The pile will allow Apple and Beats to create breakthrough music products “you haven’t conceived of yet,” although executives of neither company declined to expand what they are planning to turn on.
Apple’s Beats acquisition is one of the largest in the company’s history and besides the hardware line, Apple also gets Beats Music, the up-and-coming music streaming service.
The music-streaming service was set up in January this year and holds close to 250,000 paid users, adds the story. The difference in price for the two Beat units is because they are returned by different investors. Apple paid a total of $3 billion for the company which was founded by Jimmy Iovine and Dr Dre.
Apple’s reason for buying Beats was for the music, why won’t Apple create its own music streaming service? With 800 million iTunes users and 40 million free listeners on iTunes Radio, Apple is in a position to compete with the likes of Spotify and Pandora. It’s a “no-brainer,” says Cook, who notes that Apple has bought 27 other companies between now and fiscal year 2013.
Beats Music charges users up to $10 a month but streaming services end up paying as much as 70 percent of their revenue in artist royalty fees which leaves little left for advertising and promotional campaigns to explain to consumers the benefits of paying for a music service.
As stated to analysts Apple’s purchase is largely an acquisition of talent and a manner to set off the declining popularity of iTunes for digital music, the company notes its main origin of revenue has always been from devices.
If Apple does hope to counterbalance the decline in iTunes music sales, the $500 million for Beats seems to be a really good bargain indeed.