Beats Worth Over $1 Billion

Wow. Remember all the hate Beats by Dre got on WSO when they first came out? Only an idiot would pay that for headphones. There's no way they're going to sell any at that price. They probably don't even sound that great. Well, guess what? We were all wrong.

Dr. Dre is cashing a check for $250 million after selling his minority stake in the company to The Carlyle Group, valuing the company at more than $1 billion overall. The company is an absolute juggernaut in the headphone space, garnering more than 50% of the high-end US market since its launch in 2006.

The firm, which primarily sells under the Beats by Dr Dre brand, has cornered the market in high-end headphones. Beats accounted for 64% of headphones selling for more than $100 in the US in 2012, according retail analysts NPD Group. The market for expensive headphones increased by 73% in 2012.

The company has increased revenue 500% since 2010 and now books over a billion in sales per year. While consumer electronics aren't really in Carlyle's wheelhouse, it looks like a pretty smart play. Anytime you can buy that kind of growth for 1x sales, it's probably a good idea.

So now I have a question for you guys. I'm sure a bunch of you own a set of Beats. I am forever going through earphones. I literally buy them in bulk (3 or 4 sets at a time) because they generally only last me about 8 weeks before I pull the cord out the wrong way or do something to screw them up. Is it worth it to spend $300 on a set of Beats Studios? What the durability like?

I've never liked in-ear earphones, but I'm sort of resigned to them because they've been a low cost solution that's easily replaceable. If I spent $300 on a set of headphones and then mangled the cord so they didn't work, I'd probably want to smash something. Have any of you had that problem with Beats?

 
Best Response

Whoa whoa whoa. Wait a fucking second. This is another PRIME example of how a combination of excessive marketing towards youth combined with peer pressure of wanting to keep up with the latest "cool" tech trends launch a company into these types of numbers, see the iPhone for further reference.

Am I hating? No, exploiting morons is where it is at, but if anyone for a second thinks that Beats are even worth half their MSRP, you are a moron that needs to be punched in the face.

Eddie, if you have decided to go the route of cans instead of IEMs or ear buds, I would suggest going with one of the very reputable brands out there like Shure, Sennheiser, and Audio-Technica.

These, for example, are widely regarded as one of the best sets of cans on the market for the price:

http://www.amazon.com/Audio-Technica-ATH-M50-Professional-Monitor-Headphones/dp/B000ULAP4U

I would suggest getting these, but also keep in mind when it comes to listening to audio via headphones, a few factors come into play: The file type you are playing (file types like .FLAC will produce the highest audio quality) what type of music software or program you are using (for android, I suggest using PowerAmp as your app - not only is it a great music app, but it has a very intuitive equalizer). If you are listening on a computer, I would even suggest investing in an external amp.

You're born, you take shit. You get out in the world, you take more shit. You climb a little higher, you take less shit. Till one day you're up in the rarefied atmosphere and you've forgotten what shit even looks like. Welcome to the layer cake, son.
 

Comparing Beats with the iPhone is a pretty ridiculous argument. Until recently Beats didn't even develop or manufacture its own product, it was all outsourced to Monster - which actually makes some pretty decent high-end audio products itself. I would compare the original Beats business model more to something like Red Bull - an exercise in pure marketing with outsourced manufacturing and distribution. Hilarious that you think Apple was simply exploiting morons by developing the iPhone, probably the most influential and redefining consumer product developed in last decade or so. But you know, the whole mobile revolution is just, as you say, a "cool trend".

 
Nefarious-:

Whoa whoa whoa. Wait a fucking second. This is another PRIME example of how a combination of excessive marketing towards youth combined with peer pressure of wanting to keep up with the latest "cool" tech trends launch a company into these types of numbers, see the iPhone for further reference.

Am I hating? No, exploiting morons is where it is at, but if anyone for a second thinks that Beats are even worth half their MSRP, you are a moron that needs to be punched in the face.

Eddie, if you have decided to go the route of cans instead of IEMs or ear buds, I would suggest going with one of the very reputable brands out there like Shure, Sennheiser, and Audio-Technica.

