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Apple to buys Beats for $3 billion

Los Angeles, May 29, 2014

Apple will buy Beats for about $3 billion and bring recording mogul Jimmy Iovine into its ranks, hoping to win points with the music industry and help it catch up in fast-growing music streaming.

As expected, Beats co-founders Iovine and rapper Dr. Dre will join Apple as part of the acquisition of the music streaming and audio equipment company. They should prove key in forging relationships with an industry that historically viewed Apple with suspicion but in recent years has pressed the iPhone maker to do more on subscription services, a market expected to eclipse song downloads in the long run.

Iovine's music industry relationships could ease notoriously difficult licensing negotiations for a future streaming service, recording industry executives say.

"The ugly truth is that there is such a Berlin Wall between Silicon Valley and LA," Apple chief executive Tim Cook told the Wall Street Journal in an interview. "The two don't respect each other, don't understand each other."

While the price tag represents an iota of Apple's roughly $150 billion cash hoard, it marks a significant departure for a company that for two decades has stuck mainly to acquisitions worth hundreds of millions of dollars. The deal is seen as Apple's effort to jump-start an uneven attempt to make headway in music streaming, the fastest-growing segment of the market, as iTunes sales
decline. Pandora Media Inc and Spotify have raced ahead while Apple's eight-month-old iTunes Radio has not made much of a dent.

With music downloads in decline, record labels have also put pressure on Apple to get its act together on streaming. The record labels hope Apple can turn Beats Music into a strong competitor to Spotify and other streaming services, sources familiar with the matter have said.

Apple is also gaining a line of high-end headphones popular with a young urban demographic, bumping up its "cool" factor, analysts have said. But industry executives say the company was most impressed with Beats' five month-old music service. - Reuters




Tags: Apple | Streaming |

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