Headphones from Beats Electronics are so popular that knock-offs are sometimes sold outside MTR stations for HK$20 (US$2.6) a piece. No wonder Apple has set its sights on the audio device maker. The iPhone manufacturer is said to be close to buying Beats Electronics for US$3.2 billion.
A deal would make sense as digital music has always been one of Apple’s core businesses since it rolled out its first iPod in 2001.
Beats Electronics’ co-founders, hip-hop mogul Dr. Dre (real name: Andre Young) and legendary music producer Jimmy Iovine, are both expected to take up senior positions at Apple as part of the deal, according to the Wall Street Journal.
If the speculation proves to be true, this will be the second time that Apple CEO Tim Cook will welcome celebrities inside his business circle. Last year, Cook tapped former Burberry CEO Angela Ahrendts to become one of the heads of the group’s retail and online stores. The move is but an extension of the cult of personality during the Steve Jobs era.
In fact, well-known tech analyst and Apple follower Gene Munster from Piper Jaffray described Apple’s move on Jimmy Iovine as an expensive “acquihire”, as reported by US business news site Business Insider.
Munster thinks that gaining Iovine is almost the only reason for acquiring Beats, although it involves a steep price tag.
Iovine has produced records for Patti Smith and U2, for whom he helped win a deal to create a specially designed iPod preloaded with the singers’ music.
Iovine is now the chairman of Interscope Geffen A&M records, a division of Universal Music Group. The latter also owns 14 percent stake in Beats and would reap approximately US$500 million from Apple’s deal if it turns out to be true.
Headphones have become a fast-growing business mainly because of Beats Electronics. Sales of premium headphones in the United States exceeded US$1 billion last year, an increase of 21 percent from 2012, according to data released by market research firm NPD Group.
There are reports saying that Beats Electronics is looking to expand beyond headphones and into speakers and earphones as well.
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