‘Largest Acquisition’: Apple Buys Dr Dre’s Headphones Firm Beats for $3 Billion

The tech giant officially announced its deal to buy popular headphones maker Beats Electronics and its related streaming music service, Beats Music, for $3 billion, Apple announced on Wednesday.

Beats has a streaming music service similar to Spotify called Beats Music, which will now be part of Apple. Photo: Beats By Dre/Twitter

Beats has a streaming music service similar to Spotify called Beats Music, which will now be part of Apple. Photo: Beats By Dre/Twitter

Apple has confirmed on Wednesday the acquisition of Beats Electronics, the headphone and music streaming service co-founded by Dr. Dre and recording impresario Jimmy Iovine.

“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 chief executive. “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.”

Mr. Iovine added: “I’ve always known in my heart that Beats belonged with Apple. 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 Cupertino tech giant is purchasing Beats for $2.6 billion in cash plus another $400 million in equity, marking the company’s biggest-ever acquisition. It comes three weeks after the deal was first rumored, and the initial price was believed to be $3.2bn.

Beats co-founders Jimmy Iovine and Dr. Dre will join Apple as part of the deal, which will likely close by September, Apple said.

Mr. Iovine added: “I’ve always known in my heart that Beats belonged with Apple. 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.”

Moreover, streaming music service Beats Music also will be part of Apple. With $1.1 billion in revenue last year, Beats is already making money and will boost Apple’s earnings once the new fiscal year begins in October, Apple CEO Tim Cook said in an interview.

“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.”

Audio quality aside, Apple may be able to juice sales of the iPhone, its biggest money maker, by offering pairs of Beats along with it, The Atlantic’s Derek Thompson argued. Any little increase in phone sales would make for a healthy boost to the company’s profits, simply because the iPhone is so big for Apple.

Beats was founded in 2008 by the rapper and producer Dr. Dre and the producer and mogul Jimmy Iovine. The company primarily sells high-end headphones and speakers, as well as audio software and subscriptions to a music-streaming service.

Before Beats, Apple’s biggest acquisition had been its $400 million purchase of NeXt Computer, a company that Jobs founded after being ousted from Apple in the 1980s. Cook said he never considered what Jobs would have thought about the Beats’ acquisition.

Sony Music CEO Doug Morris, who considers Iovine to be his best friend, believes Cook is making a smart move that will give Apple even more credibility in the music industry.

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