Apple is set to purchase the high-end headphone maker (and now online music streaming service) for $3.2 billion. Yes, $3.2 billion – a deal which would make Dr. Dre the richest man in hip-hop.
It will also be Apple’s most expensive acquisition yet.
Beats, founded by rapper Dr. Dre and music mogul Jimmy Iovine, has been riding the success wave for a while, with Forbes estimating its value at around $2 billion. That’s a pretty high number – and it’s significantly less than what Apple is willing to pay for it. Although it’s not known how much of Beats Dre and Iovine own (due to multiple transactions and fund raising this past year), it was once estimated that the two each own 25% of the company. Needless to say, both men will be coming out of this significantly richer.
What makes this purchase newsworthy (more so than most acquisitions) is Apple’s history with buying big companies. It’s uncommon for the tech giant to make these kind of buyouts, and this is Tim Cook’s way of taking Apple on a different course. But it’s also a good business move.
Beats has now entered the world of online streaming, the mecca of music that is making life hard for apps like iTunes, which has taken a hit in sales the past year – for the first time ever since iTunes’ inception. Digital track sales were down more than 5%, and whole album sales down almost 8.5%.
Investing in a streaming business can only help Apple, so while this purchase is unorthodox, it’s not necessarily unwise. In fact, it could turn out to be a very wise decision.