Jimmy Iovine and Dr. Dre may have built a $3.2 billion empire on a product that cost less than $20 bucks to create.
The New York Times reports that Dr. Dre’s Beats by Dre headphones are inexpensive to make, with headphone designers estimating “the cost of making a fancy headset is as low as $14.” A pair of Beats by Dre can cost upwards of $450.
While Beats by Dre may be made for cheap and have questionable sound quality, the brand is a marketing juggernaut. Beats by Dre owns an 27% of a headphone industry that reported $1.8 billion in sales last year.
Beats audio has become a pretty familiar brand around these parts: in addition to the ubiquitous headphones, the company has licensed its brand to HP and is majority owned by HTC — both of which manufacture an increasing number of Beats-branded products. Regardless, it’s the headphones that built the brand, and the future of who will be manufacturing them is a little more cloudy today as Beats and Monster will not be renewing their contract.
Sources told Business Week that the split happened because of a disagreement over (what else?) money and credit, with each company believing it deserved more of both. Read More