Apple on verge of buying Beats for $3.2B

SAN FRANCISCO (AP) — Apple is orchestrating a $3.2
billion acquisition of Beats Electronics, the headphone maker and music
streaming distributor founded by hip-hop star Dr. Dre and record
producer Jimmy Iovine, according to a published report.
Citing
people familiar with the negotiations, The Financial Times says Apple
could announce the deal as early as next week. In its report posted
online late Thursday, the newspaper warned the talks could still
collapse if the two sides can’t agree on some final details.
Both Apple Inc. and Beats Electronics declined to comment to The Associated Press.
The
potential acquisition would add Beats Electronics’ popular line of
headphones and music streaming service to an Apple line-up that already
includes digital music players and the iTunes store, the world’s top
music retailer.
If the deal is completed, it would be by far the largest purchase in Apple Inc.’s 38-year history.
The
Cupertino company has traditionally seen little need to buy technology
from other companies, reflecting Apple’s confidence in its ability to
turn its own ideas into revolutionary products such as the Mac computer,
the iPod, the iPhone and the iPad.
But Apple hasn’t released a
breakthrough product since its former CEO and chief visionary, Steve
Jobs, died in October 2011. The innovative void has increased the
pressure on Jobs’ hand-picked successor, Tim Cook, to prove he is
capable of sustaining the success and growth that turned Apple into the
world’s most valuable company and a beloved brand.
Cook has shown a
willingness to spend more of Apple’s money than Job ever did. Among
other things, Cook began paying Apple stockholders a quarterly dividend
and has progressively committed more money to buying back the company’s
shares.
Apple’s pursuit of Beats Electronics is the latest
indication that the company is having trouble generating growth on its
own. Apple already sells Beats Electronics gear in its stores, giving
the company insights into how much the trendy headphones and other audio
equipment appeal to its customers.
The negotiations also are
taking place as the music market increasingly tilts toward streaming and
away from the downloads that once drove the success of Apple’s digital
music store, iTunes.
U.S. revenue from downloads — which iTunes
dominates — dropped 1 percent to $2.8 billion in 2013, while streaming
music revenue from the likes of Pandora and Spotify soared 39 percent to
$1.4 billion, according to the Recording Industry Association of
America.
While downloads still command 40 percent of the market,
streaming revenue now accounts for 20 percent of total revenue, up from
just 3 percent in 2007.
Beats Electronics LLC was founded in Santa
Monica, California in 2008 by Dr. Dre and Jimmy Iovine. Its headphones
were manufactured by Monster Cable until the two companies parted ways
in 2012. The headphones have become a bit of status symbol worn by
celebrities as well as audiophiles.
In 2012, Beats bought
streaming music service MOG, which it transformed and relaunched as
Beats Music earlier this year. The launch was fueled by a landmark
partnership with AT&T that allowed up to five family members to pay
$15 a month for the service as long as they were AT&T wireless
customers. The deal broke the industry mold of charging each person $10
per month.
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AP Business Writer Ryan Nakashima in Los Angeles contributed to this story.