Report: Apple close to acquiring Beats for $3.7b

ADAM SATARIANO
Last updated 17:01 09/05/2014
Reuters
SOUND OFF: Recording artist Dr Dre wears a pair of Beats headphones.

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Apple is close to acquiring headphone maker and music-streaming service Beats for US$3.2 billion (NZ$3.7 billion), in what would be its largest-ever purchase, a source with knowledge of the matter says.

A deal would give the world's most valuable company a stronger foothold in the music-accessories business and would bolster Apple's online music capabilities. Music has long been one of the cornerstones of the company's business, with its iTunes store and the iPod music player that reignited Apple's growth more than a decade ago.

While the iPhone and iPad are now more important to its business, Apple continues to add new features around music. The company had 63 per cent of the paid digital download market, researcher NPD said last year.

An acquisition would signal Apple is serious about introducing a music-subscription service. iTunes is the world's largest seller of music, but is only for downloads of single tracks and albums. By contrast, Beats earlier this year unveiled a music-subscription service that costs US$9.99 a month, giving users unlimited access to all the songs in its catalogue. Beats also features playlists made by musicians and DJs.Dre

Apple last year introduced iTunes Radio, an advertising-supported online music streaming service that competes with Pandora.

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Chief executive Tim Cook has said he isn't averse to doing deals and has made 24 purchases over the past 18 months. The company typically buys small companies, shuts them down, then incorporates the team and technology into Apple's own product lines.

"We are not in the race to spend the most or acquire the most," Cook said on the company's earnings call last month.

If the Beats discussions result in a deal, it would be the biggest purchase for Apple to date, according to data compiled by Bloomberg. Apple previously acquired some companies for about US$400 million, such as Next Computer in 1997 as part of an arrangement to bring co-founder Steve Jobs back to the company,

Beats spokeswoman Sarah Joyce and Apple spokeswoman Christine Monaghan did not immediately respond to requests for comment.

The deal discussions were reported earlier today by The Financial Times.

Beats was founded by music-industry insiders Jimmy Iovine and Dr Dre. After gaining popularity for its high-end headphones, the company started its music-subscription service, called Beats Music, to challenge Spotify.

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HTC used to own a 51 per cent stake in Beats, a controlling stake that it purchased for about US$300 million. The company sold back 25 per cent of Beats in 2012. In September, Carlyle Group bought a minority stake in the company.

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