By Dow Jones Business News,
May 08, 2014, 06:25:00 PM EDT
Apple in Talks to Buy Beats Electronics
Apple Inc. is in talks to acquire Beats Electronics LLC, the high-end headphone company that earlier this year started
a subscription-music service, for more than $3 billion, according to people familiar with the matter.
Beats was founded by music industry veteran Jimmy Iovine and Dr. Dre, the hip-hop producer and artist. Its investors
include Carlyle Group LP, Access Industries Inc., and Vivendi SA's Universal Music Group, where Mr. Iovine has been a
senior executive for many years.
The acquisition would be Apple's largest ever. Apple declined to comment. A Beats representative couldn't immediately
The potential deal, reported earlier by the Financial Times, would provide Apple with an entree into two burgeoning
markets: high-end headphones and subscription music. Music services that charge a flat monthly fee for access to an
unlimited amount of music are growing rapidly, led by Spotify AB, which counts more than 10 million paying subscribers
around the world, according to a person familiar with the matter.
Meanwhile, sales of song and album downloads have flattened recently, after years of explosive growth that made
Apple's iTunes Store the biggest music retailer in the world. A subscription service, even a fledgling one like Beats
Music, could strengthen Apple's music business and eliminate a nascent competitor.
Apple launched iTunes Radio, a free streaming-music service, in September. It has grabbed some market share from
Spotify and rival Pandora Media Inc., but the reviews for the service have been mixed. iTunes Radio was viewed by
analysts as a way for Apple to build up its advertising business.
Carlyle executives have said Beats had revenue of about $1.2 billion last year.
The company's Beats By Dr. Dre headphones, which cost several hundred dollars a pair, are often held up as a higher-
quality alternative to the tiny white "earbuds" that Apple packages with its iPods and iPhones.
A sale would generate a huge windfall for Washington, D.C., based Carlyle, which paid about $500 million for just
under half of Beats in late October and would reap about $1 billion in profit on its seven-month-old investment.
Ryan Dezember and Hannah Karp contributed to this article.
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