iBeats: what will Apple do with Beats?

Last night Apple finally confirmed the company had indeed purchased Beats Electronics for $3 billion, following weeks of speculation.

The acquisition is significant for a number of reasons - firstly because it's the biggest deal Apple has made since 1996, and also because it marks a distinct strategic shift for the Californian company. So what will they do with Beats?

Through the deal Apple will gain Beats' music streaming service, Beats Music, alongside the headphones, speakers and audio equipment arm of the business.

Beats Music operates as a subscriber-based product in the vein of Spotify, capitalising on the popularity of streaming over individual digital music purchases in recent years. Music subscription revenue increased 50 per cent to $1.1 billion in 2013, while downloads declined by 2 per cent in the same period.

Coupled with Apple's iTunes Store, through which consumers pay for individual tracks or albums, and iTunes Radio, the company will create a more rounded digital music service through which to compete with Spotify, Pandora and other rivals.