Apple is reportedly in talks to acquire Beats Electronics, the high-end-headphone maker co-founded by hip-hop artist Dr. Dre, in a deal worth $3.2 billion, according to the Financial Times.
The deal could be announced as early as next week, the report says, but has yet to be finalized and could still fail to materialize pending discussions between the two companies.
Beyond its line of bass-boosting ear pieces, Beats has also broken into the competitive market for subscription streaming-services, with a mobile offering that, unlike Apple's iTunes and iTunes Radio, offers ad-free, on-demand music listening for about $10 per month. If the deal goes through, Apple will acquire the subscription business alongside Beats' hardware division, with the Beats management team reporting to Apple CEO Tim Cook, the FT adds.
Beats declined to comment for this story. CNET has also contacted Apple and will update this story when we hear back.
While Apple has long had a favorable relationship with Beats -- the Dre-branded headphone line is featured prominently in both its physical Apple stores and the accessory section of its online store -- the crux of the deal may prove to be Beats Music.
Beats' streaming service could become a central part of Apple's music strategy, following the launch of its online radio service, iTunes Radio, last year. Beats Music debuted with a powerful billing and marketing partnership with AT&T and it has reportedly been growing quickly. Though the company has yet to disclose hard and fast subscriber numbers, industry estimates peg the total at about 200,000.
The talks come as trends in music purchasing are shifting to subscription services like Beats Music from the one-off digital purchases Apple's iTunes has long dominated. Data from the Recording Industry Association of America found that paid subscription services grew the fastest of all digital formats last year, rising 57 percent, while revenues from permanent digital downloads that are iTunes' specialty declined 1 percent.
Beats, established in 2008 by Dre and longtime music industry executive Jimmy Iovine, is known for hyper-hyped headphones that critics dismiss as being all celebrity endorsement and little substance. But the splashy branding and big-name partnerships have resonated with mainstream consumers, with Beats holding the biggest share of the headphone market despite the high prices of its products, which start at around $99 for earbuds and go all the way up to $450 for pro-grade over-the-ear headphones.
In Beats, Apple could have a brand partner that knows how to instill a refreshed cool factor into the Cupertino, Calif. company's product line and marketing.
Despite its hardware lead, Beats has had a rocky relationship with investors. In August 2011, hardware manufacturer HTC pumped $309 million into the companyto acquire a majority stake of 50.1 percent. But it sold back half of that stake in July 2012 and the rest in September 2013 to ensure that it did not incur its second ever quarterly loss.
But around the time of Beats' buyback of HTC's remaining 25 percent stake, Beats received a $500 million investment from private equity firm Carlyle Group that valued the headphone maker at $1 billion. Apple has more than $150 billion in cash reserves, so overpaying for Beats to the tune of $2 billion is unlikely to raise alarms.
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