Beats Electronics

Last updated
Beats Electronics LLC
Subsidiary
Industry
Founded2006;13 years ago (2006)
Founders Dr. Dre
Jimmy Iovine
Headquarters
Area served
Worldwide
Key people
Luke Wood (President)
Matthew Costello (COO) [1]
will.i.am (partner) [2]
Noel Lee (Investor) [3]
Products
Revenue US$1.5 billion (2013) [4]
Number of employees
700 (As of 2014)
Parent Apple Inc. (2014–present)
Website www.beatsbydre.com

Beats Electronics LLC (also known as Beats by Dr. Dre, or simply Beats by Dre) is a subsidiary of Apple Inc. that produces audio products. Headquartered in Culver City, California, [5] [ third-party source needed ] the company was founded by music producer and rapper Dr. Dre and Interscope Records co-founder [6] [ full citation needed ] Jimmy Iovine.

Apple Inc. Technology company; developer of consumer electronics and multimedia platforms

Apple Inc. is an American multinational technology company headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software, and online services. It is considered one of the Big Four tech companies along with Amazon, Google, and Facebook.

Sound recording and reproduction recording of sound and playing it back

Sound recording and reproduction is an electrical, mechanical, electronic, or digital inscription and re-creation of sound waves, such as spoken voice, singing, instrumental music, or sound effects. The two main classes of sound recording technology are analog recording and digital recording.

Culver City, California City in California, United States

Culver City is a city in Los Angeles County, California. The city was named after its founder, Harry Culver. As of the 2010 census, the city had a population of 38,883. It is mostly surrounded by the city of Los Angeles, but also shares a border with unincorporated areas of Los Angeles County. Over the years, it has annexed more than 40 pieces of adjoining land and now comprises about five square miles.

Contents

The subsidiary's product line is primarily focused on headphones and speakers. The company's original product line was manufactured in partnership with the AV equipment company Monster Cable Products. Following the end of its contract with the company, Beats took further development of its products in-house. In 2014, the company expanded into the online music market with the launch of its subscription-based streaming service, Beats Music.

Headphones pair of small speakers held close to a users ears

Headphones traditionally refer to a pair of small loudspeaker drivers worn on or around the head over a user's ears. They are electroacoustic transducers, which convert an electrical signal to a corresponding sound. Headphones let a single user listen to an audio source privately, in contrast to a loudspeaker, which emits sound into the open air for anyone nearby to hear. Headphones are also known as earspeakers, earphones or, colloquially, cans. Circumaural and supra-aural headphones use a band over the top of the head to hold the speakers in place. Another type, known as earbuds or earpieces consist of individual units that plug into the user's ear canal. A third type are bone conduction headphones, which typically wrap around the back of the head and rest in front of the ear canal, leaving the ear canal open.

Loudspeaker transducer that converts electrical energy into sound energy; electroacoustic transducer; converts an electrical audio signal into a corresponding sound

A loudspeaker is an electroacoustic transducer; a device which converts an electrical audio signal into a corresponding sound. The most widely used type of speaker in the 2010s is the dynamic speaker, invented in 1924 by Edward W. Kellogg and Chester W. Rice. The dynamic speaker operates on the same basic principle as a dynamic microphone, but in reverse, to produce sound from an electrical signal. When an alternating current electrical audio signal is applied to its voice coil, a coil of wire suspended in a circular gap between the poles of a permanent magnet, the coil is forced to move rapidly back and forth due to Faraday's law of induction, which causes a diaphragm attached to the coil to move back and forth, pushing on the air to create sound waves. Besides this most common method, there are several alternative technologies that can be used to convert an electrical signal into sound. The sound source must be amplified or strengthened with an audio power amplifier before the signal is sent to the speaker.

Beats Music

Beats Music was a subscription-based online music streaming service owned by the Beats Electronics division of Apple Inc. The service combined algorithm-based personalization with expert music suggestions from a variety of sources.

In 2011, NPD Group reported that Beats' market share was 64% in the U.S. for headphones priced higher than US$100, and the brand was valued at US$1 billion in September 2013. [7] [8]

United States dollar Currency of the United States of America

The United States dollar is the official currency of the United States and its territories per the United States Constitution since 1792. In practice, the dollar is divided into 100 smaller cent (¢) units, but is occasionally divided into 1000 mills (₥) for accounting. The circulating paper money consists of Federal Reserve Notes that are denominated in United States dollars.

