Beats' founder Dr. Dre with headphones manufactured by his company which could soon be taken over by Apple

Apple to buy headphone maker Beats Electronics

Apple is orchestrating a £1.9bn acquisition of headphone maker and music streaming distributor Beats Electronics, according to a report.

Citing people familiar with the negotiations, The Financial Times reported that Apple could announce the deal for Beats, which was founded by hip-hop star Dr Dre and record producer Jimmy Iovine, as early as next week.

In a report on its website, the newspaper warned the talks could still collapse if the two sides cannot agree on some final details.

The potential acquisition would add Beats' popular line of headphones and music streaming service to an Apple line-up that already includes digital music players and the iTunes store, the world's top music retailer.

If the deal is completed, it would be by far the largest purchase in Apple's 38-year history.

The company has traditionally seen little need to buy technology from other companies, reflecting Apple's confidence in its ability to turn its own ideas into revolutionary products such as the Mac computer, the iPod, the iPhone and the iPad.

But Apple has not released a breakthrough product since its former CEO and chief visionary, Steve Jobs, died in October 2011. The innovative void has increased the pressure on Jobs' hand-picked successor, Tim Cook, to prove he is capable of sustaining the success and growth that turned Apple into the world's most valuable company.

Cook has shown willingness to spend more of Apple's money than his predecessor ever did. Among other things, Cook began paying Apple stockholders a quarterly dividend and has progressively committed more money to buying back the company's shares.

Apple's pursuit of Beats is the latest indication that the company is having trouble generating growth on its own. Apple already sells Beats gear in its stores, giving the company insights into how much the trendy headphones and other audio equipment appeal to its customers.

The negotiations are taking place at a time when the music market increasingly moves toward streaming and away from downloads that once drove the success of Apple's digital music store, iTunes.

US revenue from downloads - which iTunes dominates - dropped 1 per cent to $2.8bn in 2013, while streaming music revenue from the likes of Pandora and Spotify soared 39 per cent to $1.4bn, according to the Recording Industry Association of America.

While downloads still command 40 per cent of the market, streaming revenue now accounts for 20 per cent of total revenue, up from just 3 per cent in 2007.

Beats was founded in Santa Monica, California in 2008 by Dr Dre and Jimmy Iovine. Its headphones were manufactured by Monster Cable until the two companies parted ways in 2012. The headphones have become a bit of status symbol worn by celebrities as well as audiophiles.

In 2012, Beats bought streaming music service MOG, which it transformed and relaunched as Beats Music earlier this year.

Listen to the E&T podcast: the future of streaming music, with media analysts Strategy Eye

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