Beats Music

Apple paid over $2.5 billion for Beats Electronics, slightly less than $500 million for Beats Music

Details of the Apple acquisition of Beats are shedding a bit more light on where the value is coming from, indicating that the streaming music portion of the company is worth just shy of $500 million. That places the value of the Beats Electronics business at $2.5 billion, which in itself had nearly $1.5 billion in revenue in 2013.

Saying that the Beats streaming service is worth even $500 million is a bit ambitious, though, as it was revealed during the acquisition that it has only 250,000 subscribers, making each customer worth a whopping $2000. By contrast, Spotify has 10 million subscribers paying roughly the same $10 per month subscription fee and is valued at $4 billion — $400 per subscriber.

Even with the favorable split giving the streaming service a high valuation, you can see that the Beats Electronic side of the business is the real breadwinner in the deal. Whether Apple really did just want Jimmy Iovine and Dr. Dre on-board with the executive team, this can still be a money-generating investment, all things considered.

Source: WSJ

Andrew Martonik

Economist. Android Central editor. Let's talk about mobile things.

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There are 17 comments. Add yours.

MrBru06 says:

Woke up jumped out my bed...

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MrBru06 says:

I'm in a two man cell...

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MrBru06 says:

Wit my homie Lil Half Dead.

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emjayess says:

Woke up, fell out of bed

emjayess says:

Dragged a comb across my head

emjayess says:

Then enticed a youngster to join my business

Gabriel Leow says:

Apple and beat will create something amazing soon

Aergad says:

I see this as Apple just wanting the music business, but the electronics business had to be included in the deal. I am willing to guess that Apple will attempt to sell off the electronics business within the year...hoping to make a profit on it. It happens all the time in these kinds of transactions.

Carioca32 says:

Perhaps, but I can't see anyone else paying over $2.5B for a second rate (at best) headphone company. Let's be honest for a second, we're not talking about Grado, Bose, Shure or Senheiser here.

Derrick4Real says:

You're anti-Beats bias is clouding your judgement. None of those companies are as good a business as Beats by dre. YOU may like their headphones more than Beats but those companies don't sell nearly the product or have nearly the profit of Beats by Dre which sells more than those combined. If there is a headphone company with the most value based on their profits it's Beats not those others.

Carioca32 says:

Sorry, I was talking about specs and reviews. I was hard pressed to find a single comparison putting Beats above even the mid-range competition like Sony and Phillips. Beats sell well because its fashionable among adolescents, which is a fickle thing.

And I don't know about Beats selling more than the companies I mentioned. Bose's revenue alone is over US$2 Billion, Sennheiser's almost $1 Billion, albeit based in Germany.

Iocane Powder says:

Beats came on as a fashion statement and it caught fire. Good for them. But for longevity they need a product and business that can survive capricious fashion cycles. On its face it appears to be a bizarre purchase for a trending name, but perhaps Beats owns some patents or unreleased products that are in line with Apple's long term vision. Or maybe Apple is just using the purchase to move money around.

Didier Ouzaid says:

Or maybe Apple is gonna milk the cash cow and make the Beast headphones even better (quality wise), while building on the streaming part of the deal. Sure Beats headphones arent the best, but they're highly profitable and that's what Apple is after. If they can better them without cranking up the prices too much, why not. And the brand is already well established.

Dont forget that headphones arent smartphones. Comparing Beats to Bose, Shure or AKG is one thing, but the latter's high end pieces go for close to or above 1000$. The market for these headphones is relatively small, and there arent any carrier subisidy for them.

Derrick4Real says:

I think that's a convenient narrative for people that have a dislike for the Beats hardware.

Randy Evans1 says:

They will recoup that pocket change from us. Especially since the only place to download music will be iTunes! Be nice if when you got a new iPhone that instead of earbuds they gave you a nice Bluetooth Headphone.