Apple Officially Acquires Beats For $3 Billion

Beats Acquired By Apple

Apple PR:

Apple today announced it has agreed to acquire the critically acclaimed subscription streaming music service Beats Music, and Beats Electronics, which makes the popular Beats headphones, speakers and audio software. As part of the acquisition, Beats co-founders Jimmy Iovine and Dr. Dre will join Apple. Apple is acquiring the two companies for a total of $3 billion, consisting of a purchase price of approximately $2.6 billion and approximately $400 million that will vest over time.

The deal is finally done. This is Apple’s largest acquisition in its history, and as Gruber notes, for a price that’s a couple of hundred million dollars less than what was expected. Who’s counting though, right?

A couple of interesting details; the Beats team will be reporting to Eddy Cue, Apple’s senior VP of Software and Services. Jimmy Iovine and Dr. Dre will both be joining Apple, but with no formal titles. They’ll be working to “to bridge the cultural divide between technology and entertainment industries” according to an interview in the WSJ.

Incidentally, Jimmy Iovine will be resigning as chairman of Interscope records. Dr. Dre will still produce music though.

More broadly, it seems like the music subscription component of Beats will live on. Tim Cook spoke to the WSJ on the subject and said:

We love the subscription service that they [Beats] built — we think it’s the first one that really got it right.

The Android and Windows Phone apps for Beats Music will also live on (at least for now), which puts Apple in the unique position of now owning apps on other mobile platforms.

This acquisition marks the end of a rocky road of company partnerships and acquisitions for Beats. Originally, Monster Cable was granted exclusive rights to manufacture and sell Beats products in 2008. This deal ended acrimoniously in 2012, and Beats took its manufacturing in-house.

In 2011, HTC acquired a 50.1% majority share of the company for around $309 million. They planned to aggressively co-brand with Beats in order to sell HTC smartphones, but the plan fizzled, and Beats eventually bought those shares back over time for only a slightly higher price.

Beats still has co-branding arrangements with other companies too, most notably HP’s line of consumer PCs and Chrysler cars. What happens to those kind of arrangements post-acquisition is anyone’s guess.