Apple announced today that it has reached an agreement to purchase Beats Electronics and Beats Music for $3 billion, confirming weeks of rumors that the two companies were working on a deal. The purchase, which is expected to close by the end of the third quarter of this year, will give Apple control over both the popular Beats headphone brand as well as the company’s streaming audio service.
“I’ve always known in my heart that Beats belonged with Apple,” Beats co-founder Jimmy Iovine said in a press release.
Iovine and his co-founder Dr. Dre will both join Apple as a part of the deal, though it’s unclear what will happen to the rest of Beats’ workforce. The star power and music industry savvy of Iovine and Dre should help propel Apple’s music offerings forward, especially as the company continues to navigate a changing market for selling tunes.
“Music is such an important part of Apple’s DNA and always will be,” Eddy Cue, Apple’s Senior Vice President of Internet Software and Services, said in a press release. “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.”
The deal announced today is the largest acquisition in Apple’s history, and could be a rare instance of Apple allowing a company it purchased to maintain its existing brand. Typically, Apple buys companies and quietly shuts them down, but the tone of comments in today’s press release, coupled with Beats’s strong brand recognition, point to the Beats name existing independent from Apple, at least for now.
While today’s deal is slightly different from Apple’s typical behavior, Beats brings a number of key benefits to the table. Apple has lagged behind as more people start using subscription-based streaming services to listen to their music, rather than purchasing it from the iTunes Store. Beats Music, while new to the market, has the potential to do well, especially with Apple’s support.
Beats’s headphones similarly fit with Apple’s focus on design. They may not be loved by audiophiles, but their iconic designs are popular, especially when competing models can look bland and uninspired by comparison.
On top of all that, Iovine will be the only Apple employee to be mentioned by name in a Bruce Springsteen song.
We’ll probably hear more about the Beats deal in the coming days. Iovine and Beats Music CEO Ian Rogers will take the stage at Re/code’s Code Conference this afternoon, while Cue and Apple Senior Vice President of Software Engineering Craig Federighi will be interviewed this evening. Next week, Apple executives will be giving the keynote address at the company’s Worldwide Developer Conference in San Francisco.