It's now been over three years since Apple (NASDAQ:AAPL) closed its $3 billion acquisition of Beats, which remains its largest acquisition to date. Apple didn't buy Beats because Beats was a strong business with robust financials (it was the opposite); Apple bought Beats because it had an incredibly strong brand and had foundational pieces of a music-streaming service, and the talent to go with it. Chief among that talent was Jimmy Iovine, who has been in charge of Apple Music ever since the music-streaming service launched in 2015.
It looks like Iovine's stint at the Mac maker is coming to an end.
Four years is almost up
Billboard reports that Iovine is planning to leave Apple in August, citing anonymous sources. The music executive's departure is said to coincide with when his Apple shares fully vest. Iovine's position at Apple does not require SEC Form 4 disclosures (his only Form 4 filings relate to Live Nation, where he serves as a director), so there isn't much information regarding his equity holdings and restricted stock grants that is publicly available, but here's what we do know.
The Beats deal officially closed on July 31, 2014, and Apple issued 5.1 million shares to former investors of Beats, in addition to the cash component of the deal. At the time, those shares were worth approximately $485 million, based on a closing price of $89.66. Of that total, the vast majority ($417 million) would vest over time provided the executive stayed with Apple.
It's not clear who received all that stock, as SEC disclosures aren't required, but the two most prominent Beats execs that Apple got as part of the deal were Iovine and Dr. Dre, the co-founders (and substantial equity owners) of Beats. It's at least safe to say that Iovine represents a meaningful chunk of that $417 million -- which, by the way, is now worth nearly $813 million.
An August departure also lines up with what we know, since four-year vesting schedules are quite common, and July 31, 2018, will mark four years after the deal closed.
Still No. 2
Iovine's planned departure comes as Apple's competition with Spotify continues to intensify. It was reportedly Iovine's decision to add original video content to Apple Music in an effort to differentiate the service, but that strategy has been controversial. Iovine has also made it clear that pure-play music streaming services like Spotify are in precarious financial positions due to low margins and myriad free alternatives.
Hello 70 million subscribers 👏— Spotify (@Spotify) January 4, 2018
Spotify just announced that it now has 70 million paid subscribers, expanding its lead over Apple Music. The last time that Apple disclosed Apple Music subscribers (September 2017), it had 30 million. Both services continue to grow at healthy rates, and Apple Music has been able to mostly keep up, with roughly half as many paid subscribers at any given time, so Apple Music could easily be approaching 35 million.
Iovine has been instrumental in growing Apple Music to where it is, but it looks like the company is going to have to carry on without him in a matter of months.