Apple has lowered the purchase price of Beats from an estimated $3.2 billion to $3 billion, the New York Post reported this morning.
Leading up to the anticipated acknowledgement and announcement of the acquisition, supposedly due later this week, the Post’s sources claim Apple has shaved $200 million off its deal with the company, both its electronics division and streaming service, that was revealed earlier this month. Though Apple’s reasoning has not yet been clarified, it is suspected that Beats’ low subscription base, suspected to be 111,000 (compared to Spotify’s recently announced 10 million), decreased its valuation to Apple.
The news follows Billboard’s speculation on what has been holding up the acquisition, including the high pressure of CEO Tim Cook’s first really big spend, the early news leak, Dr. Dre and his claim that the deal would make him hip-hop’s first billionaire (calculations have put his actual value at closer to $800 million), and how to fit the rapper and Beats co-founder Jimmy Iovine into executive positions on Apple’s team.
“Apple hadn’t even begun its due diligence process when news of the number came out,” someone familiar with the matter told the Post.
Some industry insiders and commentators suspect Apple’s interest in Beats stems from its desire to find a place in the subscription streaming service. Responsible for more than 70% of song and album download sales, Apple’s iTunes store is the leading digital music store in the U.S., and download sales have dropped over 13% and counting since the first quarter. The company’s own streaming service, iTunes Radio, has seen only 1%-2% of listeners buying the tracks they listen to while watching YouTube, Spotify, Pandora, and others gain momentum over labels iTunes once influenced to a greater degree.
Apple did not immediately respond to a request for a comment by Billboard.