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Apple paid less than $500M for Beats Music leading to speculation about deal

Yesterday Apple confirmed that the company had bought Beats Electronics (the hardware side of Beats) and Beats Music (the newly launched music streaming service) for $3 billion after several weeks of speculation. The deal means that Dr. Dre, real name Andre Romelle Young, and Jimmy Iovine will take on roles as active employees of Apple with Beats becoming a subsidiary of Apple. 

A report from the Wall Street Journal (via MacRumors) breaks down the financials of the deal further than the $3 billion on Apple's press release, of which $2.6 billion is cash and $400 million is stock. According to the report, Apple paid $2.5 billion for Beats Electronics and a little under $500 million for Beats Music, which has 250,000 paying subscribers in the US. 

The figures are significant because they raise questions about the deal. In an interview with Re/Code, Tim Cook claimed the deal was "all about music" but many have speculated that the deal is actually about acquiring Beats Music in order to get ahead in the music streaming business as iTunes music sales fall. Apple either got an incredible deal for Beats Music, which it will use strategically in the future, or the company is actually interested in the hardware side of Beats which reportedly made $1.5 billion in revenue last year. 

Apple's rumored expansion into the fashion industry could explain why the company is interested in Beats, a brand which has turned headphones into a fashion accessory. Whatever Apple has planned, the company was willing to make their biggest acquisition ever to achieve it. 

Source: Wall Street Journal (paywall) 

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