Apple consummates rumored deal, buys Beats for $3B

Apple will buy Beats for about $3 billion, a move that may win points with the music industry and help it catch up in fast-growing music streaming.

As expected, the co-founders of Beats, recording mogul Jimmy Iovine and rapper Dr. Dre, will join Apple as part of the acquisition of the music-streaming and audio equipment company. Iovine, 61, is best known as the co-founder of Interscope Records, a rap music pioneer that branched out to include acts like Lady Gaga and U2.

They should prove key in forging relationships with an industry that once viewed Apple with suspicion but in recent years has pressed the iPhone maker to do more on subscription services, a market expected to eclipse song downloads in the long run.

Iovine's music industry relationships could ease difficult licensing negotiations for a future streaming service, recording industry executives say.

The deal marks a significant departure for Apple, a company that for two decades has stuck mainly to acquisitions worth hundreds of millions of dollars.

The purchase is seen as an effort to help Apple make headway in music streaming, the fastest-growing segment of the market, as iTunes sales drop. 

With music downloads in decline, record labels have also put pressure on Apple to get its act together on streaming. The record labels hope Apple can turn Beats Music into a strong competitor to streaming services, sources familiar with the matter have said.

Apple is also gaining a line of high-end headphones popular with a young urban demographic, bumping up its "cool" factor, analysts have said. But industry executives say the company was most impressed with Beats' five-month-old music service.

The market as a whole is burgeoning. Streaming subscriptions jumped 51 percent in 2013 to $1.1 billion, out of $15 billion spent on music, according to the International Federation of the Phonographic Industry. Meanwhile, downloads slipped 2.1 percent.

Reuters