For a period, the company was majority-owned by Taiwanese smartphone maker HTC. The company reduced its stake to 25% in 2012, and sold its remaining stake back to the company in 2013. Concurrently, Carlyle Group replaced HTC as a minority shareholder, alongside Dr. Dre and Iovine in late 2013. On August 1, 2014, Apple Inc. acquired Beats for US$3 billion in a cash and stock deal, the largest acquisition in Apple's history.

Taiwan Country in East Asia

Taiwan, officially the Republic of China (ROC), is a state in East Asia. Neighbouring states include the People's Republic of China (PRC) to the west, Japan to the north-east, and the Philippines to the south. The island of Taiwan has an area of 35,808 square kilometres (13,826 sq mi), with mountain ranges dominating the eastern two thirds and plains in the western third, where its highly urbanised population is concentrated. Taipei is the capital and largest metropolitan area. Other major cities include Kaohsiung, Taichung, Tainan and Taoyuan. With 23.7 million inhabitants, Taiwan is among the most densely populated states, and is the most populous state and largest economy that is not a member of the United Nations (UN).

Smartphone Multi-purpose mobile device

Smartphones are a class of mobile phones and of multi-purpose mobile computing devices. They are distinguished from feature phones by their stronger hardware capabilities and extensive mobile operating systems, which facilitate wider software, internet, and multimedia functionality, alongside core phone functions such as voice calls and text messaging. Smartphones typically include various sensors that can be leveraged by their software, such as a magnetometer, proximity sensors, barometer, gyroscope and accelerometer, and support wireless communications protocols such as Bluetooth, Wi-Fi, and satellite navigation.

HTC Taiwanese electronics company

HTC Corporation is a Taiwanese consumer electronics company headquartered in Xindian District, New Taipei City, Taiwan. Founded in 1997, HTC began as an original design manufacturer and original equipment manufacturer, designing and manufacturing laptop computers.

History

Formation

Dr. Dre (seen in 2012), company co-founder Dr. Dre at Coachella 2012 cropped.jpg
Dr. Dre (seen in 2012), company co-founder
Jimmy Iovine and David Guetta Jimmy Iovine & David Guetta.jpg
Jimmy Iovine and David Guetta

The company was formally established in 2006, [9] a time when Iovine perceived two key problems in the music industry: the impact of piracy on music sales and the substandard audio quality provided by Apple's plastic earbuds. Iovine later recalled that Dre said to him: "Man, it's one thing that people steal my music. It's another thing to destroy the feeling of what I've worked on." Iovine sought the opinions of musicians with "great taste", such as M.I.A., Pharrell Williams, will.i.am, and Gwen Stefani during the early developmental stage. [10] Beats initially partnered with Monster Cable, an audio and video component manufacturer based in Brisbane, California, to manufacture and develop the first Beats-branded products, and debuted its first product, Beats by Dr. Dre Studio headphones, on July 25, 2008.

Copyright infringement Intellectual property violation

Copyright infringement is the use of works protected by copyright law without permission for a usage where such permission is required, thereby infringing certain exclusive rights granted to the copyright holder, such as the right to reproduce, distribute, display or perform the protected work, or to make derivative works. The copyright holder is typically the work's creator, or a publisher or other business to whom copyright has been assigned. Copyright holders routinely invoke legal and technological measures to prevent and penalize copyright infringement.

M.I.A. (rapper) English rapper, singer, songwriter, record producer, visual artist and activist

Mathangi Arulpragasam, better known as M.I.A., is an English rapper, singer, songwriter, record producer, visual artist, and activist. Her stage name is wordplay on her name as well as a reference to the military term "missing in action". Her work combines elements of alternative, dance, electronic, hip hop, and world music.

Pharrell Williams American singer, rapper and record producer from Virginia

Pharrell Lanscilo Williams is an American rapper, singer, songwriter and record producer. Williams and Chad Hugo formed the record production duo The Neptunes in 1992, producing hip hop and R&B music. He is the lead vocalist of the band N*E*R*D, which he formed with Hugo and childhood friend Shay Haley. He released his first solo single, "Frontin'", in 2003 and followed it with his debut solo album, In My Mind, in 2006. His second album, Girl, was released in March 2014 and included the commercially successful single "Happy". As part of the Neptunes, Williams has produced numerous singles for various recording artists.

To promote its products, Beats primarily relied on endorsements by pop and hip-hop music performers, including product placement within music videos, and partnering with musicians and other celebrities to develop co-branded products. [10] [11] [12] [13] Beats' use of endorsements by musicians helped the company aggressively target the young adult demographics. [14]

Pop music is a genre of popular music that originated in its modern form in the United States and United Kingdom during the mid-1950s. The terms "popular music" and "pop music" are often used interchangeably, although the former describes all music that is popular and includes many diverse styles. "Pop" and "rock" were roughly synonymous terms until the late 1960s, when they became increasingly differentiated from each other.

