Barely a day after the Financial Times first reported Apple's alleged acquisition of Beats Electronics for $3.2 billion, Beats co-founder and rapper Dr. Dre came out on a Facebook video posted by his friend actor Tyrese Gibson proclaiming himself the "first billionaire in hip-hop."
The video, which has now been taken down by the Fast & Furious actor, shows Gibson, Dr. Dre, officially named Andre Young, and their friends celebrating the rapper's pending inclusion in Forbes' list of billionaires.
Owing to his large stake in Beats Electronics, Dr. Dre is currently the second richest hip-hop artist in the world, with a value estimated to be $500 million. He is second only to Sean "Diddy" Combs, who has an estimated net worth of $700 million, and has leapfrogged over Jay Z, who has a fortune of $200 million.
Forbes estimates that Dr. Dre owns somewhere around 20% to 25% of Beats' shares and pegs the headphone-maker's value at $2 billion. This means that a sale of $3.2 billion would double the rapper's stake and increase his net worth to $800 million after capital gains taxes. It is $200 million short of Dr. Dre's claim to billionaire status, but the acquisition of Beats will make him hip-hop's richest man.
Further, Dr. Dre is set to easily make the remaining $200 million if he continues to be involved in Beats' business operations. Unlike his co-founder legendary producer Jimmy Iovine, who is listed as chief executive of Beats, Dr. Dre does not hold a business title in the company. If talks of the acquisition are true, Iovine will serve as a "special advisor" to Apple CEO Tim Cook while the Beats team will report directly to Apple's head honcho. Beats will also remain a standalone brand, according to sources who requested to remain anonymous because they were not authorized to speak about the matter.
Although the acquisition seems to be a marriage of complete opposites, with one an engineer's sanctuary and the other a celebrity-fronted music company known for throwing lavish parties, Apple and Beats have more in common than meets the eye.
"These aren't strange bedfellow at all. Steve Jobs really drove the relationship with the music industry. The executives at Apple and Beats know each other very well, and there's a comfort level," says Peter Csathy, CEO of entertainment law firm Manatt Digital Media Ventures.
Iovine became one of the first and staunchest supporters of Apple's iTunes after Steve Jobs himself personally demonstrated the new service to him in 2003. He succeeded in enlisting several artists and music labels to support iTunes and placed Apple's iPod in music videos by musicians such as Eminem, 50 Cent and Mary J. Blige. With the rumored pending deal with Apple, the Bloomberg Billionaire Index estimates that Iovine's net worth will rise up to $1 billion.
"Jimmy is the best in the business at that and that's why he continues to win," says hip-hop music executive and founder of Loud Records Steve Rifkind.
