Wall Street analysts were skeptical to hear that Apple was spending $3.2 billion / €2.3 billion on Dr. Dre’s Beats Electronics, but it now seems that the deal indeed went down and is only pending a formal announcement from the two parties involved.
A one-minute clip shot on a smartphone inside Dre’s studio last night pretty much confirms that the papers have been signed, making the hip-hopper the first billionaire in his line of work.
The Grammy-nominated Tyrese Gibson is the one who indirectly spilled the beans, saying that Dre has just entered the “billionaire boys club,” while Dre himself could not contain his excitement and blurted out that he’d just become the “The first billionaire in hip hop.”
Before the clip went out, Piper Jaffray analyst Gene Munster had made a prediction that the rumor was false.
“We are struggling to see the rationale behind this move,” he wrote in a note to clients Thursday evening. “Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand and has never acquired a brand for a brand's sake (i.e., there are no non-Apple sub-brands under the company umbrella). Separately, we are not aware of any intellectual property within Beats that would drive the acquisition justification beyond the brand.”
Other analysts echoed his concerns. However, the video shot by Tyrese Gibson is all the confirmation one needs to believe that the deal indeed went down this week. Apple and Beats Electronics will probably make the formal announcement in a press release later today, or next week.
It isn’t clear what Apple is after in this costly deal, but one of the reasons could be to snag the entire engineering team at Beats Electronics and use it to create Apple-branded wearables. Apple is known to be planning a foray in the wearables industry with its revolutionary iWatch.
The company could also be after the recently-launched Beats Music service, which is similar in offerings to Pandora and Spotify, and even iTunes Radio. The Cupertino giant stands to add more users to its ecosystem as a result of this purchase, from Beats Music fans to Beats headphone users.
iPhone and iPod devices ship with Apple-designed headphones that are of medium quality, while Beats headphones use a special equalizing technology that puts an emphasis towards producing larger amounts of bass and are optimized towards hip-hop and pop music.