Friday 24 October 2014

Apple in talks with headphone maker Beats over €2.3bn takeover

Published 09/05/2014 | 10:34

Recording artist Dr. Dre wears a pair of Beats headphones

Apple is orchestrating a $US3.2 billion (€2.3bn) acquisition of headphone make and music streaming distributor Beats Electronics, according to a report.

Citing people familiar with the negotiations, The Financial Times reported that Apple could announce the deal for Beats, which was founded by hip-hop star Dr Dre and record producer Jimmy Iovine, as early as next week.

In a report on its website, the newspaper warned the talks could still collapse if the two sides cannot agree on some final details. Both Apple and Beats declined to comment to The Associated Press.

The potential acquisition would add Beats' popular line of headphones and music streaming service to an Apple line-up that already includes digital music players and the iTunes store, the world's top music retailer.

If the deal is completed, it would be by far the largest purchase in Apple's 38-year history.

The company has traditionally seen little need to buy technology from other companies, reflecting Apple's confidence in its ability to turn its own ideas into revolutionary products such as the Mac computer, the iPod, the iPhone and the iPad.

But Apple has not released a breakthrough product since its former CEO and chief visionary, Steve Jobs, died in October 2011. The innovative void has increased the pressure on Jobs' hand-picked successor, Tim Cook, to prove he is capable of sustaining the success and growth that turned Apple into the world's most valuable company and a beloved brand.

Mr Cook has shown a willingness to spend more of Apple's money than his predecessor ever did. Among other things, Mr Cook began paying Apple stockholders a quarterly dividend and has progressively committed more money to buying back the company's shares.

Apple's pursuit of Beats is the latest indication that the company is having trouble generating growth on its own. Apple already sells Beats gear in its stores, giving the company insights into how much the trendy headphones and other audio equipment appeal to its customers.

The negotiations also are taking place as the music market increasingly tilts toward streaming and away from the downloads that once drove the success of Apple's digital music store, iTunes.

US revenue from downloads - which iTunes dominates - dropped 1% to 2.8 billion US dollars in 2013, while streaming music revenue from the likes of Pandora and Spotify soared 39% to 1.4 billion US dollars, according to the Recording Industry Association of America.

While downloads still command 40% of the market, streaming revenue now accounts for 20% of total revenue, up from just 3% in 2007.

Beats was founded in Santa Monica, California in 2008 by Dr Dre and Jimmy Iovine. Its headphones were manufactured by Monster Cable until the two companies parted ways in 2012. The headphones have become a bit of status symbol worn by celebrities as well as audiophiles.

In 2012, Beats bought streaming music service MOG, which it transformed and relaunched as Beats Music earlier this year.

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