Apple Inc, seeking to bolster its position in the online music sector, said on Wednesday it was buying Beats Music and Beats Electronics in a deal worth US$3 billion.
The move is expected to help the US tech giant, a pioneer in digital music with its wildly popular iTunes platform, ramp up its efforts to counter the successful models of streaming services like Pandora, Spotify and others.
The deal for the maker of high-end audio equipment and the subscription streaming music service is Apple’s largest acquisition ever.
It calls for Beats cofounders Dr Dre, a Grammy-winning hip-hop pioneer, and Jimmy Iovine, a veteran music executive, to join the California company.
“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” chief executive Tim Cook said in a statement.
“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.”
Bringing Beats into the Apple fold is expected to offer opportunities to weave iTunes Radio service into more devices, and even spread the App Store to other products, analysts said.
Adding Beats’ cofounders is expected to give Apple fresh star power in music and the ability to get more ad revenues from streaming, including mobile.
The deal represents a shift in strategy for Apple, which is known for developing its own products in-house and making only modest acquisitions.
However, one analyst said the logic for the tie-up is not entirely clear.
“It’s a little confusing to me what Apple is getting out of it,” Technalysis Research analyst and founder Bob O’Donnell said.
O’Donnell said Beats “appeals to a demographic that is different from some of the typical Apple demographics” and has a streaming music service with “a relatively limited number of customers.”
“It doesn’t seem a great match unless there are other issues at play,” O’Donnell told reporters. “But my guess is that Apple isn’t going to spend that much without that being the case.”
The analyst said Apple may be able to give a boost to its recently launched iTunes streaming service, or possibly get a foothold in the market for music accessories.
Mobile music revenues in the US totaled US$1.68 billion last year, according to the research firm eMarketer, which estimates that figure are to increase to US$2.52 billion this year.
Ad-supported mobile music revenues topped US$1 billion last year and are expected to reach US$1.64 billion this year, the research firm said.
The deal, which has been rumored for weeks, is subject to regulatory approvals and is expected to be completed later this year, Apple said.
“I’ve always known in my heart that Beats belonged with Apple,” Iovine said. “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 premium headphone market in the US grew 20 percent last year, while sales of wireless speakers more than doubled, industry tracker NPD said.
Beats was reported to have claimed 60 percent of the US$1 billion spent on top-end earphones in the US last year.
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