Apple Beats

Apple is said to be on the verge of finalizing what would class as its biggest acquisition ever, a deal to buy Beats Music in a transaction valued at $3.2 billion. According to a Financial Times report on Thursday, citing people familiar with the negotiations, the deal could be announced as early as next week. Nothing is certain though as the parties have yet to agree on certain specifics so talks could still fall apart. Apple and Beats both declined to comment on the rumor…

The specifics of the deal have been reported in this Financial Times article (behind a paywall) by journalists Matthew Garrahan and Tim Bradshaw.

Apple will acquire Beats’ streaming music service, which launched this year, and its audio equipment business, which includes its brand of headphones and audio equipment. The Beats management team will report to Mr Cook, said people familiar with the deal.

This sounds about right to me.

With this deal, Apple surely isn’t looking to re-brand Beats accessories under its own name: the firm is already carrying various Beats headphones in its retail stores. This must be about the Beats streaming service.

As I opined recently, there’s no doubt that Apple has missed the boat when it comes to on-demand music-streaming services akin to Spotify and the like.

Sure, there is Apple’s free of charge iTunes Radio. However, iTunes Radio is an Internet radio service and as such won’t let you just pick whatever song you want to stream. You also can’t create your own playlists in iTunes Radio with custom song order.

Although Beats Music has thus far failed to gain significant traction, consider for a moment that the service is barely four months old.

Another thing to bear in mind: music streaming services usually have stipulation in their contracts with record labels that prevent their companies from transferring streaming agreements to another party.

Beats Music (iPhone 5s, Find It))
The free Beats Music for iPhone app, now available for iPad, too.

If Apple is really buying Beats for $3.2 billion, the company will be paying a hefty premium as the startup took a $500 million investment from Carlyle in September 2013, putting its valuation at about $1 billion.

Could Apple be after the Beats brand here?

Founded by music producer Jimmy Iovine and the famous hip-hop star Dr. Dre, Beats Music certainly has the brand cachet and certain allure that might help put the ‘cool’ back in iTunes.

The authors seem to agree:

Mr Iovine and Dr Dre – real name Andre Young – were inspired to create Beats by the poor sound quality of the headphones bundled with the iPod and iPhone. Beloved by music and sports stars Beats has become a street-smart fashion brand.

And when you talk fashion, the iWatch name inevitable pops up in the discussion.

Ahead of Apple’s expected launch of an ‘iWatch’ accessory, Beats will also give its designers and engineers access to years of experience in what some see as the original “wearable technology”.

The rumor is especially newsworthy in the context of a Reuters story from a year ago.

beats audio jimmy

The news gathering organization basically reported that Apple’s Cook and SVP Eddy Cue – who runs iTunes, iCloud and other online services – had met with Lovine to talk about a “potential partnership involving Beats’ planned music-streaming service.”

For reference, Apple has purchased 24 companies in the past 18 months, all of them so-called acqui-hires: that is, talent and technology focused acquisitions. For what it’s worth, Tim Cook hinted last month that Apple was “on the prowl” for more acquisitions.

What do you guys think?