Story By Steve Knopper and Jason Newman
Three weeks after rumors broke of Apple’s purchase of Beats Electronics, the company has confirmed that it is buying the headphone and streaming music service for $3 billion, $200 million less than the originally reported amount. Jimmy Iovine and Dr. Dre, the company’s co-founders, will join Apple in unspecified roles as part of the deal.
Apple said in a statement that, subject to regulatory approvals, the company will close the deal in the fourth quarter of their fiscal year, or by September 28th.
“I’ve always known in my heart that Beats belonged with Apple,” Iovine said in a statement. “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.”
“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” Apple’s CEO Tim Cook added. “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.”
Universal Music Group (UMG) Chairman and CEO Lucian Grange praised Iovine in a statement, noting that “history teaches us that great entrepreneurs are few and far between.”
“Jimmy Iovine is one of that small number of entrepreneurs who, by doing so much so well in so many different arenas, have left their indelible mark,” Grange said. “Based on mutual trust and respect, UMG’s singular relationship with Jimmy permitted his innovation to flourish in all these ways. We thank Jimmy for both the incomparable leadership he’s provided to Interscope and UMG and for the highly beneficial partnership UMG has enjoyed with Beats. We wish Jimmy the very best and look forward to enhancing our partnerships with Apple and Beats for many years to come.”
Apple reps have not specified the company’s strategy in buying Beats, but analysts and experts have filed dozens of speculative reports. Some say Apple is seeking Beats’ audio technology to beef up tinny-sounding MacBook speakers and even tinnier-sounding earbuds. Others say the play is for Beats Music, the streaming service that has emerged as a competitor to Spotify, although reports have leaked that it has only 111,000 users. Still others suggest the purpose is to fold celebrity businessmen Jimmy Iovine and Dr. Dre into Apple as a posthumous replacement for the late Steve Jobs’ star power.
Iovine and Dre founded Beats by Dre in 2006 after recognizing a niche in the high-end headphones market between expensive audiophile models and earbuds, which had become ubiquitous with the rise of the iPod earlier in the decade. “Apple wasn’t focused on sound,” Iovine said earlier this year. “They were selling an iPod.”
Beats is the number-one headphones maker, bringing in more than $500 million in revenue in 2012. The company expanded into streaming music in January, launching its $10-per-month Beats Music, hiring Nine Inch Nails’ Trent Reznor as chief creative officer and emphasizing “curation” — advising music fans on what songs to play. It was a smart move, as streaming music has become more dominant over the past two years and iTunes-style sales of albums and tracks have plunged. But Beats’ low user numbers may suggest that the streaming business is already full.