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Apple and Beats Music: What you need to know

Christopher Breen | May 30, 2014
Apple recently announced that it was acquiring Beats Electronics and Beats Music, the companies known for popular and stylish headphones and an up-and-coming music subscription service. Here are some of the important details of the deal.

Apple recently announced that it was acquiring Beats Electronics and Beats Music, the companies known for popular and stylish headphones and an up-and-coming music subscription service. Here are some of the important details of the deal.

What's Apple paying for Beats?

Apple is paying $2.6 billion initially and, in the future, will vest an additional $400 million.

Does all that money go to the founders?

Beats was co-founded by Jimmy Iovine (I-oh-veen) and Dr. Dre (Andre Young), and while they'll realize several hundred million from the deal not all the money will go to them. Companies such as the Carlyle Group and Universal Music have invested in Beats and will take their cut when the deal is completed sometime in the fourth quarter of this year.

Will the Beats brand exist once the deal is complete?

Yes. Although Apple owns both Beats Electronics and Beats Music, they will each continue to exist as separate brands.

What does Apple get from the Beats deals?

Three things: Beats Electronics, which is responsible for the company's headphones; Beats Music, the subscription arm of the company; and the services of both Iovine and Dre.

More specifically, Beats Electronics makes over a billion dollars a year on its headphones and accessories, which will add to Apple's bottom line. Beats Music gives Apple an operating subscription music service, which means Apple doesn't have to create one from whole cloth.

And Iovine and Dre (who will join Apple and work under Apple senior vice president of Internet Software and Services, Eddy Cue) have connections in the entertainment business that may help Apple with current and future entertainment deals.

Does this mean that the next iOS devices will ship with Beats-branded headphones?

Probably not. Currently the least expensive headphones made by the company--the Urbeats se earbuds--retail for just pennies under $100. It's possible Beats will have some say in the design of future headphones, but it's unlikely Apple will mix the two brands together in this kind of way.

Will iTunes Radio disappear because of the Beats deal?

Apple has offered no indication that this will affect iTunes, iTunes Radio, or iTunes Match in any way. In Apple's press release Cue described Beats as supplementing both the free iTunes Radio and the download business of the iTunes Store. 

Wasn't Beats involved with HTC?

It was. In 2011 Taiwan's HTC paid $300 million for a 50-percent stake in Beats. In 2012 it sold back half that share and then the rest in 2013. Iovine claims the deal didn't work out because of a culture clash between the two companies. Prior to the HTC partnership, Beats had teamed up with Monster.

 

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