After Beats co-founder Dr. Dre made an exuberant video post on Vine boasting about becoming the first rap billionaire, many worried that Apple’s deal with the audio and streaming music service — once rumored to be worth as much as $3.2 billion — was scuttled. But a new report suggests it’s still on track for being announced this week, although Dre’s boastfulness may have cost him two hundred million dollars.
Citing unnamed sources party to the ongoing discussions between Cupertino and Beats, The New York Post says that Apple has lowered its offer for Beats to just $3 billion, citing “due diligence” as a key factor.
“Apple hadn’t even begun its due diligence process when news of the number came out,” a source said. Although the Beats deal looks good to Apple — Beats earned $1.3 billion in sales in 2013 alone — it doesn’t look $3.2 billion good, apparently.
Although rumors have suggested that Apple’s primary interest in Beats wasn’t their audio technology, but the company’s streaming music service, The New York Post’s source says that isn’t the case. “Apple doesn’t have a streaming music business so it would be a nice instant get, but the hardware is the profitable business,” they said.
The New York Post also suggests that the real reason that Apple is buying beats isn’t, as previously rumored, to make an acqui-hire of Beats co-founders Dr. Dre or Jimmy Iovine, whose connections in the music industry are famous. Rather, Apple’s major interest is the Beats brand itself: it’s a billion dollar hardware business with major fashion appeal, exactly the kind of business Apple tries to create for itself.
If the deal goes through, Iovine and Dre are expected to be at Apple’s Worldwide Developer’s Conference on June 2 significantly richer: Dre will earn $750 million on the deal, pre-tax, while Iovine is expected to earn hundreds of millions himself.
- Source New York Post