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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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