Apple Attempts to Boost Music Credibility with $3 Billion Dr. Dre Purchase

      Culver City - It's by far the most expensive acquisition in Apple's 38-year history.  The huge price Apple is paying to counter a threat to Apples iTunes store.  The deal consists of $2.6 billion in cash and $400 million in Apple stock. 
     With $1.1 billion in revenue last year, Beats is already making money and will boost Apple's earnings once the new fiscal year begins in October, this according to Apple CEO Tim Cook.  Cook indicated Beats' music streaming service was the main selling point in the purchase, though the headphone line is also expected to continue growing, too.  The growing popularity of music streaming services such as Pandora and Spotify have been reducing sales of songs and albums, a business that iTunes has dominated for the past decade.  United States sales of downloaded songs slipped one percent last year to $2.8 billion while streaming music revenue surged 39 percent to $1.4 billion, according to the Recording Industry Association of America.
     Apple started streaming music with the launch of iTunes Radio in September 2013.  The streaming music service has not been as popular and lucrative as the company wanted, according to people familiar with the matter.  ITunes Radio has 40 million listeners and will continue as a free music streaming service with ads.  Beats Music will try to tap into the more than 800 million iTunes accounts to sell more subscriptions to its customized streaming music service.  Beats Music currently has more than 250,000 subscribers, Apple CEO Cook said.  That is well below the more than 10 million paying customers that Spotify's streaming service boasts.  Apple is counting on the Beats acquisition to boost its swagger with teenagers and younger adults, as it tries to remain a leader in digital music.  Apple, originally reshaped the music scene with the 2001 debut of the iPod.  "Apple suddenly has regained its cool," said Sony Music CEO Doug Morris, who was one of the first recording executives to embrace iTunes, more than a decade ago.        
     Beats was founded in 2008 by rapper Dr. Dre. (Andre Young) and Jimmy Iovine, recording executive who is stepping over from chairman of Universal Music Group's Interscope, Geffen, and A&M Records to join Apple.  Beats now dominates the luxury headphone market, for headphones priced over $100, according to the consumer-market research group NPD.  Sony CEO Doug Morris believes, Beats' former Universal Music Group's Cook is making a smart move, that will give Apple even more credibility in the music industry, than it has now.  See, also www.apple.com.