Apple Buys Beats Electronics For $3 Billion

It's official.

As anticipated, Apple has acquired Beats Electronics for $3 billion, which is less than the $3.2 billion sticker price originally attached to the luxe headphone maker.

The move is widely seen as one purveyor of expensive, glitzy electronics purchasing another purveyor of expensive, glitzy electronics. But Apple is also purchasing the architecture of a budding streaming-music service—Beats Music—which is a growingly competitive arena where Cupertino has historically been bereft. Remember: Apple already has iTunes Radio, which lags behind Pandora in the United States.

As a standalone service, Beats Music isn't much of a force in terms of user numbers: Just 250,000 users subscribe to it; Spotify boasts 10 million paying customer, to say nothing of the dozens of millions more who use it for free.

But Beats Music, which is fueled by both both algorithms and human curation, has attempted to differentiate itself from its competitors in part through its personalization features and focus on individual users' moods. "You want to feel that emotion that only music can make you feel, where it transports you to something else," Beats CEO Ian Rogers told Fast Company earlier this year. "We want to be of service, not just a server for the user."

It seems the Apple acquisition won't change Beats Music's approach. "We think it’s the first subscription service to really get it right," Apple CEO Tim Cook wrote in a memo to Apple employees. "Both Apple and Beats believe that a great music service requires a strong editorial and curation team, and we will continue to expand what we do in those areas. The addition of Beats will make our incredible iTunes lineup even better, extending the emotional connection our customers have with music."

The deal is said to at least partially be an acqui-hire. Beats cofounders Jimmy Iovine (a longtime music industry veteran) and Dr. Dre (not a physician) will be joining CEO Tim Cook, former Burberry CEO Angela Ahrendts, and former Yves Saint Laurent CEO Paul Deneve as Apple executives. In theory, adding Iovine—who is also the cofounder of Interscope Records—gives Cupertino a loud, vocal presence within the music industry as it looks to navigate the staunch world of music copyright (and potentially hammer out more-attractive revenue-sharing contracts).

"These guys are really unique,” said Cook on the deal. “It’s like finding the precise grain of sand on the beach. They’re rare and very hard to find."

Apple acquisitions have historically been a low-key affair; historically speaking, big, splashy deals for trend-setting companies hasn't been Cupertino's thing. According to reports, the deal was almost called off. Apple was reportedly furious when a glee-filled video of Beats cofounder Dr. Dre, apparently celebrating the deal with his friend Tyrese, was posted to Facebook. The video was quickly scrubbed from the Internet, before surfacing again later on YouTube.

"I’ve always known in my heart that Beats belonged with Apple,” wrote Beats cofounder Jimmy Iovine in a blog post. “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.”

"Music is such an important part of Apple’s DNA and always will be,” added Apple’s senior vice president Eddy Cue in a statement. (Beats Music will be part of Cue's domain, but Beats Electronics will fall under Apple's marketing chief Phil Schiller.)

[Image: Flickr user Kārlis Dambrāns]

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2 Comments

  • Ryan Linner

    Most of this is true, except I wouldn't say Beats is really differentiating themselves much from competitors with their focus on individual's moods. Songza has been doing this extensively for a couple of years, and Spotify has made some progress with suggesting playlists for certain moods/activities as well. That's where the money is. Pandora gets old after an hour once the songs progressively get worse. Making playlists is fun but the songs get old if you don't have time to curate often. Suggested playlists tailored for moods and activities from work to sunset roof parties, that's where it's at.

  • OK, great deal for Apple I suppose. But I watched the video above....is anyone else bothered by this? They drop the N word a good 10 times, they are drunk, they speak like low life thugs....no wonder the video got pulled. Apple is now tied at the hip with Dr. Dre...something to be proud of? I think not.