Apple agrees to buy headphone maker Beats for $3bn

Neki

Neki

Molten Core Raider
2,726
397
BBC News - Apple agrees to buy headphone maker Beats for $3bn

Apple has confirmed it will buy headphone maker and music-streaming service provider Beats Electronics.

The deal is worth a total of $3bn (?1.8bn), and is thought to be Apple's largest acquisition to date.

As part of the acquisition, Beats co-founders Jimmy Iovine and Dr Dre will join the technology firm.

Apple boss Tim Cook said the deal would allow the firm to "continue to create the most innovative music products and services in the world".

In a statement, Apple said it is paying an initial $2.6bn (?1.6bn) for Beats, and approximately $400m (?239m) "that will vest over time".

Beats was founded in 2008 by music producer Jimmy Iovine and hip-hop star Dr Dre and until recently was best known for its headphones.

It started a subscription-based music streaming service earlier this year.

Apple has its own iTunes store, the world's largest music download service, and launched iTunes Radio last year.

But despite having been an early pioneer of digital music, the Californian firm has been facing increased competition from subscription services such as Spotify, Pandora and Rdio.

However, Beats' music service only has about 250,000 paying subscribers, compared with Spotify's 10 million.
Click to expand...
 
Tarrant

Tarrant

<Prior Amod>
15,534
8,987
At this point all this shows me is Apple is running out of ideas. The idea of buying Beats to get in better with the audio streaming business doesn't hold water since Beats system is garbage and it would have been cheaper for them to just develop their own and do a better job of it. You'll see that this will start becoming the trend with them, buying businesses instead of innovating like they did in the past. It's pretty depressing when you think about it considering what they used to stand for.
 
Noodleface

Noodleface

A Mod Real Quick
37,961
14,508
Could be a good business move though. Walk around any college campus and you'll see every black kid has a different pair of beats to match his outfit.
 
Falstaff

Falstaff

Ahn'Qiraj Raider
8,311
3,166
Beats cost $14 to make and retail for $300. That could be one reason they bought them. The other is the big push into wearable tech and being able to brand these things. Beats by Dr Dre by Apple! I read one theory that they did it to appeal to black people because Apple is a big white brand and Beats are a big black brand.

Another reason is maybe for Jimmy Iovine but I have no idea how talented the guy is. Google bought Nest for $3.2 billion basically for Tony Fadell but that partnership makes more sense in my opinion.
 
Noodleface

Noodleface

A Mod Real Quick
37,961
14,508
Do they really have such a high profit margin on them? I tried them and they definitely aren't worth $300+ (maybe $100), but is there really a $286 margin?
 
Joeboo

Joeboo

Molten Core Raider
8,157
140
1400613757.jpg
 
Quineloe

Quineloe

Ahn'Qiraj Raider
6,978
4,463
Tarrant_sl said:
At this point all this shows me is Apple is running out of ideas. The idea of buying Beats to get in better with the audio streaming business doesn't hold water since Beats system is garbage and it would have been cheaper for them to just develop their own and do a better job of it. You'll see that this will start becoming the trend with them, buying businesses instead of innovating like they did in the past. It's pretty depressing when you think about it considering what they used to stand for.
Click to expand...
What past are we talking about?

Noodleface_sl said:
Do they really have such a high profit margin on them? I tried them and they definitely aren't worth $300+ (maybe $100), but is there really a $286 margin?
Click to expand...
They're really generic headphones other brands sell for ?25 here. Those must have a profit margin too, or no one would sell them.

I picked up a pair of Sennheiser, an actual high quality brand, for ?22 5 years back. They still work perfectly, and sound better than beats.
 
Joeboo

Joeboo

Molten Core Raider
8,157
140
I can't speak to Beats specifically, but most brands of headphones/earbuds work on insane profit margins. When I worked at Best Buy one summer, we could buy anything at cost, and cost on a $20 set of ear buds or headphones would generally be under $2. And that's Best Buys cost, the actual manufacturing cost would be a lot less than that. Pretty much all accessories are like that (cords, cables, earphones, chargers, etc) Pretty much anything electronics-related that doesn't have a screen, processor, or memory/storage is working on INSANE profit margins, often in the 500-1000% range.

I honestly wouldn't be surprised to find out that a pair of $300 Beats cost around $5-$10 to manufacture.

