On Wednesday, Apple confirmed that it would be buying Beats Electronics for $3 billion, making it the company’s largest acquisition ever. This means Apple will now own everything from Beats speakers and headphones to their quickly growing music streaming service. Don’t expect any major overhauls to the Beats brand though—the popular products will retain their usual look and feel, with the only difference being Apple’s new ownership.
The most important aspect of this acquisition for Apple is Beats Music, a music streaming service which launched in January and boasts curation by people as opposed to impersonal algorithms. Seeing as iTunes sales declined 6% last year and are down 12% this year, subscription streaming may be their saving grace. Apple’s press release was unclear on whether Beats Music will merge with the existing iTunes Radio, though it is possible the two will remain separate—the former as the elite subscription service, the other as a free alternative.
The two streaming services clearly have some growing to do, however. iTunes Radio, though it currently holds 8% of the music streaming market, hasn’t exactly been regarded as a success. Similarly, Beats Music is estimated to only have 200,000 users nearly six months after its launch.
Founded in 2008 by rapper/producer Dr. Dre along with producer Jimmy Iovine, Beats commands 59% of the market for headphones costing more than $99, with a revenue that quintupled between 2010 and 2012. As seen in the chart below, their headphones are also the number one choice among teenagers.
“I’ve always known in my heart that Beats belonged with Apple,” said Jimmy Iovine. “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.”
Following the announcement, Iovine said that he would be leaving Interscope Records to join Apple full-time. The deal is still subject to regulatory approval, but should be completed by Q4 of the fiscal year.