Update: A couple of hours after the news broke this morning of Apple being in talks to acquire Beats Electronics, the New York Post has reported that Beats CEO Jimmy Iovine is in line to join Apple as a ‘special adviser’. Iovine would report directly to Tim Cook, the report states.
In what would be its largest ever acquisition were it to go ahead, Apple is reportedly in talks to buy Beats Electronics, maker of top-end headphones and portable speakers. The figure being quoted for the deal is a substantial US$3.2 billion, coincidentally the exact amount Google paid for home thermostat/smoke alarm company Nest, back in January.
Beats was formally established by renowned rapper and producer Dr. Dre with fellow music producer and chairman of Interscope Geffen A&M Records, Jimmy Iovine in 2008. Producing audio products and equipment, the company is based in Santa Monica, California. By 2012 the company owned 51 percent of the estimated US$1 billion market, according to its website.
“A deal would give the world’s most valuable company a stronger foothold in the music-accessories business and would bolster Apple’s online music capabilities,” writes Bloomberg‘s Adam Satariano. “An acquisition would signal Apple is serious about introducing a music-subscription service.”
In January this year, Beats launched a music streaming service in the US, competing with the likes of Pandora, Rdio and Spotify, as well as Apple’s own iTunes Radio. The Beats service costs US$9.99 a month or US$119.88 a year, and this provides users with unlimited access to the entire catalogue of songs available. The service also includes playlists curated by musicians and DJs.
If the Apple/Beats deal is signed, it would also mark a change of direction for Apple.
While CEO Tim Cook has shown himself more than willing to spend some of Apple’s mountains of cash in this way, making 24 such purchases over the last 18 months, previously Apple’s acquisitions have tended to be technology-based.
“The company typically buys small companies, shuts them down, then incorporates the team and technology into Apple’s own product lines,” writes Bloomberg. It would be rare to see the Cupertino company buy an established brand, let alone shell out such a sizeable amount to much to do so.