Apple Buying Beats For $3B - Multichannel

Apple Buying Beats For $3B

To Nab Beats’ Music Streaming Service & CE Business
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Formalizing a deal that’s been rumored for weeks, Apple announced Wednesday that it has inked a $3 billion deal to acquire Beats, the company behind a subscription-based streaming music service, software, and a line of CE gear highlighted by its iconic headphones.

Under the deal, Apple put up $2.6 billion, and $400 million that will vest over time. Beats co-founders Jimmy Iovine and Dr. Dre will be joining Apple. They expect to wrap up the deal during Apple’s fiscal fourth quarter.

The subscription-based Beats Music service, launched in January, reportedly has north of 200,000 subscribers, putting it well behind Spotify’s 10 million-plus. But Apple is expected to promote the service heavily and bump those numbers.

As Internet traffic goes, the still-young Beats Music service, which sells for $9.99 per month or $99.99 per year, has not registered among the top apps tracked by broadband management firm Sandvine, which reported earlier this month that Apple iTunes traffic represented 3.64% of downstream traffic during peak periods on North American fixed networks, well behind Netflix’s commanding 34.21%.

Despite its huge subscriber lead over Beats Music, Spotify also did not make Sandvine’s list of top ten traffic-generating Internet apps.  However, Pandora Radio did make the top ten on North American mobile networks, representing 5.15% of downstream traffic, ahead of iTunes’ 3.10%.  

The New York Times said Apple, which sells music and a streaming radio service via iTunes, will continue to offer that mix alongside the Beats music service. Apple said it will offer products from the Beats lineup via the Apple Online Store, Apple’s retail stores and via select Apple Authorized Resellers.

“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, in a statement. “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.”

“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” said Tim Cook, Apple’s CEO. “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.”