Not only is it the most expensive acquisition in Apple's 38-year history, it also confirms Dr Dre's status as rap's richest man – worth almost $1bn. Known as the genius behind some of the biggest hip hop records ever produced, Dr Dre's formidable musical legacy includes launching the careers of Eminem and 50 Cent and working on albums by Snoop Dogg, The Game and Kendrick Lamar.

Yet the millionaire lifestyle was not one the rapper, otherwise known as Andre Romelle Young, was born into. He started life in the tough Los Angeles suburb of Compton to a mother who was only 16 years old when he was born. Steering clear of the gang and gun violence that was rife in his school, the young Dre eventually dropped out to pursue his career as a DJ, rapper and later, the world's most influential hip-hop producer.

Having co-foundedhis own music label in 1991, Death Row Records, which generated over £500m in revenue, Dr Dre was no stranger to the business world. However, his move into the commercial side of the industry reportedly came during a walk on a beach with Iovine in 2006, when the rapper was contemplating starting his own line of footwear. The story goes that Iovine turned to Dre and said, "Fuck sneakers. Let's sell speakers" – and their Beats empire was born.

The pair hooked up with audio firm Monster to design and manufacture the Beats headphones and, since then, have cornered the market in headphones. Using Dr Dre's name and celebrity connections such as Justin Bieber and Lady Gaga, Dr Dre and Iovine ensured their headphones became a must-have accessory.

"People thought we were crazy," Luke Wood, Beats' chief executive, told Time magazine this year. "They said the marketplace would never support a $300 headphone."

Before talks even began with Apple in March, Dr Dre raked in a reported $110m from Beats in 2012 and the company has now expanded into audio systems for cars, computers and smartphones, as well as standalone speakers called Beats Pill.

"Beats has a unique brand, it speaks to a nice young demographic, which is really interesting to marketers," says Peter Csathy, former president of Musicmatch. "When I think about Beats, I think about it as a lifestyle, I think of it as a media company, not just a hardware and music-focused company."

Dan Charnas, a former hip-hop record producer and author of The Big Payback: The History of the Business of Hip-Hop, said the entrepreneurial spirit demonstrated by artists such as Dr Dre was "in the DNA of hip hop".

"Hip hop originally fostered entrepreneurialism because, without that culture, without people like Russell Simmons setting up their own ventures like Def Jam, nobody would ever have heard any of the music to begin with," he said. "People had to do a lot of this stuff on their own before the record industry opened their doors to hip hop artists. In the last 15 years, hip hop artists like Jay-Z and 50 Cent have been venturing into consumer products so this deal is just a progression on from that."

Yet, reviews of the fashionable headphones remain doubtful that they produce a billion-dollar sound quality and say they prioritise style over substance. In a recent Guardian review, they were deemed "big bold showy headphones ... with lacklustre sound" while What Hi-Fi said they were a "one-trick trendy pony" with sound that lacked detail or articulation.

The key to the deal could lie in Beats Music, the sister company that runs a subscription music streaming service. It only began in January but already has 250,000 paying subscribers, according to Apple, and it is this side of the company that is thought to have first piqued the buyer's interest.

From left to right, music entrepreneur and Beats co-founder Jimmy Iovine, Apple CEO Tim Cook,
Beats co-founder Dr. Dre, and Apple senior vice president Eddy Cue pose together at
Apple headquarters in Cupertino, Calif., Wednesday, May 28, 2014.

"We think these guys have a very rare talent," Tim Cook, Apple's chief executive, said of Iovine and Dr Dre, "We love the subscription service that they built – we think it's the first subscription service that really got it right."

Charnas said he was surprised when he first heard about the deal.

"It's obvious Apple don't need Beats for the headphones. What Apple is after is the streaming service, but what's interesting about that is that it is just a baby, it has no way got the subscribers and following of other music streaming services like Spotify."

"We've seen how they've tried launching their own services like Genius and iTunes radio which just haven't taken off so I think it shows Apple's desperation to get into this market in a cool way without having to create their own system."

Speaking to the Wall Street Journal, Doug Morris, Sony Music Entertainment's chief executive, said the deal would make Apple "cool" again by uniting Iovine's feel for "the culture of young people" with Apple's "many millions of young peoples' credit cards".

"Apple was starting to lose their edge," added Morris who, as a former chief executive of Universal Music, was once Iovine's boss.

While Dr Dre is hip hop's most successful entrepreneur, he is not the first rapper to venture into his own commercial business. The growing firmament of "hip-hopreneurs" includes 50 Cent who banked $100m when he sold his stake in water brand Glacéau to Coca-Cola in 2008 and also has a G-Unit clothing line and record label in his extensive commercial portfolio.

Sean "Diddy" Combs, known for his track "I Get Money", has an estimated fortune of $700m generated in part by commercial ventures, including clothing line Sean John, record label Bad Boy, premium vodka brand Cîroc and multi-platform music channel Revolt TV. - Guardian.