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This is why Apple bought Beats

Brad Molen
05.28.14
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Ever since the rumors first broke that Apple wanted to buy Beats for $3 billion, the masses have uttered one universal word: Why? Apple Senior VP Eddy Cue and Beats CEO and co-founder Jimmy Iovine sat down with Recode's Walt Mossberg and Kara Swisher at the Code Conference to discuss the confirmed news. Not wasting any time, the execs got right into it. According to Cue, there were three overall reasons why the company made the deal: Talent, great headphones (something many folks will debate) and Beats Music.

"It was a no-brainer for us," said Cue, outlining the three reasons in more detail. First, Cue says the Beats team is sensational, and will be a perfect fit for Apple; additionally, Dr. Dre is an incredible artist with an incredible ear. Second, Cue notes that Beats has great headphones that do a great job at making music sound good. (He also revealed that Apple's interested in speakers as well as headphones.) Finally, he also mentioned that this is the "first music subscription service done right." To Cue, the magic is in the ability to curate songs and listen to playlists.

On Jimmy Iovine's side, selling Beats was all about the billions finding a company that has a strong respect for music, and does a solid job of making its hardware sound good. "These guys get it," Iovine said. "They respect what we do. They respect copyright. They respect the entire food chain." Of course, the idea of having a base of 800 million subscribers (compared its current status at 250,000) is likely rather encouraging to him as well. "Our dream is that everyone in the world who buys a phone" will upgrade their headphones, Iovine said.

Iovine also discussed the fact that Beats originally sold part of its business to phone maker HTC, because it needed a partner, but apparently the culture clashed and the deal ultimately didn't work out for either side. When asked why they didn't approach Apple, Iovine revealed that he'd tried to ask several times over the past decade, but "Apple makes deals the way they make products," making a slow whirring motion with his fingers.

Cue confirmed that Apple will retain the Beats brand, and that Iovine will report to him on the music side and Apple SVP Phil Schiller on the product side. Additionally, the deal that Beats had with HP will be done in the near future, though Iovine didn't go into detail on exactly when this will happen. If you're hoping that Iovine will produce content for Apple as part of the deal, no luck: He confirmed that he won't be focusing on his own stuff anymore.

Iovine mentioned that he initially approached Apple, not the other way around, although the two companies have been in contact for the last decade. "I told Eddy, 'we should work together, I've got some ideas.' How does somebody date for ten years and all of a sudden you get married? It just happens!"

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