May 29, 2014
-- Tech giant Apple will acquire music service Beats Music and Beats Electronics for $3 billion, a move aimed at strengthening its music services portfolio. Speculation about the deal started earlier this month with the size estimated at $3.2 billion says Sachin Karpe.
Formally established in 2008 by artist and producer Dr. Dre and Chairman of Interscope Geffen A&M Records Jimmy Iovine, Beats Electronics (Beats) comprises the Beats by Dr. Dre family of premium consumer headphones, earphones and speakers. It also includes patented Beats Audio software technology and streaming music subscription service Beats Music. Music is such an important part of all of our lives and holds a special place within our hearts at Apple. That’s why they have kept investing in music and are bringing together these extraordinary teams says Sachin Karpe. This will help Apple to continue to create the most innovative music products and services in the world. Music is an important part of Apple’s DNA and always will be. The addition of Beats will make the music line-up 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. Apple is paying an initial $2.6bn for Beats, and approximately $400m that will vest over time.
The deal with Beats also marks a departure for Apple, which has a reputation for developing new products rather than buying up smaller firms - a method preferred by rivals Google. Beats co-founder Jimmy Lovine, who made his name as chairman of the Interscope Geffen A&M record label, welcomed the deal and told that he believed that Beats always belonged to Apple. Adding Beats will give Apple fresh star power in music and the ability to get more ad revenues from streaming including mobile. Mobile music revenues in the US totaled $1.68 billion in 2013, according to the research firm eMarketer, which estimates that figure will increase to $2.52 billion this year.
Ad-supported mobile music revenues topped $1 billion in 2013 and is expected to reach $1.64 billion this year, the research firm said. In five years since its launch, the Beats “b” has become the brand of choice in the music and sports worlds with stars such as Lady Gaga, Lil Wayne and Nicki Minaj having designed their own customized Beats headphones and speakers says Sachin Karpe.
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