How Beats' Omar Johnson Infuses a Hot Music Brand With CPG Wisdom

Nike, Kraft and Campbell Vet Has Helped Beats Capture 64% Market Share of Premium Headphones

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Omar Johnson was a fan of Beats long before he started working for the brand. In 2008, while working on Nike's basketball business in global marketing, LeBron James gave Mr. Johnson a pair of Beats by Dr. Dre headphones as a gift.

Omar Johnson
Omar Johnson

"It was like nothing I had ever heard before. So I started tracking the brand. I watched who was wearing them, how it was being marketed, all of it. And I saw it become part of culture," he said.

In 2010, Mr. Johnson was approached by Beats co-founders Dr. Dre and Interscope-Geffen-A&M Chairman Jimmy Iovine in their bid to add more traditional product-marketing experience. Mr. Johnson, a six-year veteran of Nike and before that Kraft and Campbell Soup, had just what the music-industry executives were looking for, but making the move was a tough decision.

As a global marketing executive at Nike, Mr. Johnson's work was highly visible, showing up as major TV advertising every few months. However, both the challenges and opportunities for the smaller but more-nimble music-industry brand held significant appeal, so he made the leap in October 2010.

It's been an exciting run since, particularly this year, as Beats Electronics split from Monster, its original manufacturer and distributor. It also expanded internationally, launched its first global ad campaign, celebrated the one-year anniversary of its first standalone retail store, bought streaming-music service MOG and added new products and services, including wireless speakers (the Pill by Beats was on many top holiday-gift lists).

One of the things Mr. Johnson enjoys about Beats is infusing traditional marketing into the speed and freedom of the music industry -- although even he concedes that can sometimes be a challenge.

For instance, for Beats' first global ad campaign this fall, "B ___" (#ShowYourColor), which invites consumers to choose what they want to "B," Mr. Johnson and his team were putting the finishing touches on a TV spot just before its air date on Thanksgiving Day. At around 11 a.m. the Friday before, Mr. Iovine called him into a meeting with musician The two wanted Mr. Johnson to hear a new song by featuring Britney Spears. And they wanted him to swap it with the song on the almost-complete TV spot. When Mr. Johnson heard it, he agreed. A flurry of new shoots and music-tracks changes followed, while Mr. Johnson's team reworked the entire production schedule and connected with the original artist to break the news.

'B__' spot
'B__' spot

"No consumer-product-goods brand I've ever worked for would have done that," he said. He added that there are other perks to being a lean organization. "If we want to change the packaging, it's a conversation between five people," he said.

Yet Mr. Johnson's experience at Beats, in other ways, has been more like Nike and traditional packaged-goods firms than he would have guessed. He has built a marketing team that includes music-industry marketers, along with execs from companies such as Pepsi and Nascar. Often the team markets Beats' hip products like they might market soda or soap.

"The Beats message is about getting people into premium sound and getting people back into music. The company really cares about changing that," Mr. Johnson said. "It's actually very similar to Nike. Nike really cares about sports. Nike really cares about athletes. For them, it's about how do you get people engaged with athletics and with fun? For Beats, it's about getting people engaged with the emotion of sound."

And it has worked. Beats is now No. 1 in the premium-headphone category, classified as being over $100, with a majority share of the estimated $1.5 billion market this year, said NPD analyst Ben Arnold. Through the end of 2012, early NPD data show Beats captured a 64% market share of premium headphones, along with 28% of the overall headphone market share. Beats recorded $519 million in revenue, up from $298 million in 2011, according to NPD data provided by the company.

In the process, Beats has created a different genre of headphones, along with a new set of competitors, and revitalized the headphone industry.

"They absolutely created a new category with their entry in 2008. We always had a higher-end headphones market, but it was more for music-studio or professional use," Mr. Arnold said. "Beats carved out a "pro-sumer' category that is very consumer facing. They've created higher-quality audio, got consumers to step up and pay more and [positioned] headphones as a fashion accessory."

Mr. Arnold added, "Headphones is a mature market, but it doesn't act like it. Overall year-over-year sales are increasing, average price of the product is going up and revenue is positive."

With Beats' success came that particular form of flattery known as imitation. Other music artists began putting out their own branded, high-quality and high-price headphones around 2011, including Soul by Ludacris, 50 Cent's Street line, and House of Marley's eco-friendly versions.

Still, in Beats strategy, simply gobbling up majority market share isn't the be-all and end-all.

"If you have 90% of the basketball market, trying to grow to 92% is really hard," Mr. Johnson said, referencing his Nike days. "But if you grow the category, and you grow your brand in that bigger category, that's easier to do, and better for the brand in the end."

One of the ways Beats is growing the category is by turning its focus internationally this year. A global ad campaign and a big splash at the Olympics were all part of that plan. In fact, Beats, like Mr. Johnson's alma mater Nike, managed to get major exposure -- in the form of its headphones on athletes from around the world -- despite the fact it wasn't an official sponsor.

Beats offered what Mr. Johnson called a "safe house" at the Olympics in London, away from the hassle and hustle of the crowds and competition. Athletes, musical artists and invited guests could hang out and meet up in relative anonymity -- and pick up a pair of country-customized Beats headphones.

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