If Apple buys Beats Electronics for $3.2bn, will Dr Dre become hip hop's first billionaire?
Friday 09 May 2014
The reports that Apple is looking to buy Beats Electronics for $3.2 billion has got people wondering: could the deal make founder Dr Dre hip hop’s first billionaire?
The answer is ‘probably’ with a slice of ‘we’re not quite sure’ on the side.
A recent ranking by Forbes of the wealthiest rappers in 2014 estimated that Dr Dre’s net worth was $550 million - just behind Sean Combs (aka Puff Daddy) who took the top spot with a cool $700m (Jay Z came third with an estimated $520m).
This means that Dre would need only an additional $450 to make it into the billionaire boys club (sic) a sum that’s roughly equal to a 15 per cent stake in Beats Electronics if the $3.2 billion valuation holds true.
The problem is we don’t know exactly how much of a stake Dre holds in Beats Electronics. The rapper founded the company with Interscope exec Jimmy Iovine back in 2008, and previous estimates have put the founders’ stake at approximately 25 per cent apiece.
Beats by Dr Dre - the favourite headphones of the image-conscious but looked down on by audiophiles.
However, numerous deals since then have muddied the waters. In August 2011 Taiwanese phone manufacturer bought 51 per cent of the company before selling back half this stake in July 2012.
It’s been reported that their remaining 25.1 per cent makes them the largest single stakeholder, but this still leaves plenty of room for Dre to claim more than the 15 per cent stake necessary to make the billion.
Despite all this though we still can’t say for certain whether the deal will go through.
Beats have done a lot to make the ‘premium’ headphones a thing (they control 57 per cent of the pricier end of the market) and their music streaming service certainly has far more youth appeal than Apple’s iRadio, but some analysts are still doubtful – especially given the fact that a $500m investment by the Carlyle Group in September 2013 only valued the company at $1bn, a third of what Apple might be paying.
So will Dr Dre become hip-hop’s first billionaire? We're not sure, but if he does it’ll be business sense, not street cred, that gets him there.
Update: A video posted by Tyrese Gibson last night apparently 'confirms' the deal, with Gibson posting (before the story broke) a video of himself celebrating with Dre with the caption "How did I end up in the studio with Dr Dre ON THE night his deal went public that he did with Apple 3.2 BILLION!!!!" Click here to watch (warning, NSFW language)
Double update: The video has been deleted!
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