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Apple Beats combo? The cost of cool

Friday, May 09, 2014 - 02:47

May 9 - Apple may be trying to get some street cred if it indeed buys headphone maker Beats Electronic for $3.2 billion, but Wall Street is scratching its head over the reported deal, which would be Apple's biggest. Bobbi Rebell reports.

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Is Apple hitting the restart button? Sources tell Reuters it's about to buy Beats- the right-on-trend music company founded by rapper Dr. Dre and legendary music producer Jimmy Iovine. The expected price tag of $3.2 billion will get them… Beats red hot and premium priced headphones including "Beats by Dr. Dre". And the new music streaming business that has gotten great reviews for its human music curation- versus rivals computer algorithms. That's the hook says Reuters Breakingviews' Rob Cyran. SOUNDBITE: ROB CYRAN, REUTERS BREAKINGVIEWS COLUMNIST (ENGLISH) SAYING: "The reason why they are acquiring the streaming music is kind of interesting because people are moving towards streaming music instead of, you know, they used to buy lots of albums, songs from Apple and now they are moving towards getting the music on demand. The problem is they are using other companies and so they are not- they may switch away from Apple." Beats streaming service would complement Apple's iTunes radio- But there's more to the story. Rutgers professor Aram Sinnreich: SOUNDBITE: ARAM SINNREICH, PROFESSOR, RUTGERS SCHOOL OF COMMUNICATION AND INFORMATION (ENGLISH) SAYING: "It is really kind of a Hail Mary pass for them strategically speaking." He says they had to act fast- rivals like Google and Amazon are squeezing into the music business and beyond- and this is part of a bigger re-launch of their consumer business. SOUNDBITE: ARAM SINNREICH, PROFESSOR, RUTGERS SCHOOL OF COMMUNICATION AND INFORMATION (ENGLISH) SAYING: "It is not just music. It is also- there is a whole filmed entertainment component to this, right. What Apple is staking its future on are three things. It is the cloud services being able to basically lock consumers into an ongoing relationship where they hold the consumers data on their behalf in exchange for a yearly fee or some kind of subscription basis and then it's automotive and it's living room. Those are the kind of two new battle ground for digital." Not to mention the instant street cred. SOUNDBITE: ARAM SINNREICH, PROFESSOR, RUTGERS SCHOOL OF COMMUNICATION AND INFORMATION (ENGLISH) SAYING: "Beats is the coolest think in the digital world right now. They have the coolest executives. They have got a great brand and they've got a really rapidly growing consumer base. Both for the hardware and for the digital subscription side. So Apple is definitely grabbing onto their coat tails a little bit and trying to get their own brand aloft as long as they can." But shareholders did not like the deal, questioning the high price. Beats most recent funding round valued it at just one billion dollars. And Cyran says it's a sign of how far Apple has fallen. SOUNDBITE: ROB CYRAN, REUTERS BREAKINGVIEWS COLUMNIST (ENGLISH) SAYING: "It is a bit worrying because you think about it, if they could - if they were worried about streaming, they could have done it themselves. That said, Apple has a history of buying things and using them. For instance, they based their software on Unix. They didn't design that themselves. They used chips from other people. This is a software service, so then again this is something they probably should have done themselves. The fact that they are buying it from someone else is a bit concerning." Both companies declined to comment.

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Apple Beats combo? The cost of cool

Friday, May 09, 2014 - 02:47