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Apple spends $3 billion on Beats to raise music streaming clout

US technology giant Apple has spent $3 billion on headphone and music streaming company Beats. Apple hopes its most costly acquisition to date will give it more muscle in a competitive streaming market.

The announcement comes weeks after negotiations of a potential deal were leaked to the media. Reports then had the deal worth $200 million (147 million euros) more than the final agreement.

Even still, it is the largest purchase ever made by Apple in its 38-year history. The online music pioneer, which has struggled to maintain growth since the 2011 death of founder Steve Jobs, has been seeking to regain its "cool" and hopes the $3 billion (2.2 billion euros) purchase of Beats Music and Beats Electronics will do just that.

That's partly because the deal will mean the company's co-founder, rap musician Dr Dre, will become a key executive at Apple - as will its other co-founder, powerful music industry entrepreneur Jimmy Iovine.

Beats makes popular headphones and is also a music streaming service - the move is expected to help Apple ramp up its efforts to compete against other successful streaming models like Spotify, Pandora and others.

Apple CEO Tim Cook says Beats will boost Apple's earnings once the new fiscal year begins in October.

What's Apple getting out of it?

However some analysts are unsure of the logic of the acquisition.

"It's a little confusing to me what Apple is getting out of it," said Bob O'Donnell from Technalysis Research.

Beats appeals to a different demographic to Apple, O'Donnell said, while its music streaming service has "a relatively limited number of customers."

"It doesn't seem a great match unless there are other issues at play. But my guess is that Apple isn't going to spend that much without that being the case."

Beats has around 250,000 paying subscribers, compared to Spotify's 10 million, and Pandora's 250 million users of its free streaming radio service. Apple's iTunes Radio free-with-ads service launched last year but has not been especially popular or lucrative.

The growing popularity of music streaming has seen sales of songs and albums fall - a business that Apple and its iTunes media player have dominated for the past decade.

The headphone component of Beats has become a popular brand for audio equipment, attracting pop stars who have put their names to customized designs.

jr/jm (dpa, AP, AFP)

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