"People aren't hearing all the music"
|Type||Limited liability company|
|Industry||Audio, Consumer electronics, online music|
|Headquarters||Santa Monica, California|
|Key people||Dr. Dre (Founder)
Jimmy Iovine (CEO & Co-Founder)
Luke Wood (President)
Matthew Costello (COO)
Scott Henry (Chief Financial Officer & Vice President)
Matthew Frederick (Vice President)
|Revenue||US$350 million (2011)|
|Owner(s)||Dr. Dre, Jimmy Iovine|
Beats Electronics, LLC is an American producer of audio products and equipment headquartered in Santa Monica, California. The company was founded by rapper and hip-hop producer Andre "Dr. Dre" Young and Interscope-Geffen-A&M Records chairman Jimmy Iovine and primarily produces products under the brand "Beats by Dr. Dre". The company has also licensed audio technology to other companies for use in their own products, and also acquired MOG in 2012 to expand into the online music market.
From 2009 to 2012, its products were exclusively manufactured by the consumer electronics company Monster Cable. Following the expiration of its contract, Beats began to self-manufacture its products.
The company was formally established in 2008, and debuted its first product, Beats by Dr. Dre Studio headphones, in late 2008. Monster Cable was granted exclusive rights under a 5-year contract to manufacture and develop the first Beats-branded products. To promote its products, Beats primarily relied on endorsements by pop and hip-hop music performers, product placement within music videos, and partnering with musicians and other celebrities to develop co-branded products.
In August 2011, mobile phone manufacturer HTC acquired a 50.1% majority share in Beats for $309 million. The purchase was intended to allow HTC to compete with other cellphone makers by associating themselves with the Beats brand, as the purchase also granted HTC exclusive rights to manufacture smartphones with Beats-branded audio systems. Despite its majority acquisition, HTC would still allow Beats to operate as an autonomous company.
On January 12, 2012, BusinessWeek reported that Beats and Monster would not renew their production contract and would be ending their partnership by the end of 2012. As a result, Beats took its manufacturing operations in-house, 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. In October 2012, Beats unveiled its first two self-developed products; 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' business model of celebrity endorsements (including Monster themselves, who unveiled Earth, Wind and Fire and Miles Davis-themed headphones at that year's Consumer Electronics Show), 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."
In July 2012, HTC sold back half of its stake in Beats for $150 million, remaining the largest shareholder with 25.1 percent. The sale was intended to provide "flexibility for global expansion while maintaining HTC’s major stake and commercial exclusivity in mobile." 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. On September 27, 2013, HTC confirmed its plan to sell its remaining 24.84% stake in Beats back to the company for $265 million, with the deal expected to close by the end of the year. Concurrently, Beats announced that the Carlyle Group would make a minority investment in the company. The sale helped HTC turn a net profit of US$10.3 million for the fourth quarter of 2013, following the company's first quarterly loss in company history.
The appointment of a new chief operating officer (COO) was announced in early November 2013. Matthew Costello, formerly of Ikea and HTC, will report to the company's president, who had also been acting as COO prior to the appointment.
Beats' original product line were Beats by Dr. Dre headphones. In promotional materials, Dr. 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. 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.
The company has also licensed the Beats brand, under the name Beats Audio, and technology to other manufacturers. In 2011, HP began to offer personal computers equipped with Beats Audio systems. The system features a software equalizer with a preset that HP marketed as being optimized for higher quality sound output. Originally reserved for its premium Envy line of laptops, HP now offers the system in nearly all of its consumer-oriented personal computers.
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. The software was to be included in most new HTC devices, such as the One series. The Sensation XE and Rezound were also bundled with Beats by Dre earbuds, but HTC abandoned the practice on future devices. An 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."
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. BeatsAudio also may incorporate their speakers into Fiat and Dodge cars.
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, which was sold in a separate transaction to the broadcasting company Townsquare Media in August 2012.
While MOG indicated that it would continue to operate independently with no immediate change in service, 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.
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