Apple announced on Wednesday that it is acquiring Beat Electronics and Beats Music in a deal worth $3 billion. A follow-up report from the Wall Street Journal suggests the bulk of this money is going towards Beats Electronics, the audio hardware side of the business.
People familiar with the matter told the Wall Street Journal that Apple is paying slightly less than $500 million for the Beats Music streaming service and more than $2.5 billion for Beats Electronics.
Apple Inc. AAPL +1.82% is paying slightly less than $500 million for the Beats Music streaming service, and more than $2.5 billion for Beats Electronics in its $3 billion deal, according to people familiar with the matter.
Beats Electronics is the money maker for the company, generating almost $1.3 billion in sales in 2013. The audio maker sells both speakers and headphones, including the popular line of Beats by Dr. Dre headphones.
Beats Music is a new offering that debuted in January of this year and is struggling to gain ground among consumers. Leaked reports suggest the service only has 250,000 paying subscribers as compared to rival streaming service Spotify, which has more that 10 million paid accounts worldwide.
The decision to break apart the deal and offer different dollar amounts for the two divisions was a financial one as the two Beats units are backed by different investors. Calculating and negotiating the valuation for these two entities may be the reason why the deal took longer to complete than originally predicted.
In an interview following the announcement of the Beats deal, Tim Cook confirmed the acquisition was not about growing Beats existing business, but about the people who were behind the brand. As a result, Beats co-founders Jimmy Iovine and Dr. Dre will join Apple while the Beats team will now work under the guidance of Internet Services chief Eddy Cue.