News / Economy

Apple Chases Music Streaming Revenue With $3B Beats Purchase

From left, music entrepreneur and Beats co-founder Jimmy Iovine, Apple CEO Tim Cook, Beats co-founder Dr. Dre, and Apple senior vice president Eddy Cue pose together at Apple headquarters in Cupertino, Calif., May 28, 2014.
From left, music entrepreneur and Beats co-founder Jimmy Iovine, Apple CEO Tim Cook, Beats co-founder Dr. Dre, and Apple senior vice president Eddy Cue pose together at Apple headquarters in Cupertino, Calif., May 28, 2014.
VOA News
Apple is striking a new chord with a $3 billion acquisition of Beats Electronics, a headphone and music streaming specialist, that Apple is hoping will help it catch up in the fast-growing music streaming business.

Beats co-founders Jimmy Iovine and rapper Dr. Dre will join Apple as part of the acquisition of the music streaming and audio equipment company.

They should prove key in forging relationships with an industry that historically has viewed Apple with suspicion but in recent years has pressed the iPhone maker to do more on subscription services, a market expected to eclipse song downloads in the long run.

"Music is such an important part of all of our lives and holds a special place within our hearts at Apple," chief executive Tim Cook said in a statement, according to Reuters.

"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."

Bringing Beats into the Apple fold will offer opportunities to weave iTunes Radio service into more devices, and even spread the App Store for mini programs to other products, according to analysts.

Iovine's music industry relationships could ease notoriously difficult licensing negotiations for a future streaming service, recording industry executives say.

While the price tag represents an iota of Apple's roughly $150 billion cash hoard, it marks a significant departure for a company that for two decades has stuck mainly to acquisitions worth hundreds of millions of dollars.

Music downloads vs. streaming

With music downloads in decline, the move is expected to help Apple, which was a pioneer in online music, ramp up its efforts to counter the successful models of streaming services like Pandora, Spotify and others.

“Apple created the digital download business and has had an amazing run, but the industry is going in the streaming service direction,” said Daniel Weisman, a manager for Roc Nation who represents bands.

Apple is also gaining a line of high-end headphones popular with a young urban demographic, bumping up its “cool” factor, analysts have said. But industry executives said the company was most impressed with Beats' 5-month-old music service.

The market as a whole is burgeoning. Streaming subscriptions jumped 51 percent in 2013 to $1.1 billion, out of $15 billion spent on music, according to the International Federation of the Phonographic Industry. Meanwhile, downloads slipped 2.1 percent.

Some experts told AP that the Beats acquisition is a good move.
 
"When you think about what worked for Beats, namely streaming and if you think about what the total size of the streaming potential is in the market for Apple, especially if it combines with the hundreds of millions of downloads they have right now and the leverage that they could equity or asset against, I don't think it's overpriced," said Erich Joachimsthaler, the Founder and CEO of Vivaldi Partners Group.

The other prize is Beats' co-founder himself. Iovine, 61, is best known as the co-founder of Interscope Records, a rap music pioneer that branched out to include acts like Lady Gaga and U2.

"I've always known in my heart that Beats belonged with Apple," Iovine told AFP.

"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," Iovine said.

Lucian Grainge, chairman of Universal Music Group, praised Iovine.

“He founded, and for more than 20 years has led Interscope, a label that has consistently been in the forefront of the music business,” Grainge Said in a statement to Reuters. “We ... look forward to enhancing our partnerships with Apple and Beats for many years to come.”

The deal, which has been rumored for weeks, is subject to regulatory approvals and is expected to be completed later this year, Apple said.

Some information for this report provided by Reuters, AFP and AP.

You May Like

Obama: I Will Do 'Everything I Can' to Close Guantanamo

US president says prison continues 'to inspire jihadists and extremists around the world' More

Sierra Leone Educates on Safe Ebola Burials

Also, country is improving at rapid response to isolated outbreaks, but health workers need to be even faster, officials say More

Religion Aside, Christmas Gains Popularity in Communist Vietnam

Increasingly wealthy Vietnamese embrace holiday due to its non-religious glamor, commercial appeal More

This forum has been closed.
Comment Sorting
Comments
     
by: Mark from: Virginia
May 30, 2014 9:00 AM
For 50 years I have listened to music and have held onto the hard copy no matter what form it had taken; LP, tape and CD. I have a music collection that nearly fills the 300-disk cd player and I am loathe to change. I cannot see myself investing in digitally stored music no matter how appealing it is, or how mobile it is. I have two shelves filled with empty cd cases because the disks are in the cd player itself.

I may have grudgingly joined the 20th and 21st centuries in many areas, but I refuse to join the iTune crowd. Recently, files on my computer became corrupted and forced me to restore Windows to its factory settings (reformat and complete reinstall) and I lost a ton of files for applications I had garnered over the past few years (I am slow to embrace the Backup system in Windows). If that had included my digital music library....well, perish the thought, it would have been terrible.

While young folks are be-bopping around with iPads and iPods and the like, I will keep the dinosaur called a component stereo system sitting on my shelf.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Decision on Cuba Underscores Divisions Among Miami Cubansi
X
Sharon Behn
December 19, 2014 9:34 PM
For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video US Decision on Cuba Underscores Divisions Among Miami Cubans

For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Cuba Deal is Major Victory for Pope’s Diplomatic Initiatives

Pope Francis played a key role in brokering the US-Cuba deal that was made public earlier this week. It is the most stunning success so far in a series of peacemaking efforts by the pontiff. VOA religion reporter Jerome Socolovsky has more.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8143
JPY
USD
119.23
GBP
USD
0.6390
CAD
USD
1.1596
INR
USD
63.304

Rates may not be current.