Apple is reportedly ready to spend $3.2 billion to buy Beats, AT&T's streaming music partner, according to several sources, including Dr. Dre himself.
The owner of Beats hinted at the acquisition in a "video selfie" with the actor Tyrese posted Friday morning. Dr. Dre said he was set to become the "first billionaire in hip hop." And Tyrese posted the clip on Facebook (since removed) with the caption: "Dr Dre ON THE night his deal went public that he did with Apple 3.2 BILLION!!!!"
Forbes pointed out that the deal would actually net him around $800 million but still would make him hip-hop's richest man.
Hip-hop hierarchy aside, the deal is notable because, for one thing, it will be one of the largest acquisitions in Apple Inc. (Nasdaq: AAPL)'s history, showing what a big bet it is placing on streaming music. It's also potentially good news for AT&T Inc. (NYSE: T), which revealed just yesterday that it's considering shutting down Cricket's Muve Music, likely in favor of its partner's service. (See Apple iTunes Radio Brings the Beat to LTE and AT&T to Turn Down Muve's Music?)
Jefferies analyst Peter Misek also suggests that the deal could help Apple out in the emerging category of wearables. He writes in a research note:
Apple would also gain what we believe is an amazing creative team for the design and creation of hardware, primarily accessories that we believe could be very valuable in the context of the wearables market. We believe such a team could help the development of a future iWatch and other wearable products from Apple. Those two assets and capabilities alone may be worth the purchase price.
Misek also wrote that this could jumpstart competition in the music business with a response from Amazon.com Inc. (Nasdaq: AMZN) and Google (Nasdaq: GOOG). For example, he suggests that Spotify could be an attractive acquisition target for Amazon.
All this activity could really kickstart a once-stagnant mobile music market. But it remains to be seen if that's a positive or negative thing for wireless operators, which might gain either partners or competitors for streaming services.
— Sarah Reedy, Senior Editor, Light Reading