Beats by Dr Dre is looking to get out of its partnership with Taiwanese electronics maker HTC. According to an article in The Wall Street Journal, co-founders Dr. Dre (formerly of R&B outfit World Class Wreckin Cru and, more notably, NWA) and Jimmy Iovine (the chairman of record label Interscope Geffen A&M) are seeking to buy back the 25 percent interest of the company owned by HTC. In the meantime, the article points out, the duo are in talks with a new, unnamed investor who can provide the capital needed for the brand to expand.
Beats sure does get around, doesn’t it? This tie-up with HTC is third such partnership the company has been a part of since it was founded in 2008. First, Beats worked with Monster Cable. Then, in 2009, it collaborated with HP. By 2011, HTC bought a 50.1 percent stake in Beats. Iovine and Dre bought back half of that interest in 2012, and now seek to buy back HTC’s remaining stake.
Tying yourself to another brand doesn’t come without some risks, however. Take the HTC investment: At the time, HTC was still a force to be reckoned with: Just two years prior to the purchase, it was the fourth-largest smartphone maker in the world. But by the time of the purchase, HTC was already slouching toward also-ran status. Production problems, a ramp-up in prices and the departure of key staff has resulted in a tumble down the ranks of smartphone makers.
Meanwhile, Beats itself has continued to grow, commanding 59 percent of the premium headphone market, according to market researcher NPD Group. But the headphone market is limited, and so Beats has been looking to other sources of revenue: There’s a deal in place with Chrysler to provide in-car audio, and last July the company bought streaming-music service MOG.
Surely Beats needs some cash to expand their business. They need manufacturing capabilities and distribution to get more products into more stores. But cash doesn’t have to equal brand affiliation. Beats could just line up some wealthy individuals and/or some private equity and get what it needs to expand. The company has managed to do something incredibly hard in short period of time: It has become a brand name. And given the track record of some of Beats’ previous partners, it’d be likely better off on its own than tied to a company’s fate it can’t control.
