All You Need To Know About The Apple-Beats Acquisition

Tentative deal between iPhone maker and Beats is reportedly in the works and could be one of Apple's biggest buys yet.

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Dr. Dre To Join Apple's Management Team In Latest Development Of Beats Acquisition

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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.

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.
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iTunes and iTunes Radio are not going anywhere

Apple’s senior vice-president of Internet Software and Services, Eddy Cue, clarified the future of iTunes and iTunes Radio. “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.” The packaging is simple— Beats Music will be the premium subscription based service, whereas iTunes Radio will be the free offering.

Beats Music’s Streaming Service Will Be Operated Separately From The iTunes Download Store

Apple just bought Beats, but rather than risk cratering iTunes download sales by evolving it into a streaming service, it will operate Beats Music’s streaming service in parallel to give listeners an all-they-can-hear subscription option.

The deal is actually not done...yet!

While both parties can make all the announcements about the acquisition, and proceed to uncork the champagne, the deal isn’t final until various regulators give their approval. While no one anticipates any hurdles now, and that it is just a matter of time, the deal will actually be official sometime in the second half of the calendar year.

Apple Is Close To Buying The Company Behind The Popular 'Beats By Dr. Dre Headphones, According To Media Reports

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Apple is reportedly in talks to acquire Beats Electronics, the high-end-headphone maker co-founded by hip-hop artist Dr. Dre, in a deal worth $3.2 billion, according to the Financial Times. Bloomberg, The New York Times and the Wall Street Journal have since confirmed the report with their own sources.

The deal could be announced as early as next week, the report says, but has yet to be finalized and could still fail to materialize pending discussions between the two companies.

The Deal Would Mark Apple's Biggest Acquisition To Date By Far And Comes At A Time When Other Tech Giants Are Spending Billions On Acquisitions

Dr. Dre and Jimmy Iovine attend the unveiling of Beats By Dr. Dre 2011 in New York City.

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The deal would also include the new Beats Music streaming service, which was introduced in January as a competitor to Spotify and Pandora, and could signal an effort by Apple to transform its approach to music more than a decade after it opened the iTunes download store.

The Deal Could Be Announced As Soon As Next Week, According To The Reports, Though The NYTimes Reports That The Deal Could Fall Through

A deal has not been consummated, and the negotiations could still fall apart, according to these people, who declined to be identified speaking about it publicly. But if it is completed, the sale could be announced as early as next week, the people said. Apple and Beats declined to comment.

For Apple, whose revenue growth has slowed sharply in the last few years, the deal could point to a headlong move into the frontier of streaming music. The company, which only last year released its streaming product, iTunes Radio, has been slow to enter the streaming world.

A Purchase Of Beats Would Also Give Apple A Hot Product And An Even Hotter Brand, Reports NYTimes

Apple is finally growing up.

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After its enormous successes with the iPhone and iPad, Apple has been under intense pressure from investors to unveil new products, but none have yet been released. At over $3 billion, the Beats acquisition would be a major departure for Apple, which under Steven P. Jobs, its co-founder, favored smaller deals.

Beats could provide Apple with additional talent and resources for designing hardware like wearable devices. The deal could be also useful in helping Apple to improve iTunes and iTunes Radio in particular, and better adapt as consumers shift from downloads to streaming.

Beats, Established In 2008 By Dre And Longtime Music Industry Executive Jimmy Lovine, Is Known For Hyper-Hyped Headphones That Critics Dismiss As Being All Celebrity Endorsement And Little Substance

A custom Beats design featuring an Apple logo.

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Beats began to sell its sleek, bass-heavy headphones in 2008 as an alternative to the lightweight earbuds that Apple included free with its iPod players. And even at prices of up to $450 apiece, they quickly became fashion statements. The company’s headphones have fat profit margins. Headphone designers estimate the cost of making a fancy headset is as low as $14.

Despite its hardware lead, Beats has had a rocky relationship with investors. In August 2011, hardware manufacturer HTC pumped $309 million into the company to acquire a majority stake of 50.1 percent. But it sold back half of that stake in July 2012 and the rest in September 2013 to ensure that it did not incur its second ever quarterly loss.

Interestingly, The Beats Music App Is Available For Android And Windows Smartphones, And In A Version For Desktop Computers

Apple could soon be the proud owner of this guy, among other Beats products

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It’s not clear if Apple would maintain the apps for the other smartphone brands once the purchase is finalized. The company has had an on-again, off-again relationship with various investors and funding partners over the years. However, given the size of the reported purchase and Apple’s corporate seriousness, Beats’ financials and ownership must be in-the-clear enough for Apple to act.

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