Update: It’s official. Apple is buying Beats for $3 billion with Dr. Dre and Jimmy Iovine joining Apple to work with Eddy Cue, Apple’s executive in charge of Internet services. Writes The New York Times, “The Beats brand will remain separate from Apple’s and Apple will offer both Beats’s streaming music service and premium headphones.” Apple’s iTunes service will continue alongside these Beats offerings.
The deal is $2.6 billion in cash and $400,000 in stock. This is Apple’s biggest acquisition deal ever.
“I’ve always known in my heart that Beats belonged with Apple,” said Iovine in a statement about the deal.
When we first heard Apple was in talks to buy Beats Electronics, the company owned by Jimmy Iovine and Dr. Dre, reports made it seem as though the $3.2 billion deal was imminent. Nearly three weeks later and still, nothing.
Now The New York Post says the deal will happen next week and the price has dropped just a touch to $3 billion.
Some wondered if the leaked clip of Dre and Tyrese Gibson was holding up the deal. Actually, the Post says, it’s the fact that Beats Music, the company’s streaming service, only had 111,000 subscribers in March. Spotify, to contrast, has 10 million paying customers and another 30 million who use it for free. One of the reasons Apple is said to have set its sights on Beats was for the streaming music possibilities, which has become increasingly popular with fans. That could have led to a renegotiation of the price.
Still, Beats is pulling in $1.3 billion in sales of its Beats headphones, so there’s great value to bringing it into the Apple fold.
Separately but related, there’s the matter of whether or not Dre will become “hip hop’s first billionaire.” If this story is true and the company sells at $3 billion, Dre would receive $750 million from the deal, given his 25 percent ownership of the company. Deduct taxes and take into account that Forbes has placed his earnings from the company in the $275 million range for the last couple of years, and Dre falls shy of the billion-dollar mark. We’re sure he’ll be fine.
Apple is trying to get its mojo back after a slump in innovation that has pushed it out of the top spot for most valuable brand in the world. (Google now occupies that slot.) The company is planning a new iteration of the iPhone with a larger screen and possibly a new smart home that will be introduced at the Worldwide Developer Conference on June 2. Dre and Iovine are expected to be there.