News by Andrew Kameka on Friday May 09, 2014.
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Reports circulated yesterday that Apple is in talks with Beats Electronics to acquire the company for $3.2 billion dollars. The deal would reportedly be for the entire company, so it would include the high-priced Beats headphone efforts and the recently launched Beats Music service. The Financial Times first reported the story, followed by Bloomberg and the Wall Street Journal verifying it with their sources. Later last night, Beats co-founder Dr. Dre appeared in this very NSFW video that seemed to celebrate the deal and he proclaimed himself the first billionaire in hip-hop as singer-turned-actor Tyrese said Forbes would have to update its annual list ranking the richest people involved in hip-hop. (Warning: video has plenty of profanity.)
The video was taken down from Facebook and reposted on YouTube, but it appears to be confirmation that Beats is about to receive a large check from Apple. Terms of the deal have yet to be made official, though the $3.2 billion price tag seems to be a common theme among the various reports. Though the price tag is high, it's potentially worth it.
Beats is an already profitable business that was valued at $1 billion in September when the company took on new money. It headphones cost less than $20 to produce and are then sold for $200 to $400 thanks to celebrity endorsements and convincing consumers that they have unmatched sound quality. Most audiophiles will scream that those claims are highly inaccurate, but the Beats marketing machine has pushed the company to be very profitable.
Acquiring the Beats Music streaming business would also give Apple a Spotify rival, Bloomberg notes. Apple is currently the largest distributor of digital music at a time when all signs point to consumers transitioning to monthly subscription services in the future. Apple already has a Pandora competitor in iTunes Radio, and acquiring Beats would make sure Apple has a foot in the door as streaming services grow in popularity. It would also provide Apple with something few would have expected - an Apple-owned service supporting mobile operating systems other than iOS. Beats is currently available for iOS, Android, Windows Phone, and the web.via: The Next Web
Andrew is MobileBurn.com's managing editor. He is based in Miami, Florida.