The shocking news came according to five different sources, many of them prominent employees at both Apple and Beats.
According to TechCrunch, engineers are being taken off the Beats project and being moved to other Apple jobs, including iTunes. There is no word on how this might affect the headphones brand, but the music streaming service might be as good as gone.
Apple is denying everything, but experts don’t believe what they’re saying. The company told TechCrunch that the story of Beats being shut down “is not true.” But the key words here are “shut down” vs. “modified,” which can also mean basically shut down.
According to reports, Apple “may, however, modify [Beats Music] over time, and one of those changes could involved changing the Beats Music brand.”
So, at the very least, it appears that Beats may be funneled into iTunes rather than shut down completely. A point being made is that the new iPhone 6 didn’t come with Beats pre-installed, which is a sign that they don’t plan to distribute the Beats product through their primary channels.
So, it appears that the Beats by Dre brand is in for a major shift and may disappear, at least in the music streaming space. The headphones also have a questionable future, since recent analyses showed that they have mediocre quality at an inflated price. In fact, they cost roughly $14 to make and are sold for several times their value. This might lead one to wonder just how long a company can get away with such massive profit margins.
But this isn’t Dr. Dre’s problem. He’s already sold the company. Good for him.
Financial Juneteenth lessons from this story:
1) No one knows exactly why Apple would spend $3 billion on a product and then get rid of it. Some might speculate that the company simply wanted to eliminate the competition. But that’s a huge price to pay to get rid of one competitor in the broad music streaming space.
2) When your company grows in value and you sell it, it’s not your baby anymore, and not your vision. Keep this in mind when your own firm is big enough to be acquired by somebody else. Apple itself booted out founder Steve Jobs after his company went public. Be thoughtful about who you take on as partners.