: B5

Sudoku

By Daily Republic Syndicated Content | From Page: B6

 
Cryptoquote

By Daily Republic Syndicated Content | From Page: B6

Bridge

By Daily Republic Syndicated Content | From Page: B6

 
Word Sleuth

By Daily Republic Syndicated Content | From Page: B6