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Apple Gets Its Groove On With Beats Purchase

Apple aims to shake up the music industry after confirming it would buy the premium headphone manufacturer Beats Electronics. It will also acquire the subscription streaming music service Beats Music.

The $3bn (£1.8bn) deal, which had been widely rumoured earlier this month, comes amid declining music downloads as consumers switch to online streaming services such as Spotify.

Beats Deal

According to Apple, as part of the acquisition, Beats co-founders Jimmy Iovine (a music producer) and Dr. Dre (hip-hop artist) will join Apple, although there is no word on what positions they will hold in the company.

Ironically, the Beats company was created by Iovine and Dr Dre because of the poor quality of the headphones bundled with Apple products.

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

“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.”

Whilst the reasoning behind the acquisition of Beats Electronics and its premium headphones and audio equipment is clear, the more intriguing element of the deal comes from Apple’s acquisition of the subscription streaming music service Beats Music.

In years past Apple helped transform the music industry with the launch of its iPod and iTunes store, which is still the world’s largest online music store. But there is increasing recognition that music downloads are decreasing as consumers switch to online streaming services. Apple, for example, has already launched its own iTunes Radio.

“Beats Music has brought the energy, emotion and excitement of playback in the recording studio back to the listening experience and has introduced an entirely new generation to premium sound entertainment,” said Apple, which also highlighted the musical expertise of the people behind the service.

Dying Industry?

“Music is such an important part of Apple’s DNA and always will be,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services. “The addition of Beats will make our music lineup even better, 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.”

He also offered a stark assessment of the changing nature of the music industry. “Music is dying in the way that we’ve known it. It hasn’t been growing in the way that we all want it to,” Cue was quoted by Reuters as saying, when he appeared with Iovine at the Code technology conference in southern California.

According to Iovine, Beats Music gained 250,000 users in its first three months of availability. But this is still a relatively modest number compared to Spotify’s 10 million paying subscribers.

“We have to get this model right. We don’t know the exact model yet, but we have to put steroids into this thing and get it done quickly,” Iovine was quoted as saying.

With Apple’s enormous financial muscle now behind the service, there is little doubt that Iovine will have his opportunity to take the fight to Spotify.

How well do you know Apple? Take our quiz.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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