Apple acquires Beats Music and Beats Electronics for $3 billion, Tim Cook explains why

dre-cook

Apple today officially announced it has acquired Beats Music and Beats Electronics for $3 billion. The deal had been speculated for almost a month. Apple is acquiring the two companies for a total of $3 billion, consisting of a purchase price of approximately $2.6 billion and approximately $400 million that will vest over time, Apple said in a statement.

“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” said Tim Cook, Apple’s CEO. “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.”

Apple expects the acquisition to close in the fourth quarter of this fiscal. Beats co-founders Jimmy Iovine and Dr. Dre will join Apple. Beats recently launched its music streaming service, however, the initial subscription numbers have been underwhelming.

It is unclear what Apple will do with the two companies but Iovine has a lot of clout in the music industry and can help Apple with its iTunes store as well as kickstart Apple’s music streaming service. Beats range of headphones too have become a fashion statement over time and it remains to be seen how Apple takes advantage of that business.

Apple is hosting its annual WWDC next week and it would be interesting to see if Iovine and Dr Dre take the stage at the developer event. Here’s an internal memo from Tim Cook sourced by 9to5Mac on why Apple bought Beats.

Team,

This afternoon we announced that Apple is acquiring Beats Music and Beats Electronics, two fast-growing businesses which complement our product line and will help extend the Apple ecosystem in the future. Bringing our companies together paves the way for amazing developments which our customers will love.

Music is an important part of our lives and our culture. Music has the power to inspire us, to comfort us, and to send our emotions soaring. It brings people together and transcends the limits of spoken language.

Apple’s history in music began with selling Macs to musicians. That remains important to us today, but we also bring music to hundreds of millions of customers with iTunes, which is at the forefront of the digital music revolution. Music holds a special place in our hearts at Apple, and we know that we can make an even bigger contribution to something that is so important to our society. That’s why we have kept investing in music and why we’re bringing together these extraordinary teams — so we can continue to create the most innovative music products and services in the world.

Beats co-founders and music industry pioneers Jimmy Iovine and Dr. Dre will join Apple, along with their team of employees. Jimmy has been on the cutting edge of innovation in the music industry for decades, including as a key partner for Apple in the launch of the iTunes Music Store more than ten years ago. He has produced or collaborated with some of the most popular artists in history, and been an important contributor to the success of the iTunes Store.

Beats Music was built with deep respect for both artists and fans. We think it’s the first subscription service to really get it right. Both Apple and Beats believe that a great music service requires a strong editorial and curation team, and we will continue to expand what we do in those areas. The addition of Beats will make our incredible iTunes lineup even better, extending the emotional connection our customers have with music.

The Beats Music team will report to Eddy. The teams will be getting to know each other better in the weeks ahead, and we are very excited about the possibilities for the future.

Beats Electronics has become the brand of choice for headphones and speakers in both the music and sports world, just five years after its launch. They are among the most popular and highest-rated third-party products sold today in Apple’s retail and online stores. We see an incredible opportunity to bring Apple’s legendary design and engineering capabilities to these popular products under Phil’s leadership.

Please join me in welcoming Beats to Apple. I hope you are as excited as I am about this new chapter in our history.

Tim