Product placement, also known as embedded marketing, is a marketing technique where references to specific brands or products are incorporated into another work, such as a film or television program, with specific promotional intent.

A music video is a short film that integrates a song with imagery, and is produced for promotional or artistic purposes. Modern music videos are primarily made and used as a marketing device intended to promote the sale of music recordings. There are also cases where songs are used in tie-in marketing campaigns that allow them to become more than just a song. Tie-ins and merchandising can be used for toys or for food or other products. Although the origins of the music video date back to musical short films that first appeared in the 1920s, they again came into prominence in the 1980s when the channel MTV based their format around the medium. Prior to the 1980s, these kinds of videos were described by various terms including "illustrated song", "filmed insert", "promotional (promo) film", "promotional clip", "promotional video", "song video", "song clip" or "film clip".

HTC purchase and non-renewal of Monster contract

In August 2010, mobile phone manufacturer HTC acquired a 50.1% majority share in Beats for US$309 million. The purchase was intended to allow HTC to compete with other cellphone makers by associating themselves with the Beats brand, [15] as the purchase also granted HTC exclusive rights to manufacture smartphones with Beats-branded audio systems. [16] Despite its majority acquisition, HTC allowed Beats to operate as an autonomous company. [16] Luke Wood, President of Beats in May 2014, joined the company in January 2010, when the company was a "licensing business". Wood had previously worked under Iovine at Interscope Records. [1]

On January 19, 2012, BusinessWeek reported that Beats and Monster would not renew their production contract and their partnership ceased at the end of 2012. Dre and Iovine subsequently decided to oversee the entire operation of the company, from manufacturing to R&D, [1] and aimed to double its workforce to around 300 employees. Monster would ultimately begin marketing its own competing line of premium headphones aimed towards an older demographic. [11] At the time, neither Dre, Iovine or Wood were experienced in the operation of a company at such a grand level, but Wood explained in 2014:

I didn't have manufacturing experience, but I had experience of building something from scratch … Every time we put out an album, it was basically like building a new business--a unique cast of characters, unique challenges and opportunities, and trying to figure out a unique path to market. [1]

In October 2012, Beats unveiled its first two self-developed products, "Beats Executive" headphones and "Beats Pill" wireless speakers—Iovine believed that the company would now have to "control [its] own destiny" in order to continue its growth. Iovine also commented on how other headphone makers had attempted to emulate Beats' celebrity endorsement business model (including Monster themselves, who unveiled Earth, Wind and Fire and Miles Davis-themed headphones at the 2012 Consumer Electronics Show), [11] stating that "some of our competitors are cheap engineers who have never been to a recording studio. You can't just stick someone's name on a headphone that doesn't know anything about sound." [11] [17] [18] Following the decision to transform Beats into an autonomous entity, the company's revenues reached the $1 billion mark, according to Iovine. [1]

HTC sale and Beats Music

The logo for Beats Music. Beats Music logo.svg
The logo for Beats Music.

In July 2012, HTC sold back half of its stake in Beats for US$150 million, remaining the largest shareholder with 25.1 percent. [19] The sale was intended to provide "flexibility for global expansion while maintaining HTC’s major stake and commercial exclusivity in mobile." [15] In August 2013, reports surfaced that Beats' founders planned to buy back HTC's remaining minority stake in the company, and pursue a new, unspecified partner for a future investment. [20] [21]

On September 27, 2013, HTC confirmed that it would sell its remaining 24.84% stake in Beats back to the company for US$265 million. Concurrently, Beats announced that the Carlyle Group would make a US$500 million minority investment in the company. [22] [23] The overall deal valued Beats Electronics at US$1 billion [7] and helped HTC turn a net profit of US$10.3 million for the fourth quarter of 2013, following HTC's first quarterly loss in company history. [24]

The appointment of a new chief operating officer (COO), a role previously filled by Wood, [1] was announced in early November 2013. Matthew Costello, formerly of IKEA and HTC, was formally appointed into the role in May 2014. [25] [26]

On January 21, 2014, the company launched Beats Music, a subscription-based online music streaming service. [27] Prior to the launch of the service, Beats stated that it intends to provide a different type of streaming experience to what was available on the market at the time. Additionally, the service would only be available to consumers in the U.S. at inception. [28] Chief executive of Beats at the time, Ian Rogers, said:

