BEATS: ‘Dad, Can I Have $400 Headphones?’ – Episode 29

Business writer and author Jeff Haden joins Tim to tell the story of Beats. Those expensive headphones that are about more than sound. They’re fashion statement. Jeff is a contributing editor for Inc..com, and he’s the author of the book, The Motivation Myth: How high achievers really set themselves up to win. Today, we look at a case study on winning in business in the high-end headphone market and how it changed the way we look at sound.

 

Dr. Dre’s Beats Headphones are more than headphones, they are what Jeff describes as a cultural phenomenon.

We talked with Jeff about the story of how something as basic as a set of headphones became a fashion statement, something cool, and a high-end brand.

Here are the basics:

  • Noel Lee is the founder and CEO of Monster Cables. His son is Kevin.
    They’re known for turning a commodity – audio cables – into a brand.
  • So, he had a very profitable business, but at one point, it seems Kevin had the idea they could expand into the area of headphones.
  • Dr. Dre, was and is the hip hop superstar and music entrepreneur.
  • Jimmy Iovine is the music producer and record mogul who made many music superstars famous.
  • They formed the deal with Monster to produce high-end headphones.

According to claims by Monster’s founders, Beats sold a 51% share of the company to HTC in 2011, which set in motion a “change of control” that required Monster to hand over its intellectual property — research and development — along with its marketing and distribution information.

Reports were that later Beats repurchased HTC’s stake in the company and Monster claimed in a lawsuit that Beats had committed fraud and deceit against Lee by convincing him to sell his own stake in Beats.
Apple then acquired the company for $3 billion in May 2014.

It was reported in USA Today that had Lee had his 5% stake in Beats when Apple acquired the company, he would have made $100 million in the $3 billion transaction based on lawsuit claims.

The Headphone Marketplace

According to ResearchandMarkets.com – The global earphones and headphones market is expected to cross $20 billion in revenue by 2023.

As mobile devices are getting affordable, the demand for entry-level headphones is also increasing globally. On the other hand, there is also a huge demand for specialized, high-end, best sound quality earphones and headphones.

There are more than 3,000 companies engaged in manufacturing of earphones and headphones.

The top five manufacturers, Beats, Bose, Sennheiser, Sony, and Skullcandy have two-thirds of the global market share in terms of value and 50% of the market share in terms of volume.

Links

About this Episode’s Guest Jeff Haden

Jeff Haden is a speaker, contributing editor for Inc.com, and the author of The Motivation Myth: How High Achievers Really Set Themselves Up to Win.