The Cupertino-California giant, Apple Inc. purchased Beats Electronic for approximately $3 billion. This decision was taken to extend the music influence of the company. With the help of this deal, Apple will bring on Beats Electronics music accessories to promote its music business which has lost most of its charm steadily over the years while it has been the most successful in terms of streaming and downloading on its iTunes store. From this deal Apple will get a streaming favor from Beats also some music accessories as mentioned like some high quality headphones. This deal might also help Apple get some music contracts due to the present of links of Beats with several musical industries.
According to Sony music entertainment chief executive, Apple needed a deal like this which would attract young people and as many young are behind Apple at the present time the deal might prove to be successful for Apple. Apple was already looking for a startup before the deal. This deal turned out to be quite surprising as Apple has always been working alone on technology never making a deal with any company. So far it has produced some excellent devices but since the death of Steve Jobs not even a single ‘striking’ product has come.
Apple’s music business has faced some rivals as well like Pandora and Spotify. Since their entry in U.S they both have increased number of free users and paying subscribers which make them go on top of the line. Spotify has about 10 million paying subscribers while Pandora has 3.3 million. Beats is in possession of 250,000 paying subscribers according to Apple. It has also launched a free service by the name of ITunes Radio which still could not help. Though Apple believes Beats has an extraordinary talent which would be useful. The CEO of Apple according to the co=owner of Beats eagerly wanted Beats. Beats was already before the deal was giving a helping hand to Apple for approximately 11 years to work on its music strategy.
Apple will pay $2.6 billion in cash with $400 million in terms of stock of the company. The Carlyle Group, who invested in Beats, will get double of its money through this deal. The owners of the Beats electronics Dr.Dre and Mr. Lovine both will contribute to Apple. According to the CEO of Apple, Tim Cook, this deal will bring a positive change in the company. It is also an opportunity for the new CEO to hold on and drive the company in a positive direction.
Apple now counts on Mr. Lovine, as good relations with him could result in more valuable deals, considering this deal as most expensive made by Apple ever with other companies. Apart from this, Apple has been planning to make a device to stream videos and music. Though Apple is trading high in the stock market, its online market share has dropped quickly, which means this deal with Beats can be a risk as well. Apple still needs the music encouragement touch to move on with it.