Apple has confirmed that it has agreed to acquire music streaming service Beats Music and headphone maker Beats Electronics. Beats co-founders Jimmy Iovine and Dr. Dre will join Apple.
News of the impending acquisition escaped the normally steely clutches of Cupertino, California-based Apple in recent weeks.
The deal consisted of an initial purchase price of US$2.6bn plus a further US$400m that will vest over time.
The move has puzzled many in the technology industry, essentially around the question of whether a brand like Apple really needs to buy another brand in an area it already is a key player: music.
However, downloads platform iTunes is in danger of falling behind an established and faster-growing coterie of streaming music providers including Pandora and Spotify. Apple needed to act.
The power of music
“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.”
Jimmy Iovine and Dr. Dre are considered pioneers and artists in the msuci industry.
According to Apple Iovine in particular has been at the forefront of innovation in music for decades and has been an instrumental partner for Apple and iTunes for more than a decade.
“I’ve always known in my heart that Beats belonged with Apple,” Iovine said.
“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.”
Apple said that the acquisition is subject to regulatory approval and will close in the company’s fiscal fourth quarter.
One of the first results of the acquisition will be the inclusion of Beats’ product line-up in many more countries through Apple’s retail store, authorised resellers and the Apple Online Store.
“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.”