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Future Of The Headphones Category Still Up In The Air

3/12/2012 12:01:00 AM Eastern

TWICE: Do you think the market will continue to become
more crowded, or do you see companies being
“weeded out” over time?

Konrad Bergström, Zound Industries: I think
this is just the beginning, and we will continue to see
more and more companies enter this market. Just like
sunglasses, which in the beginning were viewed as a
functional product, it then evolved into being a lifestyle
product. There are now thousands of brands producing
sunglasses, and this is where I see the headphones
market going.

Consumers want to connect with the brands they
are purchasing. A lot of companies will not make it because
they cannot find that connection with the consumer,
but everyone that enters will, in their own way,
grow the global market. The ones that can keep up will
be very successful.

Dan Levine, Skullcandy: Hot markets are in a constant
state of fluidity. The brands with the best product,
best message and best team wins. Those with great
design vision, engineering, supplier partnerships, merchandising,
and marketing organizations tend to put
the right pressure on a crowded space. Over the next
18 to 24 months I expect that the relentless pace of
innovation, ideation and consumer expectations will
naturally select out the brands that cannot keep up.

The good news is that the category benefits from
this extreme level of competition. After the most recent
CES tradeshow we were shocked at the number of
new headphones popping up. One certainty is that it’s
a tough category to be great at and an easy category
to be simply average.

Brian Nohe, SMS Audio: SMS Audio believes
that the category has already begun to segment, for
example, by price, fashion, audio quality, features,
use requirements, and overall durability and reliability.
Generally, each of these segments can support several
brands and thereby force other brands to compete
aggressively to maintain viability.

Joe Phelps, Polk Audio: No question, at some
point we will see the little guys fade away, while a select
few may in fact grow to become real contenders.

Christi Park, Coby: As long as the market is growing,
it will continue to attract more manufacturers looking
to increase their market share and bottom line.
Companies are naturally weeded out when they don’t
offer consumers what they want: a well-designed,
quality product at a fair price.

Scott Hix, SOL Republic: Historically, as hypergrowth
markets have emerged so does the competition.
At a certain point of maturation, the brands that
are less relevant or that have poor business models
will exit based on necessity.

Akio Strasser, Phiaton: Given the economic situation,
it’s hard to predict one way or another. While
new companies inevitably come and go, headphones
are definitely one of the hottest categories in the CE industry,
with continued growth in demand fueling sales.
Assuming this rise in demand continues, it’s likely that
we will see more new companies getting into the mix.

Noel Lee, Monster: It’s inevitable that some companies
will fall by the wayside, but there is certainly
plenty of room for growth, and product differentiation
will help manufacturers succeed, along with the paramount
necessity of delivering a product that stands
out from the crowd.

Cheryl Severini, Maxell: I do not believe that we
have seen the tip of the iceberg — yet. Many overseas
factories are adding headphones to their production
lineups, and I believe that you will see new brands
entering the market to support this production. Over
time, new technology will enter the market, the factories will change their focus, and headphone suppliers
will be weeded out.

Bruce Borenstein, AfterShokz: There will always
be new manufacturers entering the category
because the price of entry is low, but I believe the
cream will rise to the top.

Ian Geise, Audiovox: I think you will
see some products weeded out in the
high end. You have Beats commanding
the high end with several other companies
placed but not necessarily selling
at those velocities. The traditional audio
companies will be able to drive sales because of loyal
customers that want the same type of quality as they
have in their home audio products like a Klipsch, Harman
or Bose. But many of the other headphones that
don’t have that brand recognition or cult acceptance
will go by the way side. The low-end ear bud market
will continue to thrive as they have become consumables.
Consumers buy multiple pairs — workout, plane,
home, office, etc. Brand does not play as big a role at
sub-$20 when you just want to pick up a pair of buds.

Tim Hickman, Fanny Wang: In the next year or
two we expect to see a decrease in the number of
companies manufacturing headphones because of
the cost of building and maintaining a brand. It is extremely
costly to bring the brand to consumers, and
not every company will sustain the financial backing
and profit to keep the business going.

Brian Yang, iLuv: We are already seeing a big
shift from headphones without microphones to headphones
with them. Obviously it’s due to the consumers’
quick adoption rate from standard MP3 players
to smartphones. While standard earphones are “fairly
easy” to produce, headphones with mic or remote
control require significant knowledge in order to receive
smartphone manufacturers approval. For this
reason, some brands will be weeded out unless they
move quickly to jump on this bandwagon.

Daniel Lee, Harman: The market will continue to
remain very competitive at the low end of the price
spectrum. At the mid-range and higher-end, where consumers
are seeking outstanding performance, we think
the market will shrink as quality will be the deciding purchasing
factor. Fewer manufacturers have the ability —
and the heritage — to deliver a sound performance that
will truly excite and impress the buyer.

Bob Bonefant, Soul Electronics:
They will be weeded out over time.
Fashion will only take you so far. It must
perform. We do our homework and remain
focused on our customers’ wants
and needs. The total experience must work in order
to create continued demand.

Marc Sculler, Bell’O: I think no question companies
will be weeded out over time. Very similar to most categories
in consumer electronics, those companies who
have the ability innovate, provide the highest quality products,
provide great marketing and ultimately tremendous
value will be the winner. In our industry, when you look
back five to six years ago, there were well over 100 TV
manufacturers, and that’s brought down dramatically. If
you went back further into DVD players, VCRs, or really
any of the categories, there’s always a point in time
[when] the amount of manufacturers in the early part of
the stages are large, and ultimately there’s a consolidation.
I see this to be similar to other categories in CE.

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