Apple Buys Beats Music for $3 Billion

A decade ago, Apple revolutionized the way we buy and listen to music with iTunes and the iPod. Now the company is making a major move into streaming music with the acquisition of Beats Electronics for a reported $3 billion.

While iTunes has dominated the online music business for over ten years, sales of downloaded songs have slipped by 1 percent over the last year as revenue from streaming services like Pandora and Spotify has increased 39 percent to $1.4 billion. Apple’s own venture into streaming, iTunes Radio, launched in September but has not been as successful as expected.

That’s where the expertise of rapper Dr. Dre and record producer Jimmy Iovine comes in. Beats Electronics, the headphone and music streaming service launched by the pair, made $1.1 billion last year, is expected to boost Apple’s earnings beginning in the next fiscal quarter.

Both Dre and Iovine will become key executives in Apple’s music divisions, and Iovine already has plans for both improving the overall sound of digital music and creating custom playlists for subscribers. “To complete our dream, we needed a company like (Apple),” Iovine stated. “We couldn’t finish this on our own.”

What does this mean to consumers? iTunes Radio, which currently has 40 million listeners, will go on being a free service with ads. Beats Music, which now has more than 250,000 subscribers, will tap into the over 800 million iTunes accounts in hopes of selling subscriptions to the customized service. Industry leader Spotify boasts more than 10 million subscribers to its streaming service.

In addition to the hopes of increases revenue, Apple is hoping that the acquisition of Beats Music will boost the company’s “cool” factor, which has slipped since the company launched the iPod back in 2001.

Reactions to the deal have been mixed, and only time will tell whether this partnership will be a good fit.