Beats Electronics on Monday acquired MOG, the Berkeley-based subscription music service.
Founded by rap artist and music producer Dr. Dre and music industry heavyweight Jimmy Iovine, Beats is known for its headphones and computer speaker systems. The purchase of MOG is the Santa Monica company's first acquisition and first move into digital music delivery.
"Beats By Dre was born out of a need to restore the emotional connection with music that was lost by the degradation of sound from the digital music revolution, starting with the weakest link in the experience at the time -- headphones," Luke Wood, president and chief operating officer of Beats, said in a statement announcing the acquisition. "With MOG, we are adding the best music service to the Beats portfolio for the first truly end-to-end music experience."
The companies did not disclose the terms of the acquisition, which closed Monday. Representatives of the two companies were not immediately available for comment.
MOG competes with Spotify, Rdio, Rhapsody and similar subscription-music services. Users pay a monthly fee to stream music to their computers or mobile phones; the company offers a free service that allows users to stream a limited amount of music each month.
MOG will remain autonomous from Beats and will continue to be headed by David Hyman, its founder and CEO. MOG subscribers won't see any immediate changes to the service as
The acquisition marks the second of a major subscription music service in the last year. Last fall, Rhapsody acquired rival Napster from electronics retailer Best Buy.
Subscription services have long been promoted and hyped by the music industry, which sees them as a way of blunting Apple's (AAPL) dominance of digital music through its iTunes store and as a way of guaranteeing regular income. But they've struggled to gain mass appeal.
According to the Recording Industry Association of America, the total number of U.S. subscribers to digital music services was just 1.8 million last year, up from about 1.5 million in 2010. Consumers spent about $241 million to subscribe to such services in 2011, up 13.5 percent from 2010.
By contrast, consumers spent more than $2.5 billion buying digital albums or individual songs last year, up 18 percent from 2010.
Contact Troy Wolverton at 408-840-4285. Follow him at Twitter.com/troywolv.