These, for example, are widely regarded as one of the best sets of cans on the market for the price:

http://www.amazon.com/Audio-Technica-ATH-M50-Profe...

I would suggest getting these, but also keep in mind when it comes to listening to audio via headphones, a few factors come into play: The file type you are playing (file types like .FLAC will produce the highest audio quality) what type of music software or program you are using (for android, I suggest using PowerAmp as your app - not only is it a great music app, but it has a very intuitive equalizer). If you are listening on a computer, I would even suggest investing in an external amp.

I have the ATH M50s and they are stellar

 

Related WSO Content: "Goldman 4Q Loss Over $2 Billion?" :)

On topic: Can it be a good investment? Definitely yes, it has outstanding growth and the trend can easily continue. But is it fair (meaning, will such growth occur if all customers were 100% rational)? Definitely no. Totally agree with Nefarious on marketing aimed at young crowd.

 

Amazing. Dr. Dre is easily one of the most influential rap artists of all time and his work in NWA in the early nineties was the definition of gangster rap. I'm sure he did relatively well financially through NWA, his solo records, and through his protégés Snoop Dogg and Eminem.

But, the most important thing he did (apparently), was hawking overpriced headphones. I'm not sure what the lesson is in this story, but I'm positive there is one. It must be in managing your personal brand. Kudos to him.

 

I have a lot of international travel over the next few years, so I decided to plunk down $200 for the mid-range Bose headphones. Sound quality is good, but it's the noise cancelling feature that won me over, and allows me to sleep on planes. However, I would never use these as everyday headphones; only for travel.

"I don't know how to explain to you that you should care about other people."
 

Okay, I get it. I won't be shelling out the dough for Beats, and I realize I'm kind of a goof for even considering it after having tried the Sennheisers and loving them.

But here's a little perspective for those of you uncomfortable with the valuation: Regardless of whether or not the retail price is justified, Beats Audio did a billion in sales last year and is valued at just over a billion. Compare that to Instagram, with no product, no revenues, and a platform that was just duplicated for free by Google+. Those guys cashed a check for a billion.

 

I've had my sennheisers (lower end model) for years now and they still sound great and show no signs of stopping. I've always wanted those $300 bose noise-cancelling ones though, they literally block out any noise whatsoever

Array
 

Active noise cancelling is over-rated IMO. I wouldn't say they block out any noise, but they're pretty good at reducing reverberating low frequency sounds, i.e. on the private heli to the hamptons they are great. But then you are paying for that feature with reduced sound quality, since the software actually modulates (read: distorts) the waveform itself. As with Beats, most punters cannot discern the difference.

 

If you just want to keep buying cheap pairs of beater headphones I cannot recommend these enough:

http://www.amazon.com/gp/product/B007TRUTZS/ref=oh_details_o06_s00_i00?…

Cheap to the point where you won't care when they break and the quality is absolutely unbeatable for that price point. It actually blew me away when I first tried them. Plus I'm still on my first pair (purchased in April) and I normally go through headphones at the rate you do.

 

Hey, whatever the company's worth, Dre just got a huge check and says "fuck you".

Goddamn, I'm in the wrong business. He made a fortune peddling to morons, and whether or not the earphones are good doesn't matter considering that this is the same target audience that pays $100 for a pair of sneakers.

Get busy living
 

when i got back to the states (July) this phenomenon was one of the first things i noticed... ALL the cool kids wearing beats by dre. That, combined with their international appeal (they're all over france as well) + combined with their M$$$$RP and not too surprised at the valuation.

whoever designed the marketing on this is pretty genius, good model to follow for this type of brand.

  • have to admit i like the new studio beats eminem commercial

//www.youtube.com/embed/peMSWg94ZwY

WSO Content & Social Media. Follow us: Linkedin, IG, Facebook, Twitter.
 

Once the Carlyle PE guys told Dre the difference between Sales and EBITDA, I'm sure he didn't want to wait for another 3-7 years .... so it's not that bad of a deal. Plus $250M for a 'minority' ownership stake isn't that bad when you're nearly 50. I'm sure he will have a blast for the next decade.

