Apple could be making its biggest acquisition of all time - and all in the name of bringing music-streaming service Spotify down to its knees.
The Financial Times reports that people familiar with the negotiations said Apple is currently negotiating to buy Beats Electronics for $3.2 billion. The high-end headphones maker also launched Beats Music in January, a streaming service set to battle the likes of Spotify, Pandora and Rhapsody.
The sources, who spoke on condition of anonymity because they were unauthorized to speak about the matter, said Apple could announce its plans as early as next week, although the possibility that the deal will not push through still exists.
Apple and Beats declined to comment, but an 83-second video recently posted on Facebook by Fast & Furious actor Tyrese Gibson shows Beats co-founder rapper Andre Young, more popularly known by his screen name Dr. Dre, most likely "drunk on Heinekens," proclaiming himself, "the first billionaire in hip-hop, right here from the motherf*cking West Coast!"
However, if both companies reach an agreement, the multi-billion acquisition would give Apple the leverage it needs to take over the music streaming industry, which is currently dominated by Pandora's 75 million-strong user base and Spotify with 10 million paying subscribers. Apple, which is currently the biggest seller of music downloads, has been slow to release its own streaming product, only launching the free, ad-supported iTunes Radio last year. With Beats Music under its helm and a potential market of 800 million iTunes users, Apple could very well reach new heights in the streaming business while wiping out the current competition.
"They are buying into the future and the future is going to be streaming and subscription. Revenue from streaming and subscription is growing. Files and downloads are shrinking. Everyone has to engage in streaming and subscription," says former president of Rhapsody Jon Irwin.
Aram Sinnreich, media professor at Rutgers University, puts it more bluntly: "The age of digital downloads is basically over."
The Beats Music streaming experience claims to provide "the right music for right now." The app, which is available for iOS, Android and Windows devices, has a simple interface where the user can tell the app where he is, what he is feeling and who he is with. The app will then create a playlist consisting of songs that are appropriate to the user's situation. Listeners can also find songs by artist, genre, playlist and curator.
The acquisition would also provide Apple with a new product line, the popular Beats headphones with the unmistakable "b" logo, designed to provide a high-definition listening experience as close to "the way the artist intended" as possible.
Signifying its endorsement of the product, Apple currently provides ample shelf space on its retail stores for the sleek and stylish headphones, which sell anywhere from $170 for the cheapest models for to $450 for the Beats Pro.
Beats Electronics was founded by legendary music producer Jimmy Iovine and Dr. Dre. Ironically, the startup began marketing its bass-heavy headphones in 2008 after bemoaning the demise of sound quality brought about by the era of Apple's lightweight new EarPods.
Last year, private equity firm Carlyle Group invested $500 million in Beats, valuing the company at more than $1 billion.
Some analysts approach reports of the Apple-Beats deal with a generous level of skepticism, saying that Apple and Beats "doesn't seem like a logical marriage."
"It is well understood that there are boatloads and boatloads of margins in accessories. But the Beats and Dr. Dre seem like two highly incongruous brands and there is no obvious alignment between Beats and how it would be positioned relative to the Apple line," says IDC analyst John Jackson.
