Beats Electronics, the Santa Monica maker of high-end headphones founded by rap artist Dr. Dre and veteran music executive Jimmy Iovine, has acquired digital music service MOG Inc.
Terms of the deal were not disclosed, but executives familiar with the transaction said Beats, whose products include Beats by Dr. Dre headphones, paid less than $10 million for MOG, a streaming service with about 500,000 registered users. The executives declined to be named because they were not authorized to speak publicly. The deal is expected to be announced Monday.
Luke Wood, Beats' president and chief operating officer, said his company would continue to operate MOG as a stand-alone music service but will explore how it can integrate the Berkeley company into its business of making premium headphones and speakers, whose prices range from $130 to $400 each.
"For now, MOG will remain the same product today as it was yesterday and offer the same rich experience," Wood said in an interview. "What we do know is that we're committed to offering an integrated experience for the consumer — from the point of discovery to the point of playback."
MOG competes in the rapidly growing market for streaming music with the likes of Spotify, Rhapsody, Rdio, Slacker and Muve. MOG Chief Executive David Hyman will continue to head the company while reporting to Wood and Iovine, who is also chairman and CEO of Interscope Geffen A&M, a top label under Universal Music Group. Beats, which has 88 employees, plans to keep all of MOG's 48 workers.
Investors in MOG included Menlo Ventures, Balderton Capital, Simon Equity Partners, Universal and Sony Corp. MOG and Beats are privately held.
Founded in 2006, Beats reinvigorated a moribund market for high-fidelity headphones, which suffered from a proliferation of cheap earbuds designed for portable digital music players. Through savvy marketing and an emphasis on quality, Beats expanded the category and now commands nearly 30% of the $1-billion market for headphones in North America, according to estimates by NPD Group.
Beats has since ventured beyond its DJ-style headphones and has partnered with Hewlett-Packard Co., HTC Corp. and Chrysler Group to integrate its speakers into computers and cars. With the addition of MOG, Beats would have the capability of bundling a music service into its products, although no such plans have been announced.