Apple seals $3bn deal to buy Dr Dre's Beats Electronics

Apple seals $3bn deal to buy Dr Dre's Beats Electronics

Apple has confirmed its deal to buy Dr Dre's Beats Electronics for $3bn (£1.78bn), its most expensive acquisition to date.

The acquisition of the luxury headphone brand and its music streaming service, co-founded by music mogul Jimmy Iovine and US rapper and producer Dr Dre, is seen as Apple’s attempt to counter declining iTunes sales.

Apple’s iTunes sales have been increasingly hit by the rising popularity of music streaming services such as Pandora and Spotify. The launch of streaming service iTunes Radio has done little to ameliorate this decline.

The acquisition is also a bid to give Apple greater credibility with teenagers and young adults, as its smartphone devices are increasingly seen as solidly mainstream.

Announcing the deal, Cook said: ‘Music is such an important part of all of our lives and holds a special place within our hearts at Apple.

‘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.’

Iovine said: ‘I've always known in my heart that Beats belonged with Apple.

‘The idea when we started the company was inspired by Apple's unmatched ability to marry culture and technology. Apple's deep commitment to music fans, artists, songwriters and the music industry is something special.’

Analysts said the deal marks a shift in Apple's strategy. Victor Basta, MD of M&A advisory firm Magister Advisors, said: ‘This is the first time Apple has paid up for brand value for anything.  Google, in contrast, has paid for YouTube, and other majors have bought important brands, but Apple has always bought capability not brand.' 

He added:  ‘iTunes needs to evolve faster and make bigger strategic changes in the face of competition.  This deal is about extending iTunes deeper into streaming and wearables to augment its software platform position today.’ 

Beats earned $1.1bn (£653.4m) in revenue last year. Both Iovine and Dr Dre will both become key executives in Apple's music divisions.

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