 

Does anyone on here have a set of BOSE headphones, they look nice and are from a reputable company. Thinking about getting bose cause beats can go F themselves.

I hope this is better than the last batch of shit you gave me. Produced more wood than Ron Jeremy. I don't want you to yell, "Reco!" anymore. Know what you should yell? "Timber!" Yeah, Mr. Fuckin' wood.
 

Beats are high-quality. I'd still never pay $250 for headphones. Honestly, unless music is your passion, I don't see the point in spending more then $100 for a decent set. At MOST I'd buy the $180 Sennheisers, though you can find them on sale occasionally for 10-25% off.

Also, Beats isn't just headphones. HP laptops come with them too (not sure if all of them, but mine did and it looked like at least an option on many of them).

"You stop being an asshole when it sucks to be you." -IlliniProgrammer "Your grammar made me wish I'd been aborted." -happypantsmcgee
 

End of the day, they blend clean design with decent sound and created a premium brand. Yes, you can get better quality headphones, but they're selling a total package. Even if you think it's dumb, it's what it is. It's like buying Nikes when you could get a pair of Asics.

 

It depends on what you want. If you just listen to rap all day long and want thumping bass at the expense of quality mids/highs, then maybe you'd like some Beats. However, if you value overall sound quality across the spectrum, Beats don't hold a candle to cans made by Sennheiser/Grado/AKG/etc. If you fly frequently and value noise-canceling, Bose QuietComforts are great at that.

Personally, I have a pair of AKG K550's (http://www.amazon.com/AKG-Acoustics-Closed-Back-Reference-Headphones/dp…), and I can't recommend them enough. Very balanced soundscape, amazing clarity, not to mention they look dope. If you read reviews, people might complain about their size and comfort level for certain head sizes but never about the sound quality.

Array
 

Last year I bought a pair of over-the-ear Bose headphones. I never really thought about the quality before one of my buddies showed me what that meant on a pair he'd purchased. I borrowed them for a day and listened to one of my all-time favorite albums (Violator by depeche mode, if anyone is curious) and heard things on songs that I've been listening to for an eternity, that I hadn't heard on there before. If you are into music, and you travel a lot, I would highly recommend them. If I had to go back and make a different purchase, I would opt for the on-ear versus over-the-ear, since they can become quite burdensome on the sides of your head and ears after 2-3 hours of listening... not to mention, sweaty. The other suggestions above (Sennheiser, Audio Technica) were pretty solid and seem to come from people with a much deeper appreciation and respect for music quality. Buying these caliber of headphones also requires a little bit more care than what most people are used to (replaceable in-ear buds).

 
Kools:

How did these become the "cool" brand over other artist's headphones? 50 Cent, Ludacris, Lady Gaga, etc.. all have lines of headphones, but Beats obviously dominates the market.

Can't say for sure, but I'd have to say being the first mover has a lot to do with it. And all the aforementioned names are purely performing artists, whereas Dre is primarily a producer/engineer/mixer, roles that rely on high-end studio gear for sound quality.

Array
 

This sorta reminds me of all the dopes out there buying their cell phone based on the colors available for the model instead of the actual hardware or software of the device. The reason Beats got so much hate on WSO before is because most of the people on this site are smart enough to recognize a junk/overpriced product. This is the type of company Wall Street gets wrong because they aren't exposed to the target demographic enough (young,urban,under educated). It just goes to show you how easy it is the prey on this group with shiny marketing and a perfect spokes person.

 

Lots of people have mentioned Sennheiser sets. In terms of over-the-ear, does anyone know how their HD419's are? On Amazon they're only $35 right now and rated 4.2/5. How much difference is there between that and their higher models, like HD518 or HD600? Any insight appreciated.

 
SlushFund:

Lots of people have mentioned Sennheiser sets. In terms of over-the-ear, does anyone know how their HD419's are? On Amazon they're only $35 right now and rated 4.2/5. How much difference is there between that and their higher models, like HD518 or HD600? Any insight appreciated.

