CUPERTINO, Calif. – Apple is striking a new chord with a $3 billion acquisition of Beats Electronics, a headphone and music streaming specialist that also brings the swagger of rapper Dr. Dre and recording impresario Jimmy Iovine.
Wednesday’s announcement comes nearly three weeks after deal negotiations were leaked to the media. It’s by far the most expensive acquisition in Apple’s 38-year history, a price that the company is paying to counter a threat posed to its iTunes store.
The price consists of $2.6 billion in cash and $400 million in Apple stock that will vest over an unspecified time period. The deal is expected to close before October.
With $1.1 billion in revenue last year, Beats is already making money and will boost Apple’s earnings once the new fiscal year begins in October, Apple CEO Tim Cook said in an interview.
Although he believes most technology companies are “culturally inept,” Iovine said he believes Apple will empower Beats to realize its goals of improving the sound of digital music and creating playlists tailored for each subscriber.
“To complete our dream, we needed a company like (Apple),” Iovine said in an interview. “We couldn’t finish this on our own.”
The growing popularity of music streaming services such as Pandora and Spotify has been reducing sales of songs and albums, a business that iTunes has dominated for the past decade.
Beats was founded in 2008 by Dr. Dre, whose real name is Andre Young, and Iovine, who is stepping down as chairman of Universal Music Group’s Interscope Geffen A&M Records to join Apple. It now dominates the luxury headphone market.