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Exclusive: Apple's Cook, music mogul Iovine discuss new music service

Apple CEO Tim Cook waves at the end of Apple Inc.'s iPhone media event in San Francisco, California September 12, 2012. REUTERS/Beck Diefenb
Apple CEO Tim Cook waves at the end of Apple Inc.'s iPhone media event in San Francisco, California September 12, 2012. REUTERS/Beck Diefenb

By Poornima Gupta and Ronald Grover

SAN FRANCISCO/LOS ANGELES (Reuters) - Apple Inc has held talks with Beats Electronics LLC, the audio technology firm co-founded by influential hip-hop producer Dr Dre and music mogul Jimmy Iovine, on a potential partnership involving Beats' planned music-streaming service, three people familiar with the situation told Reuters.

Apple Chief Executive Tim Cook met with Beats CEO Jimmy Iovine during a visit to Los Angeles in late February to find out more about Beats' "Project Daisy", a music subscription service the company announced in January but with scant detail, the sources said.

Apple's Internet products chief Eddy Cue, a key player in setting up its iTunes Music Store, also joined the meeting, at which Cook expressed interest in Daisy's business model and its rollout plans, although the two did not discuss specifics of a deal, the sources said.

The meeting between Cook and Iovine, who is also chairman of music company Interscope-Geffen-A&M, was "informational" and covered a broad range of music-related topics, the sources said.

Apple spokesman Tom Neumayr and Beats declined to comment.

The iPhone maker has been widely reported to be considering a music-streaming service to complement iTunes, the largest repository of music for sale.

Beats, known for its stylistic, distinctive headphones, has a partnership with Taiwanese handset maker HTC Corp, an Apple rival.

In a boost for the company, Beats said on Tuesday it had secured $60 million in funding for Daisy from a group of investors including Warner Music owner Len Blavatnik, Fort Worth billionaire Lee M. Bass, and Australian financier James Packer. The funding will bankroll the music service's launch in late 2013.

Beats reportedly named the project "Daisy" in honor of what it called the first digital, computerized song. At the time, it said in a press release that the service would "bring an emotional connection back to the act of music discovery," referring to the process through which users find, buy and consume music.

HUNGRY FOR GROWTH

The music recording industry has languished through more than a decade of declining revenues and sputtering growth. Industry sources say many of the largest companies are beginning to warm to the idea of collecting fees on music streamed over the Internet, as the use of smartphones and tablets explodes around the world.

It remains a nascent market, dwarfed by music sales via outlets such as iTunes, but one that is attracting investment.

The meeting between Apple and Iovine was set up in January, immediately after Beats announced Daisy without explaining the upcoming project's business model or how it plans to differentiate itself from existing services such as Spotify and Pandora, one of the sources said.

Other players reportedly looking at expanding into music-streaming -- whether fee-based or by paid subscription -- include Google Inc and Amazon.com Inc.

Iovine, a music producer and "mentor" to contestants on Fox's "American Idol" show, has a long association with Apple and was one of the first music industry executives to sign onto what was then Apple's nascent iTunes initiative, announced in 2001.

In a January interview with technology website AllThingsD, Iovine said he subsequently pitched a subscription service to Apple's late co-founder Steve Jobs in 2003, but the mercurial Silicon Valley icon was not keen on it right away.

Iovine said Jobs didn't want to pay the record companies enough, and thought the price would come down eventually.

(Reporting by Poornima Gupta and Ronald Grover; Editing by Edwin Chan and Edwina Gibbs)

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