Apple Inc. (NASDAQ:AAPL) has put an end to all the rumors and speculations around its negotiations with Beats Electronics. The tech giant confirmed Wednesday that it is buying Beats Electronics and Beats Music for a total of $3 billion. The iPhone maker will pay $2.6 billion in cash and another $400 million in the form of stock to make sure Beats co-founders Jimmy Iovine and Dr. Dre remain at Apple.

apple beats

Iovine can bolster Apple’s relationships with music industry

It’s Apple Inc. (NASDAQ:AAPL)’s biggest ever acquisition. Beats Electronics launched its music streaming business, Beast Music, in January. The streaming business now has 250,000 paying subscribers. Tim Cook said that the deal is all about music, indicating that Apple plans to improve upon its existing iTunes and iTunes Radio services. Subject to regulatory approval, the transaction is expected to close in fiscal Q4, 2014 which ends September.

Beats Electronics co-founders Dr. Dre and Jimmy Iovine, who was a long-time friend of Steve Jobs, will join Apple Inc. (NASDAQ:AAPL). With this purchase, the tech giant will get rare music talent, a fledging subscription music service and high-end headphones. Iovine’s strong connections could help Apple bolster relationships with the music industry and other content creators.

How Beats Music can help Apple

Stifel analysts, led by Aaron C. Rakers said in a research note that investors will focus mainly on Beats Music. The rise of subscription-based music streaming services like Spotify and Pandora Media Inc (NYSE:P) has affected the music downloads business of iTunes. Beats’ subscription music service could help the company regain its dominance in the music industry. Beats Music charges users $9.99 per month, and combines expert music suggestions with algorithm-based personalization.

Apple Beats Dr Dre

Earlier this month, reports surfaced that Beats Music had only 110,000 paying subscribers in March. In contrast, Apple Inc. (NASDAQ:AAPL)’s iTunes exited the March quarter with 800 million iTunes subscribers. So, investors would gauge the monetization potential of the combined services. Last year, iTunes generated $9.9 billion in revenues, up 18% YoY.

Stifel has a $650 price target on the stock. Apple Inc. shares inched up 0.43% to $626.61 in pre-market trading Thursday.