Sunday, June 22, 2014

How Dr. Dre Made $300 Headphones a Must-Have Accessory and made lots of money

Just a few years ago, spending $300 on headphones was something only a handful of artists, music producers, and audiophiles would even consider. But that was before a hip-hop legend got involved. These days, headphones — specifically ones that cost hundreds of dollars — are one of the fastest growing categories in the consumer electronics industry. And musicians who aren’t sticking their name on a pair are starting to seem tone deaf.

Over the last several years, the premium headphone market has exploded. According to retail analyst firm NPD Group, U.S. sales of headphones that cost $100 or more increased 73% year-over-year in 2012, far outpacing sales in the headphone market overall.

The biggest player in this market is Beats by Dre, the company founded by Dr. Dre, co-founder of the seminal hip-hop group N.W.A., and music producer Jimmy Iovine. The company captured 64% of the $100-and-up headphone market in 2012 (as Dre earned a reported $110 million, thanks mostly to Beats) by ushering in a new way of thinking about music marketing and consumer preferences. But back in 2008, when Beats released its first pair of headphones, it was far from certain that consumers would bite. “People thought we were crazy,” says Beats by Dre CEO Luke Wood. “They said the marketplace would never support a $300 headphone.”


Although he rose to fame as a performer, Dr Dre has not released a solo album since 1999.Instead, he has capitalised on a trend in hip-hop that sprang up during the 1990s, when the genre's biggest stars, like Jay-Z and Sean "Diddy" Combs - aka Puff Daddy and P Diddy - launched their own clothing labels and consumer products. 

Dr Dre was similarly pushed into consumer branding, but he took a slightly different route.He along with then-Interscope chairman Jimmy Iovine partnered with Monster, a well-respected audio firm known mostly for their HDMI cables, to design and manufacture the Beats headphones

The Monster reputation helped - but so did celebrity endorsements, which included Lady Gaga, as well as prominent placement within music videos.Most experts say the Beats success story is due in part to a canny marketing effort.Beats is viewed as a triumph of marketing more than it is a fantastic product - there are a lot of people who feel there are better headphones to be bought in the market.

By most accounts, Apple's $3bn (£1.8bn) acquisition of the Beats headphone and music streaming service will increase Dre's net worth from an estimated $550m to almost $800m - making him, if not hip-hop's first billionaire, certainly hip-hop's wealthiest man.