How Fear Led to the Creation of Beats Electronics


In 2006, legendary record producer Jimmy Iovine and hip-hop star Dr. Dre teamed up to form Beats Electronics. Selling stylish luxury headphones and audio equipment, paired with effective marketing, propelled Beats to a reported 64% market share of the U.S. headphone market over $100 in 2012. Apple would eventually purchase Beats Electronics in 2014 for $3.2 billion in cash and stock.

Jimmy Iovine shared the story of how fear led him to create Beats Electronics during his 2014 USC commencement speech: [Members Can Read the Full Transcript Here]

Now, let’s fast forward a little bit about 25, 30 years. My second pivotal life lesson came in 1999 and now I was feeling like king of the world. I had built the hottest record company in the world, Interscope Records. The home of great artists like Dr. Dre, Tupac, No Doubt, Eminem, The Black Eyed Peas and we had just signed U2. We were on a roll, we felt invincible, nothing could touch us, except Napster.

As a founder of Interscope Records, a company built up people paying for music, I was instantly scared to death. My God given insecurities kicked in again. See, I grew up in Brooklyn. My dad was a longshoreman. So I knew the difference between going to a store and paying for something and the opportunity to get it for free. I felt this stealing thing could really catch on. So I went to see one of the founding guys at Intel named Les Valdes. Somehow I thought I could reason with the industry that was about to destroy mine.

Fear, at times, makes us protect and defend what we think we already know. But sometimes in life, you need to learn a new lesson. And between you and me, in my experience, the most intelligent people that I meet are the ones that best articulate what they don’t know. That’s not what I did with Les that day. I just kept trying to tell him how I thought things should be.

After listening to me for 20 minutes, Les finally spoke. He looked me in the eye, and said, “Wow, Jimmy, what a nice story. But you know what? Not every industry was made to last forever.” That statement was so profound and so true and so insightful to me, so devastating, I nearly retired right there and then. I walked into Les’ office thinking I was Elvis, and I was gently reminded Elvis was dead.

The lesson Les taught me is one I believe is increasingly important to learn in the fast-changing world we live in today. Think about this, everything you know could already be wrong. When I got outside Les’ office and stopped sweating, I called my buddy Doug Morris, the chairman of Universal Music Group and my boss at the time. I said, “Doug, we’re screwed.” Okay, I didn’t use that exact word, but hey, I was upset. I said, “Doug, these guys don’t want our land. They want our water to take back to their land.”

In the music business back in 2003, we were standing at a crossroads. We could desperately defend the past and keep digging that same hole, or we could open our eyes to the future. Trust me, it’s a lot harder to change directions at 50 than at 25, ask your parents.

Les inspired me that day to go forward in a music business that was evolving. The old model was changing. So I began to think that maybe there was some way to harness this culture of the old music business in a whole new way. Around that time, I was lucky enough to get to know Steve Jobs from Apple. I was representing Universal Music dealing with iTunes. After three years of hanging around Steve and his team, I thought, I could learn a lot from these guys. They were breaking new ground, they were changing the game. They were winning.

I noticed how Steve took all the music and videos from around the world and built a beautiful shiny white thing called the iPod to play them on. We loved this shiny little white thing. The only part my friend Dr. Dre and I didn’t like were the shiny little white earbuds that came with the shiny white iPod because they sounded terrible. Sound wasn’t Apple’s focus. So we thought what if we make a shiny beautiful black thing so you can properly hear what’s on Steve’s iPod.

So with my friend Dr. Dre, there we had the beginning of Beats headphones. It wasn’t that simple, but you get the idea. I learned even at 50, I had to be a beginner again and that’s as zen a moment that you’ll ever hear from me. So who believed that Dr. Dre and I could sell hardware? No one. But we believed in ourselves. We harnessed our fear and turned it into action.

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