Wednesday, August 20, 2014

Beats was inspired by Apple's terrible earbuds. Now Apple wants to buy it.

Dr. Dre Chelsea Lauren/Getty Images for BET

The Financial Times is reporting that Apple is in talks to acquire the headphone maker Beats for $3.2 billion. The deal would give Apple control of Beats's headphones and music service, but the Financial Times speculates that Beats's "real value to Apple is in revitalizing its 'cool' at a time when iTunes has waned in popularity."

Beats sells a lines of headphones and speakers branded by rapper (and Beats co-founder) Dr. Dre. The company controls 70 percent of the premium headphone market.

Ironically, Beats co-founder Jimmy Iovine credits Apple's earbuds as the inspiration for founding the company — sort of. "Apple, was selling $400 iPods with $1 earbuds," Iovine told Slate. "Dre told me, ‘Man, it’s one thing that people steal my music. It’s another thing to destroy the feeling of what I’ve worked on.’"

The Beats Music streaming service has struggled to attract customers since it launched in January. Apple could give the service a boost by promoting it to its vast base of iPod and iPhone users. And the service could become the streaming-oriented counterpart to Apple's download-oriented iTunes.

Apple bought the streaming service Lala in 2009. It was shut down in 2010 and was never re-launched as an Apple product.

The deal would be unusual for Apple. Unlike rivals such as Google and Microsoft, the Cupertino company rarely makes big acquisitions, preferring to build products itself.

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