Apple's Beats Deal Is All About Bringing Music Mogul Jimmy Iovine On Board

Apple isn't buying Beats Entertainment for $3.2 billion — what it is really doing is acqui-hiring Jimmy Iovine.

According to a source with direct knowledge of the negotiations, Iovine would leave Universal Music Group, his record label home for more than two decades, to join Apple in an undefined "creative role" as part of a deal for Beats. Iovine, who along with rapper Dr. Dre founded Beats in 2008, is currently the chairman of Universal's Interscope/Geffen/A&M labels. He is among the most powerful and colorful personalities in the industry, frequently seen in vacation pictures on the Twitter feed of fellow music mogul Irving Azoff.

In recent years, Iovine, a lanky figure who often sports a baseball cap, has decreased his involvement at the labels he oversees in favor of more entrepreneurial activities. He was one of the first industry executives to anticipate the download business's decline and advocate for subscription and streaming services as music's future. While Apple has been talking up iTunes in recent earnings calls, in the last one saying that it had brought in $2.6 billion in revenue in the first quarter this year, up 9% from the same quarter a year ago and hitting an all-time record, sales of apps have been the driving force of its growth.

According to the source, Apple is buying Beats in part to bring Iovine on board to "revamp and run its whole music strategy."

A leader in the adoption of digital music via download, Apple has been unable to successfully pivot to the new world of streaming consumption. Its iRadio streaming service launched to much fanfare last year, and then quickly was forgotten about. And its newest iterations of iTunes have been met with complaints about design and recommendation features. Granted, a deal for Beats would improve Apple's functionality in both those areas since Beats's streaming service and recommendation engine are widely considered to be far superior Apple's. But this deal is primarily about Iovine, and what he can bring to Apple.