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NEW YORK, USA – Apple announced plans Wednesday, May 28, to buy Beats Music and Beats Electronics in a deal worth $3 billion that gives the US tech giant more clout in the hotly contested music sector.
The move is expected to help Apple, which was a pioneer in online music, ramp up its efforts to counter the successful models of streaming services like Pandora, Spotify and others.
Apple’s largest acquisition ever, the deal for the maker of high-end audio equipment and streaming music service calls for Beats co-founders Dr. Dre and Jimmy Iovine to join the California company.
“Music is such an important part of all of our lives and holds a special place within our hearts at Apple,” chief executive Tim Cook said in a statement.
“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.”
Bringing Beats into the Apple fold will offer opportunities to weave iTunes Radio service into more devices, and even spread the App Store for mini programs to other products, according to analysts.
Adding Beats will give Apple fresh starpower in music and the ability to get more ad revenues from streaming including mobile.
The deal represents a shift in strategy for Apple, which is known for developing its own products in-house and making only modest acquisitions.
But some analysts say the logic for the tie-up is not entirely clear.
“It’s a little confusing to me what Apple is getting out of it,” said Bob O’Donnell, analyst and founder of Technalysis Research.
O’Donnell said Beats “appeals to a demographic that is different from some of the typical Apple demographics” and has a streaming music service with “a relatively limited number of customers.”
“It doesn’t seem a great match unless there are other issues at play,” O’Donnell told the Agence France-Presse. “But my guess is that Apple isn’t going to spend that much without that being the case.”
The analyst said Apple may be able to give a boost to its recently launched iTunes streaming service, or possibly get a foothold in the lucrative market for music accessories.
Mobile music revenues in the US totaled $1.68 billion in 2013, according to the research firm eMarketer, which estimates that figure will increase to $2.52 billion this year.
Ad-supported mobile music revenues topped $1 billion in 2013 and is expected to reach $1.64 billion this year, the research firm said.
Since launching five years ago, Beats has become a popular brand for audio equipment and has attracted the likes of Lady Gaga, Lil Wayne and Nicki Minaj, who have designed their own customized Beats headphones and speakers.
Fashion designers and street artists such as Alexander Wang, Futura and Snarkitecture have collaborated on some products.
The company was founded by Dr. Dre, the popular rap musician, and his producer Iovine.
The deal, which has been rumored for weeks, is subject to regulatory approvals and is expected to be completed later this year, Apple said.
“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 premium headphone market in the United States grew 20% last year while sales of wireless speakers more than doubled, according to industry tracker NPD.
Beats was reported to have claimed 60% of the billion dollars spent on top-end earphones in the US last year. – Rappler.com