Apple, seeking to bolster its position in the hotly contested online music sector, said Wednesday it was buying Beats Music and Beats Electronics in a much-hyped deal worth $3 billion.
The move is expected to help the US tech giant, a pioneer in digital music with its wildly popular iTunes platform, ramp up its efforts to counter the successful models of streaming services like Pandora, Spotify and others.
The deal for the maker of high-end audio equipment and the subscription streaming music service is Apple’s largest acquisition ever.
It calls for Beats co-founders Dr. Dre, a Grammy-winning hip-hop pioneer, and Jimmy Iovine, a veteran music executive, to join the California company.
“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” chief executive Tim Cook said in a statement.
“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.”
Bringing Beats into the Apple fold will offer opportunities to weave iTunes Radio service into more devices, and even spread the App Store for mini programs to other products, according to analysts.
Adding Beats will give Apple fresh star power in music and the ability to get more ad revenues from streaming including mobile.
– Deal ‘a little confusing’ –
The deal represents a shift in strategy for Apple, which is known for developing its own products in-house and making only modest acquisitions.
But some analysts say the logic for the tie-up is not entirely clear.
“It’s a little confusing to me what Apple is getting out of it,” said Bob O’Donnell, analyst and founder of Technalysis Research.
O’Donnell said Beats “appeals to a demographic that is different from some of the typical Apple demographics” and has a streaming music service with “a relatively limited number of customers.”
“It doesn’t seem a great match unless there are other issues at play,” O’Donnell told AFP. “But my guess is that Apple isn’t going to spend that much without that being the case.”
The analyst said Apple may be able to give a boost to its recently launched iTunes streaming service, or possibly get a foothold in the lucrative market for music accessories.
Mobile music revenues in the US totaled $1.68 billion in 2013, according to the research firm eMarketer, which estimates that figure will increase to $2.52 billion this year.
Ad-supported mobile music revenues topped $1 billion in 2013 and is expected to reach $1.64 billion this year, the research firm said.
– Buzzy brand –
Since launching five years ago, Beats has become a popular brand for audio equipment and has attracted the likes of Lady Gaga, Lil Wayne and Nicki Minaj, who have designed their own customized Beats headphones and speakers.
Fashion designers and street artists such as Alexander Wang, Futura and Snarkitecture have collaborated on some products.
The deal could make Dr. Dre hip-hop’s richest mogul, with a net worth of $700 million to $800 million, according to Forbes.
The deal, which has been rumored for weeks, is subject to regulatory approvals and is expected to be completed later this year, Apple said.
“I’ve always known in my heart that Beats belonged with Apple,” said 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.”
The premium headphone market in the United States grew 20 percent last year while sales of wireless speakers more than doubled, according to industry tracker NPD.
Beats was reported to have claimed 60 percent of the billion dollars spent on top-end earphones in the US last year.