The 518/600 are open headphones (which means they aren't completely closed off, thereby leaking sound), and I've heard the difference between open and closed cans is pretty major.

Array
 

Hey, whatever the company's worth, Dre just got a huge check and says "fuck you". @ufoinsider

Goddamn, I'm in the wrong business. He made a fortune peddling to morons, and whether or not the earphones are good doesn't matter considering that this is the same target audience that pays $100 for a pair of sneakers.

........>>> thats EXACTLY what iWas thinking

Wise Men Listen & Laugh While Fools Talk
 

You absolutely aren't getting a value nor are you going to get the absolute best headphones out there. I don't think they are even trying to fake that they are selling that type of product. At the end of the day they are a lifestyle company making accessories more akin to a clothing line than an electronics company. They are selling you a look and a feel combined with decent sound quality and a nice looking design. There are even a myriad of colors to choose from so you can pick one that suits you best. Again, they are an accessory company. Not a tech company. It frankly doesn't matter one lick to their target audience what high or low notes they can or can't hear in these headphones.

They aren't looking for audiophiles. I'm 100% certain you can find a much better value for your money if you choose to. Again, they aren't about that. Why do people pay a premium for Hermes products? Sure, they are nicely made but their scarves aren't THAT nicely made. There is a price point where yes, the quality will be better but as with anything after a certain point you are buying the brand, lifestyle etc.

 

He's a smart guy.

He has a lot of respect in the music industry and not just from NWA. Dre got more famous after he brought America Eminem. Although there was white rappers at the time, Eminem was different and Dre saw that. He brought more white young people to listen to rap, a whole generation. He did the same thing with his headphones but with a mass appeal to every segment of the young population through his commercials and it made sense. Who doesn't like listening to quality music (even if it's not the best)? If you look at his commercials, he not only a diverse set of influential music artists (EDM/Rock/Rap/Pop) but athletes as well (football/tennis/baseball/others). Beats spent a ton on marketing and it worked, he knew what he was doing.

 
machineman13:

He's a smart guy.

He has a lot of respect in the music industry and not just from NWA. Dre got more famous after he brought America Eminem. Although there was white rappers at the time, Eminem was different and Dre saw that. He brought more white young people to listen to rap, a whole generation. He did the same thing with his headphones but with a mass appeal to every segment of the young population through his commercials and it made sense. Who doesn't like listening to quality music (even if it's not the best)? If you look at his commercials, he not only a diverse set of influential music artists (EDM/Rock/Rap/Pop) but athletes as well (football/tennis/baseball/others). Beats spent a ton on marketing and it worked, he knew what he was doing.

I think you hit the nail on the head. All of the people who think that the most important quality is the differential in sound quality, are clearly missing the point about what makes a business successful. Let's be honest, most people would be unable to discern in a listening test the difference between Beats and the 'best' headphone available. Coke tried to replace the classic formula when they learned that Pepsi beat them in blind taste tests and consumers revolted. People don't always judge on absolute quality, but the whole package and how it makes you 'feel' (or whatever people decide on). I thought they were super high end until I read this, for instance. But, then again, I would never pay that much money for headphones, so I'm not the target market.

Lot's of Haterade flowing here.

 

Left a pair of $300 Bose QC2s on a plane once, decided not to buy expensive headphones anymore. Now I almost exclusively use the Skullcandy Titans. They have great sound quality, and last a decent amount of time ($30-40 a set, and they have lasted 5 times longer than the $20 ink'd pair I had prior to them).

I've noticed a lot of people complain about the sound quality from cheaper headphones, when in reality it's mainly a result of them not having the highest bitrate music on their ipod, or that they stream music (i.e. Spotify, Pandora, etc.) over a weak connection.

Good on Dre for making his nut. Just another example of strong branding, marketing and celebrity endorsements trumping quality.

 

I own the Studio's and although they're good, I don't use them for daily use. I really only use them when watching a movie on my laptop. I use Apple headphones even with my Android phone or primary computer. Then again, I'm not an audiophile so I can't tell the difference between 5$ headphones and 350$. The studios are good comfort wise but after about 2 hours of use they really hurt the ears, and gets a little damp (read: swamp ear).

