Headphones Makers Battle For Piece Of $1B Turf

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In an economic environment where nearly every CE category has gone through its own perilous time, headphones have risen above the fray with healthy sales and growth.

The category sees so many new product introductions — from both new companies and already-established audio players — that it could fill its own section of TWICE. As a result, the market is getting crowded, said Ben Arnold, industry analyst at The NPD Group, and consumers are having a difficult time discerning the little guys from the big ones.

Sales of headphones hit $1.2 billion in 2011, up a whopping 42 percent from 2010’s $868.1 million, according to NPD, and the top five brands in headphones in terms of dollar sales were Monster, Sony, Bose, Skullcandy and Philips. In units, Sony took top billing, trailed in order by Skullcandy, Philips, JVC and Monster.

So where does that leave the other manufacturers who aren’t on this list, particularly the smaller and the newer manufacturers? Some, such as Coby (which is neither small nor new, but isn’t in the top five), aim to appeal to the same type of consumer as Skullcandy — the “aspirational consumer,” Christi Park, Coby product manager, told TWICE recently.

Others, like V-Moda, paint themselves with a different brush altogether in the category. When asked how he wants V-Moda to be viewed, founder and CEO Val Kolton said he wants his company to be known for making art and hopes his headphones will one day be in a museum.

But while both V-Moda and Coby are already established players in the CE marketplace, the newer entrants, such as AfterShokz and Audiofly, may be swimming against the tide. One major dart against them is the difficulty of marketing their products without being able to get retailers to listen to them, NPD’s Arnold said.

“I think these lesser-known guys have to do something to break through the ‘noise’ in the space. There are so many new and established brands on the market now with a variety form factors and price points that there are competitors at every turn,” he said.

“It’s not just marketing though. The key really is getting consumers to appreciate the sound quality — or comfort if the headphone/ear buds form factor are a selling point — while the product is still in the box. These younger companies need to find inventive ways to sell their products with limited existing brand awareness.”

Celebrity headphones are a popular selling technique, to be sure, with new models launched at International CES last month from Ludacris, 50 Cent and Nick Cannon, to name a few. Arnold said he expects this trend to continue, although “at some point, this model does get tired, so maybe there are other partnerships or associations that can be forged.” He cited cobranded headphones with Spotify or Pandora as examples, as well as video-themed models.

Dave Thompson, founder of Audiofly, agreed that the headphones market is extremely crowded and called it “a consumer’s paradise.”

“Our research has shown that in a growing market, there are those brands that represent a legacy of audio engineering with their products, and there are those brands that are focused on the pop culture/fashion influences of a current generation. Each approach is valid, and has found a consumer audience,” Thompson said.

“Our focus with Audiofly is to create products from a musician’s perspective,” he added, noting that the company relies heavily on professional IEMs that they used during performances.”

Other manufacturers are trying to reinvent the typical headphones form factor to distinguish themselves from the pack. SOL Republic, started by Monster protégé Kevin Lee, is pushing their modular headphones, with speakers and headbands that can be swapped, while Aftershokz has created headphones that are designed to be worn outside of the ear canal. Both companies told TWICE they believe their innovative designs will set their products apart.


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