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11/22/2024 12:25:20 am

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Apple Set to Buy Dr. Dre's Beats for $3.2 Billion

Beats/Apple headphones

Apple nears its biggest acquisition ever with talks underway of buying headphone manufacturer and music streaming service provider Beats Electronics. The pricetag? US $3.2 billion.


Reports by The Financial Times indicate Apple may be closing the deal already next week. The move is seen as an attempt by Apple to acquire not only more online music offerings, but also a wider range of phone and music accessories. Two areas expected to be in rapid growth over the next few years.

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The possible merger of Beats subscription-based music streaming service and iTunes, which dominates the market of music downloads, has left observers scratching their heads however, given the great overlap of the two companies' customer base. Particularly since Apple recently launched iTunes Radio, a free service in direct competition with Beats Music.

Analyst James McQuivey of Forrester questions the move, as conventional logic dictates big business acquisitions to be based more on acquiring technology or a customer base that you don't already have.

This has led to speculation about what Apple and Beats are really up to with future projects and services behind closed doors.

The price has also surprised industry watchers, as Beats was only valued up to $1 billion after its last funding run in September.

Beats was famously founded in 2006 by music producer Jimmy Iovine and widely sponsored by rapper-producer Dr. Dre, also known as Eminem's mentor.

The company acquired music streaming service MOG in 2012 and re-tooled it into Beats Music in January this year, backed by Warner Music Group owner Len Blavatnik. The service combines algorithms and customization to create suggested playlists for subscribers. Despite criticism about functionality and disappointing subscriber numbers, Beats CEO Ian Rogers argued that the number of trial users signing up for a subscription has been surpassing expectations and the company has pushed hard with marketing spots at the Super Bowl.

Beats Music is also expected to soon face harsh competition from similar music service Spotify, which has now partnered with mobile giant Sprint to be provided in bundles by the telecom company.

Though industry talk has been mainly focused on the online music service, to consumers the brand is mainly known for high-end headphones and sound systems.

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