Once I did bad and that I heard ever. Twice I did good and that I heard never.
 
marcellus_wallace:
The main issue all keep saying is product quality, so if they improve that would you then buy them?
Unvarnished response expected by me by some people here: "No, Dr. Dre is black. Plus, he's not even a doctor."

I hate to say it, but I doubt people would be as negative if these headphones were identical, but produced by Paul McCartney or Bono.

 

I like my ifrogz. So does my dog.

When a plumber from Hoboken tells you he has a good feeling about a reverse iron condor spread on the Japanese Yen, you really have no choice. If you don’t do it to him, somebody else surely will. -Eddie B.
 

I actually laughed out loud when I read that part of the book.

When a plumber from Hoboken tells you he has a good feeling about a reverse iron condor spread on the Japanese Yen, you really have no choice. If you don’t do it to him, somebody else surely will. -Eddie B.
 

Is it purely a branding thing?

I don't understand the mentality of the consumer in this. I just think "people that want to look cool" and the marketing associates Beats to "cool".

I paid 250 for sennheiser hd25-2 and i think that was way too much but I was making money out of using them. For casual use i will not pay more than 30$ for smth that costs like 2$ to make or something. I love the free apple ones. Are teenagers really this spendthrift nowadays?

Im thinking to spot companies like this you need to understand the consumer but i didnt do marketing and it doesnt really make sense to me.

 
GotBushels:

Is it purely a branding thing?

I don't understand the mentality of the consumer in this. I just think "people that want to look cool" and the marketing associates Beats to "cool".

I paid 250 for sennheiser hd25-2 and i think that was way too much but I was making money out of using them. For casual use i will not pay more than 30$ for smth that costs like 2$ to make or something. I love the free apple ones. Are teenagers really this spendthrift nowadays?

Im thinking to spot companies like this you need to understand the consumer but i didnt do marketing and it doesnt really make sense to me.

Their angle is a cross between Bose and a fashion company with the addition of the celebrity status of Dr. Dre. It's Bose in the sense that its intended audience are not experts/knowledgable about audio electronics and so when they go from free Apple earbuds to Beats they hear a gigantic improvement, just like people who buy Bose. And obviously a huge aspect is the fashion/design part. Walking around campus (because let's face it the consumers are mostly white college kids) with Beats on is the "in" thing to do. Now on top of all of this, the consumers (white people in 18-25 range) definitely have high opinions about Dr. Dre. Now I'm not gonna judge people who buy Beats but personally if I'm going to spend upwards of $250 on headphones there are much better values out there and honestly the people that rant and rave about the quality of $250 Beats most likely would not be able to hear the difference between $70 Sonys and their Beats.
 

Real losers here are HTC. They made nominal money on their 50% stake as the valuation of the company went up by multiples, due to a combination of bad liquidity management (horrifically bad, you can't be an electronics company and pay your immensely powerful suppliers late, like ever). Add to that the lost strategic potential (they had a legitimate shot at owning a brand and business besides the increasingly commoditized smartphone market and blew it) and this actually scores pretty high on the missed opportunity list.

I think the hate is a combination of annoyance among those who don't buy the marketing plus the fact that if you build headphones for west coast rap music, most other things besides EDM will sound bad on them. Versatility in headphones is very hard to get right, remember how many people were hating on Bose back when they introduced their bass-focused sound?

 

Wow - These are just a fad - In a couple of years, after their "cool" runs out (after 50 year old white folks start to wear them), there just going to be one of the many other headphones.

After significant research, last week I chose to buy the Audio Technica ATH-M50. It seems to not only be a genuinely better headphone than the Beats, but also sell at a reasonable price.

http://www.amazon.com/Audio-Technica-ATH-M50-Professional-Monitor-Headphones/dp/B000ULAP4U/ref=sr_1_1?ie=UTF8&qid=1380701382&sr=8-1&keywords=audio+technica+ath+m50

Go East, Young Man
 

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