After weeks of rumour and speculation, Apple has officially bought Beats Electronics for $US3 billion. The deal includes both Beats’ immensely lucrative headphone business and the recently launched streaming audio service. Beats founders Jimmy Iovine and Dr Dre will join Apple. That’s right, Dr Dre works for Apple now.
There has been a lot of speculation about what exactly Apple wants with Beats, and the truth is that it’s probably just a really good buy. Beats makes a lot of money, which Apple knows because Apple sells loads of the headphones through its retail outlets.
Of interest, however, is Apple SVP Eddy Cue’s statement from the release.
“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.”
For some time, people have been wondering when Apple would dive wholeheartedly into the streaming music business and it appears that it’s going to use Beat’s existing service as it’s ticket in, rather than trying to dismantle Beats and try to build a new one. There will be, for the time being at least, three different Apple-owned music services: Beats Music, iTunes Store and iTunes Radio.
The Beats Twitter proudly announced the deal with a reference to a great song.
Here’s to the next episode. #applebeats pic.twitter.com/GaHy1G84xF
— Beats By Dre (@beatsbydre) May 28, 2014
Now the question is what sorts of roles Dre and Iovine will take at Apple. Both are experience music moguls, so they could lend some of that expertise to Apple’s music services. It’s by far the biggest Apple acquisition of all time, so it’s hard not to think they have got more in mind than simply buying the existing Beats business.
Update: 9to5Mac obtained Tim Cook’s letter to employees. These are the choice paragraphs:
Beats Music was built with deep respect for both artists and fans. We think it’s the first subscription service to really get it right. Both Apple and Beats believe that a great music service requires a strong editorial and curation team, and we will continue to expand what we do in those areas. The addition of Beats will make our incredible iTunes lineup even better, extending the emotional connection our customers have with music.
The Beats Music team will report to Eddy. The teams will be getting to know each other better in the weeks ahead, and we are very excited about the possibilities for the future.
Beats Electronics has become the brand of choice for headphones and speakers in both the music and sports world, just five years after its launch. They are among the most popular and highest-rated third-party products sold today in Apple’s retail and online stores. We see an incredible opportunity to bring Apple’s legendary design and engineering capabilities to these popular products under Phil’s leadership.