Apple shaved $200 million from Beats deal thanks to Dr. Dre
Back in 2014, Apple made a monumental acquisition, purchasing Beats Music and Beats Electronics for a hefty sum of three billion dollars. Saying that Beats co-founders Jimmy Iovine and Dr. Dre made quite a bit of money from the deal would be an understatement. But, despite both of them fattening their pockets, it looks like it could have been a lot more, $200 million more in fact, if a premature celebration hadn’t occurred.
Tripp Mickle’s new book, After Steve, discusses how CEO Tim Cook took Apple and made it a $3 trillion company. As part of that story, there is a chapter that talks about the Beats Music and Beats Electronics acquisitions. According to Mickle, Cook became intrigued with Beats Music, a streaming service that took a novel approach, offering subscribers the ability to get “personalized” tracks and playlists. These items would be curated by experts in the music industry such as radio personalities and songwriters. Iovine would broker a deal that insisted Apple purchase not only the music streaming service but also its hardware division, known for its popular Beats by Dre audio accessories.
Iovine brokered a deal that insisted Apple purchase not only the music streaming service but also its hardware division
Apple and Beats would eventually come to terms on an acquisition deal. While the deal was being finalized, Iovine would assemble his team, explaining what would happen going forward but also issuing a warning that “the only thing that could spoil it would be for word of the deal to leak.” Unfortunately, Dr. Dre would prematurely celebrate the acquisition, posting a video online with singer and actor Tyrese Gibson. In the video, Gibson talked about Beats headphones and how a recently released Forbes billionaires list would need an update, alluding that something had occurred that would have boosted Dr. Dre’s net worth. Dr. Dre confirmed this fact in the video, stating that he was the “first billionaire in hip-hop.”
It didn’t take long for the video to circulate online, with Iovine receiving a call in the early morning about the incident from Sean Combs, better known as Puff Daddy. Understandably, Iovine panicked, but despite the situation, Tim Cook was not upset. He still felt confident that the acquisition of Beats was good for Apple. Following the incident, Cook would hold a private meeting, acknowledging the misstep but also “demanding” an adjustment, reducing its initial bid by $200 million. This is how Apple was able to shave $200 million from its deal to purchase Beats.