What to expect when Apple gets Beats

This May 15, 2013 file photo shows Interscope Records and Beats Electronics co-founder Jimmy Iovine, left, with hip-hop mogul and Beats Electronics co-founder Dr. Dre, as they announce a $70 million dollar donation to create the new "Jimmy Iovine and Andre Young Academy for Arts and Technology and Business Innovation," during a news conference at in Santa Monica, Calif. Apple announced Wednesday, May 28, 2014, that it will acquire Beats Electronics and its music service, Beats Music, for $3 billion. Iovine\'s move to Apple is allowing John Janick to lead Interscope Geffen A&M. (AP Photo/Damian Dovarganes, File)
Apple + Beats = ?

Neal Augenstein | November 15, 2014 6:26 am

WASHINGTON — Apple’s acquisition of Beats Electronics — known for its popular headphones and music streaming service — is a big move for Apple, but what will it mean for consumers?

Beats Electronics was founded by rapper Dr. Dre and record executive Jimmy Iovine, who both now become Apple employees.

We asked Chris Ciaccia, technology editor with TheStreet how the pairing will affect consumers.

The deal finally happened. What do you make of it?

“This is a really big thing. It’s kinda been in the works for the past few weeks and now we’re seeing the deal come to fruition. It’s the first time Apple has ever made a major acquistion like this — they’ve never actually gone out and bought a brand. They’ve always owned their own products, and they’re going to keep Beats separate. So this is a really big thing that Apple is doing, they’re changing the way the company was under Steve Jobs.”

Young people already knew about Beats. How would you describe what the company been until now?

“Beats up to this point has really just been about the headphones. Headphones are very expensive and teenagers are very picky about what they wear, and Beats has become the go-to product in terms of headphones. They also have a streaming music service for $9.99 a month, but that’s pretty small right now. It’s only about a couple hundred subscribers. Apple’s gettting both the headphone business, which is a high-margin business, and the up and coming music streaming music business with this deal.”

Apple already has its own streaming music service. Why add Beats’ streaming service?

“Apple has iTunes Radio, but it hasn’t really been a successful product. They have around 40 million users for iTunes Radio, but it’s never been something that’s been able to cut into the streaming music business. We still see Pandora, Spotify, Rdio, and a couple other players kind of dominating and running circles around Apple, when it came to iTunes Radio. So, Apple really felt the need to go out and compete here, since this is really the future of the music business. iTunes downloads are declining for the first time since iTunes came into existence, so if Apple is going to lose revenue from iTunes downloads, they really need to come up with something to offset that. Streaming subscriptions at $9.99 is something that’s going to be able to do that for Apple.”

What changes do you think Apple will make to Beats?

“It doesn’t seem like Apple is going to really influence Beats all that much. The (Beats) co-founders Jimmy Iovine and Dr. Dre are going to be Apple employees, and the Beats service is going to be run under (Apple senior VP of Internet Software and Services) Eddie Cue, but it seems pretty much like they’re going to leave Beats alone, they’re going to keep it a separate brand. So it really doesn’t seem at least for now they’re going to make a lot of changes to it. They’re going to work with Dr. Dre and Iovine to continue to build up the company’s content strategy, but as far as the actual Beats products, it doesn’t seem like anything’s really going to change at this point.”

Will Apple integrate Beats into its new hardware?

“I’m sure, maybe as early as iOS 8, we might see some kinds of Beats app pre- loaded on the phone. And I’m sure, given how prevalent Apple retail stores are around the country, I’m sure we’ll see a push to sell Beats headphones along with iPhones. Perhaps there’s a deal when a new iPhone comes out, there’s also new headphones coming out. I would not be surprised if there would be some synergies as they relate to both the streaming service and the headphones.”

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