Apple finally confirms Wednesday that it will buy headphones manufacturer Beats Electronics for a whopping $3 billion, turning its founders Dr Dre and Jimmy Lovine billionaires.
This can be considered as the biggest acquisition in history and it easily made Dr Dre the first billionaire in the Hip Hop industry. Part of the agreement requires Dr Dre and Lovine to join Apple.
Reports about Apple planning to acquire Beats has been going on since the two companies met for a discussion three weeks ago.
When speculations about the acquisition surfaced, Wall Street analysts tried to estimate the true value of Beats and how much would Apple possibly spend to buy it. Just less than a week ago, Nomura research analysts quoted Beats Electronics at only $1 billion a year ago, when investment company Carlyle Group purchased a stake in the headphones and Speaker Company last year.
According to reports, the main reason for Apple acquiring Beats is not simply the headsets or the speaker, but the company’s new music streaming application, which can be considered as Spotify and Pandora’s competition.
Apple’s iTunes is no longer the dominating app in the music downloads industry, since only 1 to 2 percent of people visiting it actually end up buying music. It seems like it is becoming a window-shopping venue for music enthusiasts. Consumers prefer subscription-based music streaming.
Apple is also struggling hard to prove to its stakeholders that it can still be innovative without Steve Jobs.
This latest acquisition can be considered as Apple’s move to reclaim the throne as the music download service provider.
According to its CEO Tim Cook, said music is an integral part of people’s everyday life and Apple holds it very dear in their hearts. Cook even called Lovine and his team as kindred spirits and creative souls.