Beats Audio (HTC) Acquisition of MOG All But Done, Sources Say

The phone maker HTC and its Beats Audio division (think Dr. Dre headphones) are close to wrapping up a deal to acquire the troubled music subscription service MOG.

A music tech industry source close to the situation says the parties have agreed on a price in the $17 million range, and are now working out the final details of the sale.

HTC released a short-and-to-the-point denial statement today, reading: "Rumors and speculation of an acquisition of MOG by HTC are untrue." (Yes, but is Beats Audio buying MOG?) Beats Audio didn't respond to a request for comment.

The deal makes complete sense to both Beats Audio and MOG. Beats has aspirations of offering an online music service, but lacks the expertise and battle-hardened digital music tech to build such a service. MOG has those things. With MOG under its roof, Beats could roll out a new music service in three or four months, where building a new service from scratch would take around 18 months, our sources say.

As for MOG, the company is pulling in revenue from subscriptions, but has never reached profitability. Our sources say MOG pays high royalty rates to the record labels and never reached a critical mass of subscribers needed to make money despite the fees.

Oddly, HTC may not benefit much from the deal. While HTC bought a controlling interest in Beats last year for $300, Beats operates as a separate business unit and makes its own business decisions, presumably with some input and oversight from HTC.

One source says that Beats wants to offer a MOG-powered audio service for resale to mobile carriers and other handset makers too. HTC could choose to pre-load the service on its handsets, but does not want to be so tied to Beats that it cannot choose to offer its own music service, or some other third-party service, at some time in the future.

We'll have more on this story as information becomes available.

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