Apple Confirms $3 Billion Purchase of Beats Music, Beats Electronics

The unlikely pairing that was first reported two weeks ago has come to fruition: Apple is buying Beats Electronics for $3 billion. The $3 billion valuation comes just slightly under the $3.2 billion figure that was first thrown around on May 8 due to the fact that, “Apple hadn’t even begun its due diligence process when news of the number came out,” according to the New York Post.

The deal consists of a purchase price of $2.6 billion, and $400 million in stock options according to Apple.
 
“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” said Apple CEO Tim Cook in a company press release. “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.”

In a followup interview with Re/code, Cook added, “We could build about anything that you could dream of. But that’s not the question. The thing that Beats provides us is a headstart, and it provides us with incredible people, kindred spirits.”

In an interview with the New York Times, Cook continued, lavishing praise on Iovine and Dr. Dre, proclaiming that “these guys are really unique” and are “going to be coming up with ways of features that blow your mind.” Cook also envisioned that the pair would be able “to articulate the way to take music to an even higher level than it is now.”

Jimmy Iovine (L) and Dr. Dre (R) [Image Source: Time Magazine]
Beats co-founders Jimmy Iovine and Andre Young — better known as Dr. Dre — will both join Apple in some fashion (their exact roles haven’t been disclosed at this time). According to the Wall Street Journal, their titles will simply be “Jimmy and Dre.”

“I’ve always known in my heart that Beats belonged with Apple,” said 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.”

The latest, rather large (by Apple standards) acquisition will not only give Apple access to Beats’ extremely popular lineup of in-ear headphones, on-ear headphones, and portable speakers, but also its streaming music service. “The addition of Beats will make our music lineup even better,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services. “From free streaming with iTunes Radio to a world-class subscription service in Beats, and of course buying music from the iTunes Store as customers have loved to do for years.”

Apple expects the deal to close by the end of 2014 following regulatory approval.

For more perspective on the deal, 9to5 Mac has posted Tim Cook’s letter to employees regarding the acquisition:

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