We wanted to build a music service that combined the freedom of an on-demand subscription service—unlimited, uninterrupted streaming and downloads of tens of millions of songs – but layer on top features that would give you that feeling only music that moves you can give. The right song at the right time will give you a chill. Make you pull someone close. Nod your head. Sing in the mirror. Roll down the car window and crank the volume to the right. [28]

Product of Apple (2014–present)

On May 8, 2014, the Financial Times reported that Apple was in negotiations with Beats to purchase the company for US$3.2 billion—the largest purchase in Apple's history, ahead of its US$429 million purchase of NeXT in 1996. [29] The impending deal was prematurely and indirectly revealed in a photo and YouTube video posted to Facebook by Tyrese Gibson on May 8, 2014; the video documented a celebration in which Gibson and Dr. Dre made boasting remarks about the acquisition, with Dre declaring himself the "first billionaire in hip hop", while Gibson declared that the "Forbes list" had changed. Both the photo and video were removed from Facebook the following morning, but both remain on Gibson's YouTube channel. [1] [30] Indeed, analysts estimated that the rumored deal would make Dr. Dre the first billionaire in the hip-hop music industry in terms of net worth, assuming that he held at least 15% ownership in the company prior to the deal. Dr. Dre was listed with a net worth of US$550 million on Forbes' The World's Billionaires 2014 list. It was also estimated that the Carlyle Group would receive a profit of US$1 billion from its minority stake in the company. [22] [31] [32]

On May 28, 2014, Apple officially announced its intention to acquire Beats Electronics for US$3 billion—with $400 million to be paid in Apple stock and the remainder in cash. Some reports suggested that the reduction in value may have been a result of lower-than-expected subscriber numbers for the Beats Music service. [1] Iovine felt that Beats had always "belonged" with Apple, as the company modeled itself after Apple's "unmatched ability to marry culture and technology." In regard to the deal, Apple CEO Tim Cook stated that "Music is such an important part of all of our lives and holds a special place within our hearts at Apple. That’s why we have kept investing in music and are bringing together these extraordinary teams so we can continue to create the most innovative music products and services in the world." Beyond stocking Beats products at its retail outlets, Apple did not provide any further indications over how Beats would be integrated into its product line at the time, and whether Beats Music, which competed with Apple's own iTunes Radio service, would continue to operate after the finalization of the acquisition. [33] [34] [35]

The acquisition closed on August 1, 2014; to eliminate redundancy, Apple planned to lay off 200 workers from Beats' workforce of around 700. [36] [37] Beats Music was discontinued effective immediately with the launch of Apple Music on June 30, 2015. [38] [39]

Bose lawsuit

In July 2014, Bose Corporation sued Beats Electronics, alleging that its "Studio" line incorporated noise cancellation technology that infringed five patents held by the company. Bose has also sought an injunction which would ban the infringing products from being imported or sold in the United States. [40] [41] The lawsuit was settled out of court. Apple pulled all Bose products from its retail outlets, although it is unclear whether it was in response to the lawsuit, an ambush marketing conflict involving Beats and the NFL (which had recently named Bose as one of its official sponsors, and thus fined a player for displaying the Beats logo during an official activity), or as a result of Apple's acquisition of Beats. [42] However, two months later, Bose products returned to the shelves of Apple Stores. The companies settled in October 2014: details were not disclosed. [43]

Monster lawsuit

In January 2015, Monster Inc. sued Beats for fraud, alleging that the company had used illicit tactics to force Monster out of the venture whilst retaining rights to the technologies and products that it had co-developed, and engaged in collusion to harm Monster's own audio products business. Monster argued that the acquisition of Beats by HTC and its founders' subsequent buyback was a "sham" to take control of Monster's stake in the company—which could have been valued at over $100 million in the Apple purchase, that the company had "concealed" the role of Monster and its CEO Noel Lee in the design and engineering of its products, and that "had the partnership expired on its own terms, there would have been no transfer of Monster's years of work [onto the company]." Monster also alleged that Beats had partaken in anti-competitive practices with retailers to force those offering Beats products to not offer Monster's competing products. [44] [45] [46]

In June 2015, the Wall Street Journal reported that in retaliation for the lawsuit, Apple Inc. revoked Monster's membership in the MFi Program on May 5, 2015, meaning that Monster can no longer manufacture licensed accessories for iPhone, iPod and iPad products, and must cease the sale of existing licensed products that contain the certification or technology licensed through the program by September 2015. [47]

The case was dismissed in August 2016, with a Supreme Court ruling that Beats "had the right to terminate the agreement as of January 7th, 2013 or when there was a transaction resulting in a change of control of Beats", and that Monster "did not obtain the right to approve the change of control. Nor did the agreement require that any change of control had to be objectively reasonable". [48]

