Apple Inc., which spent $1.6 million with African-American-owned media companies in 2011, ranking the company dead last among 80 advertisers surveyed, announced on Wednesday that it has agreed to purchase a company cofounded and partly owned by Dr. Dre for approximately $3 billion.
Rumored for several weeks, Cupertino, Calif.-based Apple said it has signed a deal to purchase the subscription streaming music service, Beats Music and Beats Electronics, which was co-founded by Dr. Dre and Jimmy Iovine. Beats Electronics makes Beats headphones, speakers and audio software.
Beats Music, LLC, a privately held company, is based in San Francisco and Santa Monica, Calif. Iovine is the company’s chairman, and Dr. Dre is listed as co-founder.
Apple, which expects to close the deal in its fiscal fourth quarter, reported that the price includes $2.6 billion and $400 million that will be invested over time. Apple certainly has the money. It is Apple’s biggest purchase ever.
On April 23, Apple reported a second-quarter net profit of $10.2 billion on revenue of $45.6 billion compared to $43.6 billion for the same three-month period in 2013. The improved revenue was largely driven by sales of Apple’s popular iPhones.
The deal will make Apple’s music offerings stronger, said Eddy Cue, the company’s senior vice president of Internet Software and Services.
“Music is such an important part of Apple’s DNA and always will be,” Cue said in statement. “The addition of the Beats will make our music lineup even better, from free streaming with iTunes Radio to a world-class subscription service in Beats and of course buying music from iTunes Store as customers have loved to do for years.”
The Beats is the brainchild of Dr. Dre and Iovine, chairman of Interscope Geffen A&M Records. The company was formally established in 2008. Dre’s birth name is Andre Romelle Young.
Before becoming a businessman, Dr. Dre was best known for the 1992 rap classic “Nuthin’ but a ‘G’ Thang,” performed with fellow rapper Snoop Doggy Dog.
Dr. Dre and Iovine, who has been a partner for Apple and iTunes for more than decade, will join Apple.
Ken Smikle, president of Chicago-based Target Market News and editor of the report “The Buying Power of Black America,” said Procter & Gamble, spent the most on advertising with black-owned media — $78.9 million in 2011 — while Apple spent the least.