Apple Is Still Buying Beats, But It Really Just Wants Dr. Dre

Apple’s rumored $3.2 billion acquisition of Beats Audio is still going down, according to the most recent report, and the iPhone maker is said to be splurging on the headphone company because it requires the expertise of a certain Doctor.

News that Apple was close to buying Beats broke earlier this month and shocked the tech world, with Apple-loving tech observers going all fluttery over the notion that the maker of the iPhone and iPad – the best smartphone and tablet on the market, respectively – would sully its image by bringing Beats’ headphone division – often critically panned – under the Apple brand. “Why is Apple doing it?” observers moaned, stroking their white headphone cords like rosary beads. According to a new report from TechCrunch, though, Apple is less interested in the Beats brand than it is in the talent that built that brand: hip-hop mogul Dr. Dre and record industry giant Jimmy Iovine.

“They want Jimmy and they want Dre,” a “well-placed source” told TechCrunch. “He’s got fashion and culture completely locked up.”

According to that source, the Apple-Beats deal is still quite likely to go down, as the source quoted a 70 percent likelihood of Apple making the buy.

Just what sort of cultural cachet are Dr. Dre and Jimmy Iovine holding onto that Apple wants? One need only look to the success of Beats as a brand to see what the duo can accomplish. Beats as a company is only eight years old, and the firm’s first headphones saw release in 2008. Year after year, Beats’ headphones have been panned by critics, who hammer the cans for their emphasis on bass over other audio elements.

And, year after year, Beats’ revenues have grown. The company has leveraged an exceedingly cool image into consistently growing revenues and a considerable profit margin. Beats currently holds somewhere north of 60 percent market share among premium headphone brands, an industry it has helped expand beyond its initial audiophile base. Put plainly: with some slick design, even slicker marketing, and a healthy dose of celebrity endorsements, Beats was able to make it cool to rock a set of supposedly overpriced studio headphones on the train, at the beach, or while just about anywhere outside a studio.

Beats audio equipment
Beats’ audio equipment has seen mixed reviews from critics, but that hasn’t halted their financial success.

That sort of marketing prowess is always good to have on one’s side, of course, especially as Apple is rumored to be gearing up for the launch of its long-expected iWatch. Some are already speculating that Apple is lining up celebrity endorsers like Kobe Bryant and others to push the brand, and getting Dre to bend the ear of other taste influencers could be just the thing Apple needs to ensure a success.

The funny thing, though, is that that’s not even the full reason Apple wants Dr. Dre and Iovine. The big pull for Apple, sources say, is that bringing Dre and Iovine into the fold gives Apple a “record-label-in-a-box.” Apple has had no small amount of trouble convincing music labels and television content producers to get on board with some of its initiatives. Most recently, its iTunes Radio service was supposedly delayed by months before launching last year, as the record companies were reluctant to give the iPhone maker any any sweetheart deals for streaming content.

Apple is also said to have run into roadblocks in its dealings with the television industry. Bringing Iovine into the ranks could help smooth negotiations with those players, possibly clearing the way for the long-rumored Apple-branded television.

On top of those two facets, the Beats acquisition would likely include Beats Music, the Spotify-like music streaming program Beats launched a while back. That service has reportedly underperformed, with only a few hundred thousand users, but Apple’s money and iPhone user base combined with Iovine and Dre’s music industry connections could turn it into a considerable force in the streaming market.

Plus, it doesn’t hurt that Beats’ “overrated” headphones and other audio products pulled in $1 billion in revenue last year. That’s less than a drop in the bucket for Apple, which regularly clears $40 billion in revenue every three months, but pennies make dollars, you know.

Lead photo by Aaron Frutman, via Photopin

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