Products

Personal audio

Example of Beats Headphones BeatsHeadphones-2 (47705430872).jpg
Example of Beats Headphones

Beats' original product line were Beats by Dre headphones. In promotional materials, Dre outlined the line's advantages by alleging that listeners were not able to hear "all" of the music with most headphones, and that Beats would allow people to "hear what the artists hear, and listen to the music the way they should: the way I do." In comparison to most headphones, Beats products were characterized by an emphasis towards producing larger amounts of bass, and are particularly optimized towards hip-hop and pop music. [8] [49] [50] In October 2012, Beats unveiled its first two self-developed products, the Beats Executive noise-cancelling headphones (to compete with similar offerings by Bose and Sennheiser) and the Beats Pill portable speaker. [11] [18] In October 2015, Beats launched a new collection of speakers including the upgraded Beats Pill+ Speaker. [51]

PowerBeats Pro was released on May 5, 2019, in the United States and 2 weeks later for UK and Europe. [52]

Beats Studio 3 Wireless

This is currently the high-end wireless headphones that Beats offers. It connects by bluetooth and has 40 hours battery life. With sound canceling on it has 22 hours of battery life It features Apple’s W1 chip for quick connection to Apple devices running iOS 10, macOS Sierra, or watchOS 4 or later, it also features pure adaptive noise cancelling technology which uses microphones both inside and outside the ear cups to measure sound levels based on the environment. If there is any headgear or eyewear on the user's head it calibrates the noise cancelling and volume level accordingly. It comes in a wide range of colors, including black and blue.

Beats Audio

The company has also licensed the Beats brand, under the name Beats Audio (rendered beats audio), and technology to other manufacturers. In 2009, HP began to offer personal computers equipped with Beats Audio systems, beginning with its HP Envy line. [53] The system features a software equalizer with a preset that HP marketed as being optimized for higher quality sound output. [54] Beats Electronics ceased its partnership with HP following its purchase by Apple Inc.; HP subsequently entered into a similar agreement with Bang & Olufsen. [55]

Following its acquisition of a stake in the company, most new HTC smartphones began to be released with Beats Audio software, beginning with the HTC Sensation XE/XL with Beats Audio in September 2011. [56] The software was to be included in most new HTC devices, such as the One series. [57] [58] [59] The Sensation XE and Rezound were also bundled with Beats by Dre earbuds, but HTC abandoned the practice on future devices. A HTC product executive claimed that despite the prominence of the Beats brand, "an accessory like the headphone doesn't factor in when someone is buying a smartphone." [60]

Car audio

In 2011, Beats reached a deal with Chrysler LLC to feature Beats-branded audio systems in its vehicles. The first vehicle under the partnership was its 2012 Chrysler 300S luxury vehicle, which included a 10-speaker Beats by Dr. Dre sound system. [21] [61] Beats audio systems have also been included in models from Fiat Chrysler Automobiles' other marques. Automobile brands that currently have Beats audio systems available in its vehicles are Dodge, Chrysler, Jeep, Fiat, and Volkswagen. [62]

Beats Music

On July 2, 2012, Beats announced it had acquired the online music service MOG, in a purchase reported to have been between $10 million to $16 million. Beats stated that the acquisition was part of the company's goal to develop a "truly end-to-end music experience." The acquisition did not include the company's blog and advertising network, the MOG Music Network, [63] [64] which was sold in a separate transaction to the broadcasting company Townsquare Media in August 2012. [65]

While MOG indicated that it would continue to operate independently with no immediate change in service, [64] Beats subsequently announced a new subscription-based online music service, known as Beats Music, which launched in January 2014. In comparison to its competitors, such as Spotify and Google Play Music, the service emphasizes recommendations by music professionals alongside algorithmic recommendations. [27] [66] MOG was shut down on May 31, 2014, and existing users were directed to Beats Music. [67] Beats Music was in turn replaced by Apple Music in June 2015; the service also incorporates a Beats-branded online radio station, Beats 1. [38] [39]

Critical reception

Some critics claim that Beats products emphasize appearance over quality and function, arguing that more durable and better-sounding products are available for the same price or lower. [68] [69] Tests done on an HTC smartphone with Beats Audio indicated that the audio technology is a combination of audio equalization that boosts the low (bass) and high ends of the audio range, [70] audio compression, and audio amplification. [71] On accusations that Beats' products were "bass heavy", Beats current president denies it, citing that their products are not for reference, but rather for playback. [72]

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