Beats’ Acquisition Of MOG Confirmed: ‘Beats Was Never Just About Headphones’ [Updated]

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Looks like the reports that have been in play for months now have finally been confirmed: Beats Electronics, known best for their hip Dr Dre headphones and partly backed by HTC (who had also been a rumored MOG buyer), is indeed buying the music streaming service MOG, with the acquisition now confirmed by both sides.

The move will give MOG — struggling to grow against the runaway success of Spotify — a new lease of life tied to a specific hardware maker; and Beats another step up on the consumer electronics experience, following in the mold of Apple in providing the whole package from one brand.

“The addition of MOG’s music service to the Beats portfolio will provide a truly end-to-end music experience,” David Hyman, the founder and CEO of MOG told USA Today. Although the deal has been in play since March of this year, this was in fact the first confirmation by either side that they are linking up. We’re still contacting both companies for a direct confirmation. Update: Beats has now issued a formal release:

“[Beats] was never about just headphones. We’ve…expanded the Beats mission to every other link in the music experience chain – speakers, mobile phones, personal computers and automobile sound systems. With MOG, we are adding the best music service to the Beats portfolio for the first truly end-to-end music experience. With their talent and technology, the possibilities around future innovation are endless,” said Luke Wood, president and COO of Beats. MOG will remain an independent company post-acquisition, and the MOG Music Network, an ad-network and online music service, is not part of the deal. The LA Times further reports that the price paid by Beats was less than $10 million. [original story continues below]

What we don’t know yet is how the two companies will actually integrate their services together: “time  will tell” is all Hyman would say in response to that question. And there is also the question of how and if this will play with HTC, which invested $309 million in Beats in August 2011. The handset maker has been struggling against Samsung in the Android smartphone space but has been trying to fight back with a strategy that, like this deal between Beats and MOG, plays into making service investments to sit on top of its hardware, and further differentiate it from the rest of the Android pack.

Financial terms of the deal have not been disclosed.

Beats is taking a leaf from Apple’s book by looking for a way to control the music streaming experience, as well as the hardware that gets used to consume it — that sits in contrast to a number of other new hardware entrants at the moment. Sonos, for example, has a robust API platform that it uses to bring in a number of music streaming services into the fold to consume through its music streaming hub and speakers.

This is a first acquisition for Beats. No indication yet on whether we should be expecting more.

Jimmy Iovine and Dr Dre, the two founders of Beats, did not comment in the USA today piece, but we do get a quote from president and chief operating officer Luke Wood also underscoring how owning music services is part of the Beats’ bigger vision: “Beats was created as a response to the complete erosion of the music experience… Our whole reason for starting Beats was to try to bring emotion back into that experience. We believe music services is a vital part of that ecosystem.”

Given that producer Iovine and musician Dr Dre are music industry heavyweights, it’s not really a surprise seeing them make a stab at music services as well as hardware — they are part of the army of music industry people who have been impacted by the rise of digital media and subsequent fall in traditional media sales (and the margins that came with them), and have been developing their super high-quality sound products in response to that.

This gives them another chance to have a crack at righting that their own way, by bolting on an actual music service, and an engineering/management team that knows how to execute that kind of product.

The whole logic behind the creation of Beats has been about sound quality, so it’s unsurprising that this seems to have also played a role in the MOG acquisition, too:  “They were the first service to offer their entire catalog in the 320-kilobit format,” Woods notes.

MOG is one of the older of the music streaming services — founded in 2005, and now containing 16 million tracks for listening — and it was perhaps too far ahead of its time. The later arrival of Spotify seemed perfectly in tune with the rise of better broadband connections, flat-rate mobile data and a public that was finally moving away from being tied to their old CD collections so that they could consume their music on their fancy new smartphones. While Spotify and others like Rdio have extended their services outside of their home markets, MOG only recently (June 2012) made its first foray outside of the U.S., to Australia in a partnership with carrier Telstra.

MOG has of course kept up with the times, with deals with LG and Samsung for smart TVs and other services, and a Facebook streaming service as well, including an in-car deal with Ford — but it’s perhaps not quite picked up the same kind of mindshare as Spotify in the process.  Its service costs $4.99 per month for unlimited ad-free streaming; $9.99 to throw unlimited portable downloads into the mix.

The ubiquity of MOG’s service was another selling point for the Beats folks: “They understand that the consumer wants ubiquity,” Woods noted.