Apple has indeed purchased Beats, which includes both Beats Audio hardware and Beats Music, the streaming radio service that was founded by rapper Dr. Dre and longtime music industry exec Jimmy Iovine. The deal was reported to be in the works earlier this month, and was said to be worth an estimated $3.2 billion at the time, though a recent New York Post report said it was cut to $3 billion after Apple completed its due diligence. The price is indeed $3 billion, with $2.6 billion in cash and $400 million in stock.
Apple typically makes smaller purchases of startups and companies most people have never heard of, so Beats is a considerable change of course for the company. The last really high-profile acquisition Apple made was NeXT, back when it bought that company to bring Steve Jobs back into the fold.
Much speculation has been made around what the Beats acquisition brings to Apple, which already has an existing streaming radio business and a very healthy third-party ecosystem when it comes to headphones, Bluetooth speakers and other peripherals. Apple doesn’t yet sell on- or over-the-ear style headphones, however, or its own speakers, and these are areas where competitors like Samsung currently operate to support their smartphone devices.
The company also reportedly enjoyed Beats’ ability to convert free trial users of its service to paid subscribers, according to a recent Bloomberg report. And bringing on Beats’ top executive talent, which includes Jimmy Iovine and Dr. Dre, was also said to be an important factor. In an interview with the New York Times, Apple CEO Tim Cook cited Dre and Iovine as important factors and praised the Beats streaming music service.
Given the stature of this acquisition, Apple is being a bit more communicative about the deal than it has about others in the past. Apple indicates Beats Music will continue to be made available and operate as before (even on other platforms). Also as part of the deal, Beats co-founders Iovine and Dre join Apple’s management team.
Full release below:
CUPERTINO, California—May 28, 2014—Apple® today announced it has agreed to acquire the critically acclaimed subscription streaming music service Beats Music, and Beats Electronics, which makes the popular Beats headphones, speakers and audio software. As part of the acquisition, Beats co-founders Jimmy Iovine and Dr. Dre will join Apple. Apple is acquiring the two companies for a total of $3 billion, consisting of a purchase price of approximately $2.6 billion and approximately $400 million that will vest over time. “Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” said Tim Cook, Apple’s CEO. “That’s why we have kept investing in music and are bringing together these extraordinary teams so we can continue to create the most innovative music products and services in the world.” “I’ve always known in my heart that Beats belonged with Apple,” said Jimmy Iovine. “The idea when we started the company was inspired by Apple’s unmatched ability to marry culture and technology. Apple’s deep commitment to music fans, artists, songwriters and the music industry is something special.” Iovine has been at the forefront of innovation in the music industry for decades, and he has been an instrumental partner for Apple and iTunes® for more than a decade. He has produced or collaborated with some of the most successful artists in the history of the iTunes Store®, helping make it the world’s number one music retailer. Iovine and Dr. Dre are sound pioneers, artists and entrepreneurs. Beats Electronics has brought the energy, emotion and excitement of playback in the recording studio back to the listening experience and has introduced an entirely new generation to premium sound entertainment. Beats Music was developed by a team of people who have each spent their entire career in music and provides music fans with an incredible curated listening experience. “Music is such an important part of Apple’s DNA and always will be,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services. “The addition of Beats will make our music lineup even better, from free streaming with iTunes Radio to a world-class subscription service in Beats, and of course buying music from the iTunes Store as customers have loved to do for years.” In just five years since launch, the Beats “b” has become the brand of choice in the music and sports worlds, and is the market leader in the premium headphone market. Music superstars including Lady Gaga, Lil Wayne and Nicki Minaj have designed their own customized Beats headphones and speakers. Fashion designers and street artists such as Alexander Wang, Futura and Snarkitecture have collaborated on special limited products, while renowned athletes including LeBron James, Serena Williams and Neymar use Beats as a critical part of their training and game day process. Beats has quickly become part of pop culture in the US and with the acquisition the Beats product lineup will be offered in many more countries through the Apple Online Store, Apple’s retail stores and select Apple Authorized Resellers. Subject to regulatory approvals, Apple expects the transaction to close in fiscal Q4. Formally established in 2008 as the brainchild of legendary artist and producer Dr. Dre and Chairman of Interscope Geffen A&M Records Jimmy Iovine, Beats Electronics (Beats) comprises the Beats by Dr. Dre family of premium consumer headphones, earphones, and speakers as well as patented Beats Audio software technology and streaming music subscription service Beats Music. Through these offerings, Beats has effectively brought the energy, emotion and excitement of playback in the recording studio to the listening experience and has introduced an entirely new generation to the possibilities of premium sound entertainment. Beats Music is a subscription streaming music service that focuses on providing a personalized music experience for each user through a unique blend of digital innovation and musical passion. Programmed by a trusted team of well-respected music experts with over 300 years of experience across all genres, Beats Music delivers the right music for any situation, any time, and any preference, personalized to your tastes. The result is an artist-friendly digital music service that does more than simply offer access to music, but one that establishes an emotional connection to it as well. Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.