Remember, Beats were originally created by the Monster Cable people, so you know the markup is absolutely insane. Monster is all charging more based on branding rather than providing actual superior products. Beats is the same way. You pay a premium because they are a fashion accessory. It's like buying a Coach purse.
 
Falstaff

Falstaff

Ahn'Qiraj Raider
8,311
3,166
Noodleface_sl said:
Do they really have such a high profit margin on them? I tried them and they definitely aren't worth $300+ (maybe $100), but is there really a $286 margin?
Click to expand...
I saw it on a Vox article that linked to this New York Times article:Some Premium Headphones Amplify Celebrities Over Sound - NYTimes.com

relevant paragraph(s):

Knowing what?s behind the marketing can help a consumer avoid the hype when choosing a product. Headphone designers estimate the cost of making a ?fashion headset? selling for $200 is as low as $14. ?I would have guessed $20 to $22,? said Tim Hickman, whose California Headphone Company and Fanny Wang Headphone Company brands are made in China.

?When you look at a $300 Beats headphone, how much does it cost to tool the enclosure, how much does it cost to stamp the thing out?? said John Chen, director of sales for the audio manufacturer Grado Labs. ?Stamping it out is pennies.?


?I wish that were true,? said Noel Lee, founder of Monster Products, which until December produced Beats by Dr. Dre headphones. ?I?m going to say it?s in the $40 and up range to make a quality product.? (Monster also makes those $80 HDMI cables at electronics stores, the ones that cost much less atMonoprice.com.)
Click to expand...
 
Soygen

Soygen

The Dirty Dozen For the Price of One
<Nazi Janitors>
28,325
43,161
Damn. Dr. Dre - Straight Outta Compton and into being a billionaire!
 
Joeboo

Joeboo

Molten Core Raider
8,157
140
If he becomes a Billionaire, he'll be the first black male Billionaire in America. Oprah is the only black billionaire in America currently.
 
Falstaff

Falstaff

Ahn'Qiraj Raider
8,311
3,166
joeboo_sl said:
I can't speak to Beats specifically, but most brands of headphones/earbuds work on insane profit margins. When I worked at Best Buy one summer, we could buy anything at cost, and cost on a $20 set of ear buds or headphones would generally be under $2. And that's Best Buys cost, the actual manufacturing cost would be a lot less than that. Pretty much all accessories are like that (cords, cables, earphones, chargers, etc) Pretty much anything electronics-related that doesn't have a screen, processor, or memory/storage is working on INSANE profit margins, often in the 500-1000% range.
Click to expand...
My friend in high school worked at Suncoast and they and Best Buy were owned by the same company so he got that same discount at Best Buy. I remember buying some $60, 3ft firewire cable for like $4.90.
 
Joeboo

Joeboo

Molten Core Raider
8,157
140
We'd make a lot more money on the $30 printer cable than we did on the $300 printer.
 
Haast

Haast

Lord Nagafen Raider
3,281
1,636
joeboo_sl said:
Remember, Beats were originally created by the Monster Cable people, so you know the markup is absolutely insane. Monster is all charging more based on branding rather than providing actual superior products. Beats is the same way. You pay a premium because they are a fashion accessory. It's like buying a Coach purse.
Click to expand...
Back when everything was analog, Monster had a semi-legitimate case for their massively over-designed products. All that multi-layer shielding and extra copper can't make an awful signal good, but it can protect a very high quality signal from noise (a probably imperceptible amount) better than a normal cable. So mouth-breathing audiophiles could buy them and feel a sense of smug superiority.

However, when they tried to make $150 HDMI cables, I about died laughing. The whole point of digital protocols is noise immunity and error correction, and no fancy shielding or conductors will make a damn bit of difference.
 
Gravy

Gravy

Bronze Squire
4,918
454
joeboo_sl said:
I honestly wouldn't be surprised to find out that a pair of $300 Beats cost around $5-$10 to manufacture.
Click to expand...
This. I owned a retail store for 5 years, and you'd be SHOCKED at how low the manufacturing costs for electronics are (as well as most everything else).
 
Crone

Crone

Bronze Baronet of the Realm
9,707
3,210
This forum doesn't have an electronics retailer uppity up to get us all sweet Beats for cost? Come on now! hook us all up!
 
You must log in or register to reply here.