What you need to know
- Apple acquired Beats Music and Beats Electronics in 2014.
- The company paid some $3 billion for Beats Music and Beats Electronics, with founders Jimmy Iovine and Dr. Dre cashing in.
- A new inside story reveals that Dr. Dre's video leaking the acquisition cost $200 million and nearly tanked the whole deal.
While Dr. Dre's infamous video celebrating Apple's acquisition of Beats in 2014 saw Dre herald himself as "the first billionaire in hip-hop," a story from a new tell-all book about Apple under Tim Cook has revealed that the video cost Dre some $200 million, and could have torpedoed the entire deal.
The episode comes by way of Tripp Mickle's book After Steve: How Apple Became a Trillion-Dollar Company and Lost Its Soul, which tells the story of Apple under the stewardship of Tim Cook in the wake of Steve Jobs' passing. Writing in chapter 10, Mickle begins by prefacing Apple's entry into music streaming, explaining that CEO Tim Cook discovered Beats and wanted to acquire it because of its human-curated playlists, but also because Cook wanted "a solution to the company's failure to enter the streaming music business."
Cook met some internal resistance over the deal, and had to contend with Jimmy Iovine insisting that Apple buy both Beats Music and Beats Electronics, but eventually Apple agreed to a price:
"It was a sum that Iovine and Dre could barely fathom. As the lawyers worked through final details, Iovine summoned the leadership team of Beats to his home near Beverly Hills. He told everyone that they were on the cusp of finalizing a massive deal. The only thing that could spoil it would be for word of the deal to leak."
Iovine explicitly warned his team "whatever you do, don't talk about this," even reportedly quoting Goodfellas to Dre saying "Remember that scene in Goodfellas where Jimmy tells the guys, 'Don't buy any furs. Don't buy any cars. Don't get showy'?" he said. "Don't move."
Naturally, at 2 am the following morning, Iovine received a call from Puff Daddy, where Puff explained that Dr. Dre and rapper Tyrese had posted a video on Facebook revealing the deal:
At 2:00 a.m., Iovine got a call from Puff Daddy, who was screaming that Dre and Tyrese, a rapper, were talking about the deal in a Facebook video. Iovine pulled up the video and cringed as he saw Tyrese bragging about being drunk on Heineken in a recording studio
Dre famously announced that it was time to update the Forbes rich list as he was now the first billionaire in hip-hop. According to Mickle, Iovine panicked, worried that "everything was in jeopardy." Tim Cook was also apparently unimpressed, but calm about the situation:
When word of the video reached Cook, he summoned Iovine and Dre to Cupertino. He invited them into a conference room for a private conversation. Iovine was anxious and afraid that Cook was going to kill the deal. Instead of the anger and cursing that would have poured out of Jobs in a moment like that, Cook exuded calm. He told the music executives that he was disappointed and wished that Dre's social media outburst hadn't happened but said that the video hadn't shaken his conviction that buying Beats was right for Apple.
Mickle goes on to reveal that Cook "used the social media fiasco to demand an adjustment to the terms of the deal." Stating "in the days that followed, Apple shaved an estimated $200 million off its offering price. The reduction led staff at Beats to say that Apple had given Dre just enough of a haircut to make sure that he did not become a hip-hop billionaire."
Indeed, it was reported at the time of the deal by the New York Post that Apple had cut the price some $200 million, the exact sum noted by Mickle here. Back then it was suggested that a leak about Beats Music's low subscriber count had brought down the price, but Mickle's new revelation suggests that it might have been Dr. Dre's exuberant celebration of the deal was to blame instead.
Inside Apple like never before.
Tripp Mickle speaks with over 200 former and current Apple executives, telling the dramatic story of Steve Jobs' passing and demonstrating in his words "How Apple Became a Trillion-Dollar Company and Lost Its Soul."
