Hip-hop artist Lil' Wayne, wearing diamond-studded Beats headphones, sits courtside during the 2012 NBA All-Star Game.

Story highlights

Beats headphones dominate the $2 billion headphone market

The accessories are criticized by audiophiles over their marketing, bass-heavy sound

Beats president: We focus on premium audio and excitement of studio experience

Brand has spawned rivals; observer says audio quality is likely to improve a lot

CNN  — 

Kelley Zapata loves her Beats.

The University of Georgia junior first got a pair of Beats by Dre Studio headphones for Christmas in 2008. They were a revelation, she says, especially for someone used to Apple earbuds.

“I was blown away,” she recalls. She’s since invested in two more.

She’s not alone. The audio company’s lower-case “b” is ubiquitous on the ears of listeners across the country, seen on celebrities – Lil Wayne at a Lakers game, Katie Holmes on a movie set – and college students.

Indeed, according to the NPD Group, a marketing research company, Beats controls 27% of the $1.8 billion headphone market – and 57% of the market for “premium” headphones, ones that cost $99 or more. On- or over-the-ear Beats retail from about $200 to $400, so you can easily spend as much on the headphones as you can on your MP3 player or contracted phone.

That’s a lot of “b”uzz.

Producer and musician Dr. Dre wearing his Beats at a Boston Red Sox game in 2010.

But along with the popularity has come a backlash. Beats have been criticized for being a marketing gimmick, a bass-heavy fashion accessory not up to the kind of high-quality audio sound they promote. Zapata admits she was initially seduced by the pitch: “I’m a big Lady Gaga fan, and she had them in her music video,” she says.

For audiophiles, Beats are a sacrilege. They’ve filled up message boards complaining about the popular cans.

“(A) Timex with Rolex’s price tag,” wrote one responder to a board titled “Why the Beats hate?”

“To a lot of people, the fact that someone took our hobby and our industry and vastly perverted it to the public at large borders on offensive for a variety of reasons,” added another poster.

But the audiophiles might be missing the point. What Beats has done, suggests Tyll Hertsens, is expand the market for better-quality headphones – as witnessed by the countless headphone makers jockeying for space at the International Consumer Electronics Show in Las Vegas last week.

Building on the distinctiveness of Apple’s white earbuds – which announced their wearer owned a desirable iPod or iPhone – Beats essentially created a new niche.

“What they did was brilliant,” says Hertsens, editor of InnerFidelity, a site devoted to personal audio. “They somehow knew that people were aware enough of headphones that they could make them have some cachet.”

And cachet, he observes, comes with a price.

“It used to be that a $250 price of headphones were expensive. Now that’s just the norm. (Beats) raised the acceptable price of headphones,” he says.

Audio quality and design

With that increased price has come a renewed awareness of both audio quality and design, says Hertsens.

“In the past three years or so, headphones have gotten a lot better,” he says. They’re on display and available for testing; people can walk into an Apple Store and truly hear the difference, he says.

Audiophiles always prized sound quality, of course. But the headphone brands they argued about – brands such as Beyerdynamic, Grado (which has shunned advertising in its long history) and Sennheiser – weren’t widely known among consumers, particularly in an age moving toward convenience and away from component stereo systems. Along with the omnipresent Sony, perhaps the best-known name in the premium market was Bose, and Bose had its own detractors.

Few had eye-pleasing designs. The sound was what mattered, of course.

As Hertsens notes, what Beats did was change the formula. The brand dates back to the mid-2000s, when producer Dr. Dre and music mogul Jimmy Iovine were frustrated by their painstakingly crafted music being listened to through tinny earbuds.

In 2008, Beats put out the Studio, manufactured by Monster. The cans were an immediate hit.

The philosophy of the company hasn’t changed, says Luke Wood, originally a consultant to Beats Electronics and now the company’s president.

Digital production and technical advancements improved the sound of records but headphones were lagging, he says, thanks to a convenience culture put forth by laptops, earbuds and MP3 files. (Ironically, Wood observes, Steve Jobs “really cared about sound”: “I don’t think anybody at Apple thought those white earbuds were the end-all of premium sound.”)

“With Beats, the idea was to take the energy and passion of how we market our music and marry that with a focus on premium audio and the excitement of what we hear in the recording studio,” Wood says.

He’s aware of the criticism, but points out that a fondness for certain elements of audio – like music itself – is subjective.

“It’s really about point of view and taste,” he says. He, Iovine and Dre have “all made hundreds of records and spent tens of thousands of hours in the recording studio,” he says. “I think we have an educated point of view and a consistent point of view to sound, and I certainly think we come from a place where we know what we’re talking about.”

The value of competition

Beats competitors are now legion, and many have copied the Beats playbook in marketing their headphones.

There are headphones from 50 Cent (SMS, which also has a collaboration with Lucasfilm), Bob Marley’s estate (House of Marley, which promotes an enviro-friendly aesthetic), Quincy Jones (manufactured by AKG) and Tony Bennett (by Koss). Lou Reed’s last video was for the Parrot Zik, designed by Philippe Starck.

Even the low-key Grado now has a branded headphone, a collaboration with Bushmills Irish whiskey. Actor Elijah Wood and DJ Zach Cowie contributed to the design.

Monster, which no longer manufactures Beats, has launched a line with the producer Swizz Beatz – a Monster investor – called DNA. (Zapata, the Georgia student and Beats loyalist, says she’s intrigued by them.)

NPD Group consumer electronics analyst Ben Arnold believes that, though the headphone market may be slowing from its double-digit growth of recent years, there’s no sign of a crash. With December’s sales, he expects 2013 to top $2 billion, and says sales should go up another 5-7% in 2014.

Hertsens remains lukewarm on Beats’ audio quality. In a detailed “Celebrity Headphone Deathmatch” review a couple of years ago, he gave grudging marks to the Studio and deplored the slightly cheaper Solo. But he approves of the greater emphasis on design and expects the audio quality of headphones, as a whole, will improve.

“(Right now) there’s nothing to compete against Beats when you’re talking about, ‘I’m going to give you style, I’m going to give you comfort, and I’m also going to give you sound quality,’ ” he says. “In a way we’re indebted to Beats because they made more money available for manufacturers to compete in the marketplace and make better headphones.”

Beats’ Wood is planning on it. He says he’s not worried about the competition, just maintaining Beats’ quality.

“What we’re seeing is this resurgence of premium sound. People really care and hear the difference,” he says. “I think we’ll see this, not just in headphones, but also in home stereos, in cars – and ultimately the whole bar will be raised.”