Its official Apple will buy Beats Electronics for US$3 billion, the move could shake up the headphone and wireless audio market putting brands like Monster, Sol Republic and Sennheiser under pressure.
Despite having poor subscription numbers when compared with several other leading music streaming services Apple said it would pay $2.6 billion in cash and $400 million in equity for Beats Music who last year launched their subscription music-streaming business.
U.S. sales of single downloads slid 6% to 1.3 billion tracks last year, while album downloads were flat at 118 million. Pandora’s free, ad-supported service has more than 70 million active users. Spotify, which entered the U.S. in 2011, now counts 10 million paying subscribers world-wide.
Beats co-founders-rap star Dr. Dre and music mogul Jimmy Iovine -will join Apple, and Apple will continue to use the Beats brand, a first for the company.
The Wall Street Journal reports that Mr. Iovine said he would leave his post as chairman of Vivendi’s Interscope Records and will work full-time at Apple. Dr. Dre, whose real name is Andre Young, said he would continue to produce music but do “as much as it takes” for Apple.
Mr. Iovine, a long-time friend of Apple co-founder Steve Jobs, said the two men’s titles would simply be “Jimmy and Dre.” They will work with both Apple’s electronics and music-streaming divisions, spending as much time at Apple’s Cupertino, Calif., campus as necessary, while serving more broadly to bridge the cultural divide between technology and entertainment industries.
“The ugly truth is that there is such a Berlin Wall between Silicon Valley and L.A.,” said Apple Chief Executive Tim Cook in an interview. “The two don’t respect each other, don’t understand each other.
Apple launched its own free music-streaming service, iTunes Radio, in September 2013. It counts 40 million U.S. users but has yet to make much of a competitive dent. Beats started its $9.99-per-month subscription music-streaming service in January.
The Beats deal also marks the start of Mr. Cook’s push to place his own stamp on Apple, which is still using much of the playbook established by Mr. Jobs. However, Beats pushes Apple in an unfamiliar direction. Not only will it take two celebrities into the company-it will acquire a new stand-alone brand, in a culture where the only brand until now has been Apple.