Apple still very much interested in Beats but not for reasons you think

Apple’s blockbuster acquisition of Beats Electronics isn’t for technology. It’s for the talent. Apple reportedly wants music industry heavyweights Jimmy Iovine and Andre Young a.k.a. Dr. Dre on its executive board.
(Photo : Beats Music)

Apple’s rumored $3.2 billion acquisition of Beats Electronics is still happening, even though sources say the deal almost did not pull through several times, because Apple wants Jimmy Iovine and Dr. Dre on its board of executives.

TechCrunch cites a “well-placed source” who said he could speak with “70% certainty” that Apple is going to complete the acquisition not for Beats’ expensive headsets but for Beats founders legendary producer Iovine and Andre Young, a.k.a. hip hop artist Dr. Dre.

“They want Jimmy and they want Dre. He’s got fashion and culture completely locked up,” the source tells TechCrunch.

Just a few days after the billion-dollar acquisition was revealed by the Financial Times earlier this month, the Wall Street Journal came out with a report that Iovine will be made a “special advisor” to Tim Cook and will have to leave his position as chairman of record label at Interscope Geffen A&M, which has a 14% stake in Beats. His role will be to “revamp and run its whole music strategy.”

Iovine is considered a legend in the digital music industry, having produced music from the likes of Bruce Springsteen, John Lennon and Kansas. He is also known as one of the staunchest supporters of Apple’s music business, having used his powers in negotiation to place the iPod in music videos by 50 Cent, U2 and Mary J. Blige. The Iovine-Dr. Dre hire is sure to bring another vestige of cool to Apple’s already cool brand.

This seems to coincide with Apple chief executive Tim Cook’s latest moves to hire former chiefs of two high-end fashion houses, Angela Ahrendts of Burberry and Paul Deneve of Yves St. Laurent, Nike design director of FuelBand Ben Shaffer, and former Leica engineer Ari Partinen, all of whom were significant forces behind the successes of companies focused on design and marketing.  

Aside from the top management hires, Apple will also get a bonus in the form of the Beats headset that is popular with celebrities and marketed as a fashion accessory and Beats Music, Beats’ new streaming music service launched earlier this year. The bass-heavy headset designed to provide a music experience as close to studio-recorded music as possible has garnered mixed reviews, but Apple has much to benefit from Beats Music.

Apple, with more than 800 million iTunes users, is still the Number 1 provider of a la carte music downloads, but revenue from digital downloads have slipped 13.3% last year and iPod sales continue to decline since 2009. All this indicates that users prefer streaming media they can access over a variety of devices instead of downloaded files that are restricted to one device.  

Apple came too late to the streaming business with iTunes Radio only launched lately. With competitors such as Spotify, which has 10 million subscribers to beat, Apple can very well take over the music-streaming industry with 800 million users and Beats Music under its helm.