Branded High-End Headphones Carve Niche at Retail

The new headphones are arriving amid a growing market for digital audio and video content as consumers scoop up headphones for use with portable devices ranging from smartphones and digital audio players to tablets and notebook PCs, retailers said. And while headphones have long been a retail staple, new competitors are raising the category’s profile by aligning with musicians like Dr. Dre, Ludacris and Lady Gaga and installing new listening stations such as Beats’ four-foot display at Best Buy.

"There always was a fashion component to headphones, but it just wasn’t being exploited,” said Steve Weiner, a senior vice president at ListenUp, which carries headphones from Beats, Grado, B&W, Denon and others. “With young people buying personal listening devices, headphones have become an extension of that and perception of them is being redefined."

The redefining of a decades-old category also has taken the form of consumers buying multiple headphones for different listening environments including gaming, home audio and exercising, retailers said. And while Beats by Dr. Dre Pro headphones may sell for $500, earbuds from Skullcandy retail for $20 to $70. Sol Republic, which was founded by Kevin Lee, former vice president of product development at Monster, is offering in-ear Amps ($59) and Amps HD ($99) headphones featuring tangle-free cables and polymer-based FlexTech single-piece headband that can be bent in either direction without breaking.

"The emergence of several strong marketing and lifestyle brands and products has spurred new interest in the product line that has been around for decades,” said a Best Buy spokeswoman, whose chain has dedicated about 25 percent of the 52 SKUs that Best Buy Express kiosks carry to headphones. “Consumers are finding renewed interest in products built to compliment their unique lifestyle as well as reason to own multiple pairs of headphones for a variety of uses.” Best Buy is using a “multi-channel strategy” that promotes headphones in stores, online and in kiosks, where both Monster and Skullcandy jockey for position. Skullcandy logos will be emblazoned on a Best Buy Express kiosk that’s scheduled to formally launch at Arizona State University in September as the retailer brings the format to college campuses.

Multiple brands of headphones will co-exist since the barrier to enter the category is low, because much of the product is built by contract manufacturers in the Far East, industry officials said. And while Sol Republic will likely at some point compete for shelf space with Monster, which distributes Beats by Dr. Dre headphones and is run by Kevin Lee’s father Noel, for now there is ample room, Kevin Lee said. Sol Republic will sell its headphones starting in September through Best Buy and Apple stores. Sol also will be marketing on-ear Tracks standard ($99) and HD ($129) models, each in three different colors. And the company will consider pushing into other categories, like speakers, Lee said. Sol also seeks support for its products from musicians and disc jockeys, Kevin Lee said.

"If the industry was crowded with a lot of headphone manufacturers that developed and marketed product correctly and the category would be tight and I would say maybe there are enough competitors,” said Kevin Lee, who will continue as a senior executive in corporate development at Monster. “There is a huge market out there right now with room for multiple leaders in the category.”

As headphone suppliers strive to expand distribution, most are also guarding against losing the cachet that surrounds their brands, company officials said. Sol Republic will sell limited edition models through specialty retailers to provide some separation from products distributed through Best Buy and Apple, Lee said. And while Beats and Monster have grown the Dr. Dre branded business rapidly in landing product in Amazon, Apple, Best Buy, Staples, Target and others, the companies also are wary of making the headphones ubiquitous, said Tyler Williamson, director of product marketing.

"We are going to be smart about it because we don’t want to be over-distributed,” Williamson said. “We are doing well, but we need to make sure that we don’t become ubiquitous."

The wider distribution and increased sales also has brought lawsuits as headphone suppliers seek to protect their designs. Monster has hired investigators to conduct raids at factories in China and sued Sakar International for patent infringement for what it claimed were “knock offs” of Beats By Dr. Dre Studio headphones. Monster claimed Sakar’s Swagger headphones, sold through TJ Maxx, infringed a patent granted in 2007 for an ornamental design (CED April 5/10 p3). Beats also counter-sued Signeo International earlier this year claiming its Soul by Ludacris headphones infringed three patents covering the design of its Studio and Solo models. Signeo originally sued Beats in June in U.S. District Court, San Francisco, seeking a ruling that the Ludacris models don’t infringe Beats patents. In addition to infringing patents, Beats also maintained the Ludacris headphones copy the “trade dress” of the Dr. Dre products.

"The key is you have to police it because one of the concerns” is that competitors will infringe patents, a Beats spokesman said. “You have to have the staff in place to make sure” that patents are protected, he said.