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Apple buys Beats Music and launches another revolution

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Apple's purchase of Beats Music and Beats Electronics is now official, according to a May 28 report in “The New York Times." Word that Apple was preparing to buy Beats leaked three weeks ago.

The amount that Apple paid for Beats Music and Beats Electronics is 2.6 billion dollars plus 400 million stock, which makes this deal the largest purchase in Apple's history. Historically, Apple only buys only small companies. Even when Apple bought NeXT in the deal that brought Steve Jobs back to Apple, it paid only about 600 million (in today's dollars adjusted for inflation).

Beats Music and Beats Electronics are two arms of the same company. Beats Music is a growing music subscription service that began in January, but already has 250,000 subscribers. Beats Electronics is a maker of high-end headphones and speakers that dominate parts of the audio market. Beats' products are available in Apple stores and enjoy a reputation for quality.

Beats Electronics is profitable (with revenue of about 1.5 billion dollars last year) and will give Apple a foot-hold in the high-end headphones market, as well as a toe-hold in the nascent, but growing, wireless speaker market. Beats Music gives Apple a presence in the expanding music subscription market, which is considered the future of music delivery. “Music is dying in the way we know it,” the Senior Vice President of Internet Software and Services, Eddy Cue, said during a Wednesday Code interview.

Beats Music focuses on “what song comes next” and marries technology with human curation, which makes it unique among music streaming subscription services. It is this “uniqueness” that lead Apple to buy Beats Music. As Eddie Cue said in the same Code interview, Beats Music is the first “subscription service done right."

Apple's plan now is to fuse the approach of Beats Music with the resources of Apple to put Beats Music on steroids. As part of this process Beats Music now has a new app that is free to download from the App Store. Plus, the Beats Music free trial is now extended to 14 days rather than seven days and a monthly subscription fee is reduced to just $8.33 a month, a discount of $20.00 a year.

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