Dr Dre beats new paths in music

With millions of record sales under his belt and a glittering career producing albums for stars such as Eminem and 50 Cent, Dr Dre is lauded within the music industry as a hip-hop pioneer.

The consumer electronics industry has come to hold him in similar esteem, judging by the rash of imitators of Beats by Dre, the headphones company he co-founded, showcasing their wares at this week’s Consumer Electronics Show in Las Vegas.

Jostling for attention among the ranks of vast television sets and touchscreen coffee tables were new headphone lines from Soul, which works with rapper Ludacris, and SMS Audio, which has a partnership with 50 Cent. Sony recently launched an X-Factor branded headphone endorsed by Simon Cowell, while other headphones are being marketed by non-musicians, with New York Jets quarterback Tim Tebow and even Snooki, the reality TV star from MTV’s Jersey Shore, getting in on the act.

“I take it as a compliment,” says Dr Dre in a Financial Times interview, when asked whether he is worried by the new competition. “Anyone that’s trying to do something to improve sound . . . that’s all good.”

In the four years since Dr Dre and his long-time friend and collaborator Jimmy Iovine founded Beats, premium-priced branded headphones have become a mass-market proposition, coveted by young music aficionados and worn by English Premiership footballers and NBA basketball stars such as LeBron James.

Beats’ growth has fuelled the overall headphone market in the US, which rose from $1.8bn in 2011 to $2.4bn in 2012, according to NPD, the market research firm. Despite the increasing competition, Beats remains the market leader: it had 40 per cent of all US headphone sales and close to 70 per cent of premium priced headphone sales over the Christmas period. Its 2012 revenues rose from $298m to $519m. Unlisted Beats does not disclose whether or not it makes a profit.

Mr Iovine, Beats’ chief executive – and the chairman of Universal Music Group’s Interscope Geffen A&M Records unit – says he is unfazed by the flurry of new rivals. “They think that if you pay a famous person to wear headphones that will sell headphones. But that’s not what this is. These guys have no idea how to move sound around.”

Beats has diversified beyond headphones, designing the in-car stereo system for the new Dodge Charger and integrating Beats technology into HP laptops. The company has designed a stereo speaker range and recently launched the “Pill”, a wireless music player that uses Bluetooth to stream music from a phone or laptop.

It recently acquired MOG, a music streaming service, and hired Ian Rogers, founder of Topspin Media, to run it. Trent Reznor, the composer and former Nine Inch Nails frontman, has joined as chief creative officer. Mr Rogers will relaunch the service this year, where it is likely to compete with rival services such as Spotify and Rhapsody.

“The opportunity here is to create a trusted brand in music so that when consumers open it they know they are going to get an awesome service and not simply a search engine that says ‘good luck’ ,” says Mr Rogers.

I had no idea when we started that it would get this big

Beats is expanding internationally, opening offices in Ireland, China and Russia, putting Mr Iovine and Dr Dre atop an expanding global business that they now control: last year they ended a five-year manufacturing and distribution agreement with Monster, a California-based audio group, leaving them fully independent.

The pace of growth has been a surprise, says Dr Dre. “I had no idea when we started that it would get this big.” Mr Iovine, meanwhile, says the company is taking a leaf out of Apple’s book, connecting an evolving hardware range with music purchasing. “Our competition is going to come from another place,” he says. “We’re going after the whole [music] ecosystem.”