Music and Marketing

The Business of Selling Sound: Meet the Marketing Execs Behind Today's Top Headphone Brands

Beats, SMS Audio and Skullcandy Are Defining Trends in the $2.4 Billion Category

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Remember when headphones were just a personal way to listen to music? Then along came digital music, iPods, tablets and smartphones, and, with the help of a couple of trendsetting rappers and music producers, the headphone morphed into a high-end fashion, technology and music necessity for digital natives.

Today the headphone industry consists of eclectic marriages between wonky technology companies and streetwise musicians. And it's booming: The headphone industry grew from a $1.8 billion market in 2011 to $2.4 billion last year. Premium headsets drove 95% of the growth, according to NPD Group.

The stories of how these leading headphone companies were formed are different, but all are growing fast. Beats created the premium-headphone category in 2008 when rapper-producer Dr. Dre and music executive Jimmy Iovine struck a production deal with Monster. Rapper 50 Cent bought KonoAudio in 2011 and launched SMS Audio, adding producer Timbaland as an investor earlier this year. Skullcandy got its start by sponsoring athletes in skateboarding and snowboarding, adding a partnership with Jay-Z in 2010.

Omar Johnson, senior VP-marketing, Beats

Did you have a music background before taking on this job, and is one required to work in your industry today?

I'm a kid with a pre-med degree in biology and chemistry and an MBA. I worked at [Nike] for a big part of my career. Now I'm leading marketing for an electronics company, so I would say there are many paths to get here. But since culture is a big part of how we drive our business and how we drive our brand, there are a lot of young talented people who are super-immersed in culture who could come to a place like Beats and work.

Why does it seem that every popular music-hardware brand today has big-name music personalities and celebrities behind it?

Like any cause, PETA or anything else you need to rally support around, the bigger the names you can rally around your cause -- our cause is premium sound and the emotion of sound -- the more successful you're going to be. A lot of brands rush out to hire celebrities, but it's not celebrities, it's about music makers who are authentic and meaningful to the product. … The best artists in the world listening to our music and saying, 'This is how I want my music heard.' These are the people giving Jimmy and Dre feedback when we're tuning our headphones. There are not many scientists around us, it's the music community that's telling us how to shape our headphones and how to shape the sound.

When did headphones stop being purely functional and start becoming fashion statements?

Jimmy and Dre, their entire career, as important as sound is -- think about all the artists they've launched -- Lady Gaga, Marilyn Manson, Tupac, Eminem -- aesthetic has always been important. Those guys just don't know ugly, right? They won't make something that sounds amazing and looks ugly. I won't say they've paid tons of attention to fashion, but they definitely pay attention to aesthetic.

Brian Nohe, president, SMS Audio

Did you have a music background before taking on this job, and is one required to work in your industry today?

I was with Gillette for almost 20 years … sort of a big corporate background in terms of general management. I retired and was investing in small companies as my own VC guy and got involved in a company called KonoAudio. 50 [Cent] had looked at doing an endorsement deal with another company that ultimately fell through, and he bought my company in Sept. 2011. … The old paradigms are changing quickly, and those that can find a new idea or concept or product with a unique delivery or selling proposition can find a voice.

Why does it seem that every popular music-hardware brand today has big-name music personalities and celebrities behind it?

I draw an analogy to the sneaker industry. Twenty-five years ago you bought a pair of sneakers, and they were $15 at the shoe store. Then you had Nike and Adidas and New Balance come out with higher-end and endorsed sneakers, and before you know it, sneakers are selling for $175.

But endorsement deals only go so far. …50 and I took the approach that it's better to have people invested in the company than just simply endorsers. …You'll see us shortly announce a couple of probably sports celebrities who will be buying into the company as investor partners.

When did headphones stop being purely functional and start becoming fashion statements?

They're still hardware. It still has to be a great functioning product whether it looks good is secondary. …We tend to be a little more subtle than some of the other products, but there's a lot you can do with these. Think about sneakers and all the color variations and styles, so I think you'll see it continue in our industry as well.

Sam Paschel, chief commercial officer, Skullcandy

Did you have a music background before taking on this job, and is one required to work in your industry today?

I've been at Skullcandy for about a year and before that I spent 11 years at Burton Snowboards. Crossover there is pretty apparent -- we had a similar brand ethos, a similar consumer and a connection to action sports. … The music industry specifically comes with some amazing emotional and cultural touchpoints and assets that give marketers quite a bit to work with. The truly hard part is understanding your consumer well enough to edit down to the stories and gospels that are really going to connect with them.

Why does it seem that every popular music-hardware brand today has big-name music personalities and celebrities behind it?

We started with a different model where we were supporting athletes in key action sports. So for us, it's primarily athletes. … But it's not just that we have athletes, and we pay them. We have events and investments in that subculture to make sure that we're connecting in a way that's legitimate and authentic. …That has expanded now to, for instance, supermodels, who are more brand ambassadors, because there's a natural play with what we do from color, graphic and trend and what they do in the style and the fashion world.

When did headphones stop being purely functional and start becoming fashion statements?

Prior to Skullcandy, it was a black-and-white headphone space. There were undifferentiated products, boring products, like Sony or Bose in black or white. What Skullcandy brought as a first mover was art, color, graphic, trend, youth culture, energy, and that's where the brand differentiated and leapt out as the first brand to bring self-expression to the headphone space. … It really shifted the space from an object that was carrying music to something that became part of the uniform of youth, something reflective of your own belief system and a self-expressive thing.

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