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Originally published May 8, 2014 at 5:52 PM | Page modified May 9, 2014 at 6:58 AM

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Apple may take big bite of Beats music service for $3.2 billion

While the iPhone and iPad are now more important to its business, Apple continues to add new features around music. The company had 63 percent of the paid digital-download market, researcher NPD Group said last year.


Bloomberg News

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Apple is close to acquiring headphone maker and music-streaming service Beats Electronics for $3.2 billion, in what would be the largest-ever purchase by the iPhone maker, a person with knowledge of the matter said.

A deal would give the world’s most valuable company a stronger foothold in the music-accessories business and would bolster Apple’s online-music capabilities.

Music has long been one of the cornerstones of the company’s business, with its iTunes store and the iPod music player that reignited Apple’s growth more than a decade ago.

While the iPhone and iPad are now more important to its business, Apple continues to add new features around music. The company had 63 percent of the paid digital-download market, researcher NPD Group said last year.

An acquisition would signal Apple is serious about introducing a music-subscription service; iTunes is the world’s largest seller of music, but is only for downloads of single tracks and albums.

By contrast, Beats earlier this year unveiled a music-subscription service that costs $9.99 a month, giving users unlimited access to all the songs in its catalog. Beats also features playlists made by musicians and DJs.

Apple last year introduced iTunes Radio, which is an advertising-supported online music-streaming service that competes with Pandora.

Chief Executive Officer Tim Cook has said he isn’t averse to doing deals and has made 24 purchases over the past 18 months. The company typically buys small companies, shuts them down, then incorporates the team and technology into Apple’s own product lines.

“We are not in the race to spend the most or acquire the most,” Cook said on the company’s earnings call last month.

If the Beats discussions result in a deal, it would be the biggest purchase for Apple to date, according to data compiled by Bloomberg. Apple previously acquired some companies for around $400 million, such as for Next Computer in 1997 as part of an arrangement to bring co-founder Steve Jobs back to the company,

Sarah Joyce, a spokeswoman for Beats, didn’t respond to phone and email requests for comment. Christine Monaghan, a spokeswoman for Apple, didn’t return a call seeking comment.

The deal discussions were reported earlier today by the Financial Times.

Beats, based in Santa Monica, Calif., was founded by music-industry insiders Jimmy Iovine and Dr. Dre.

After gaining popularity for its high-end headphones, the company started its music-subscription service, called Beats Music, to challenge Spotify.



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