Beats controls some 70 percent of the headphones market, thanks to lightning-fast marketing and a smart grasp of pop culture. In six years, Interscope records mogul Jimmy Iovine and hip-hop icon Dr. Dre have turned Beats By Dr. Dre headphones into a $1 billion-plus business bought by the tech giant Apple.
How it all started
A while ago while I was watching Netflix documentary The Defiant ones, a four-part American television documentary series, directed by Allen Hughes. The documentary focuses on the careers of and partnership between Jimmy Iovine and Dr. Dre, co-founders of Beats Electronics. More people probably know Dr. Dre then Jimmy Iovine, but both have achieved excellence in their fields of expertise in music and business. If you didn´t watch the documentary you definitely should check it out, it will give you a greater back story to the creators of Beats by Dr. Dre brand and their colorful lives.
A brief history of Beats Electronics
Dr. Dre wanted a new challenge and shared the idea of making speakers and speaker related products with long time friend and business partner Jimmy and in 2006. started an electronics company. In 2007. they started a partnership with a company called Monsters Inc. to create a line of headphones called Beats by Dre studio that come out in 2008.
In 2011. Jimmy and Dre sell a majority stake of the company to Taiwanese phone maker HTC for $309 million, and decide not to renew the partnership with Monsters Inc.. In 2012. they launch new products Beats Executive headphones and Beats Pill speaker.
In July of 2012. Beats buys back half of the stake from HTC for $150 million, and the rest in 2013. for $265 million. Parallel to the buy back Beats electronics bought MOG ( a streaming service) that later became streaming platform Beats music.
On August 1, 2014, Apple acquired Beats for $3 billion in a cash and stock deal, the largest acquisition in Apple's history. How they got to that point is a marketing done right story.
Finding the Niche
In 2001. Apple released iTunes and revolutionized how people consume music. Early 2000´s music record sale was at an all time low due to piracy. At that time Jimmy felt the music industry had 2 problems: first, the degradation of record sales because of piracy. Second: the degradation of audio quality because of Apple's plastic earbuds.
"Apple," he says, "was selling $400 iPods with $1 earbuds. Dre told me, "Man, it's one thing that people steal my music. It's another thing to destroy the feeling of what I've worked on." The tech giant was both source of their inspiration and their frustration, Steve Jobs managed that what was thought impossible before, "he made the technology the artist", Jimmy said continuing, "I'm going to make a beautiful black object that will play it back. Dre and I decided to market this product just like it was Tupac or U2 or Guns N' Roses." Beats headphones weren't tuned evenly, like the usual high-end headphones. They were tuned to make the music sound more dramatic so audiophiles didn't respond great to them.
Where Beats made their magic happen
Jimmy Iovine is a man of great focus and with access to a lot of incredible music artists under his label, stars like M.I.A. , Pharrell Williams, Gwen Stefani, Will.i.am etc. So what do you do when you have great musicians in house? You make them a part of your All-star focused group for testing the headphones. Jimmy would regularly give them products to test and wanted their on spot analysis of them. Comments he got from the music professionals widely helped him into fine tuning Beats by Dre headphones to the sound you hear today.
But the greatest move he did was sending Beats headphones to LeBron James who loved them so much he asked for 15 headphones and soon every member of the 2008. U.S. Olympic basketball team had them when they arrived in Shanghai. What an opportunity it turned out to be, free guerrilla marketing on live television event watched all over the globe.
Fast reaction and star studded marketing ads
With the excellent results of the guerrilla campaign with LeBron James Beats quickly reacted making a couple ads featuring famous athletes. When they featured Kevin Garnett, from Brooklyn Nets it definitely got noticed. The second add with cornerback Richard Sherman from Seattle Seahawks did even better thanks to their streamlined fast ads production.
With resources Dre and Iovine had from the music industry it wasn't hard to find more then a few stars who would gladly sport the Beats by Dre headphones in their music videos and public appearances. When Iovine heard Robin Thicke´s song "Blurred Lines" he instantly felt that it would be a hit - for Beats Electronics that is. Beats secured the rights to use the song in an ad, did a quick reshoot of scenes from the music video within five days of the original video was published.
Then Beats Electronics phoned up the CEO of RadioShack and offered to make the ad a dual promotion, so RadioShack partly paid for the reshoot and promotion.
But that wasn't even the fastest time Beats Electronics reacted to a trend they noticed is moments from blowing up and becoming viral. The Sunday before Black Friday 2012. Will.i.am phoned Iovine to tell him he just finished recording a new song with Britney Spears called Scream and shout, and asked him: Would it be a good Beats ad?
Within 72 hours Beats filmed a new Black Friday ad featuring Will.i.am and the new song. It aired during Thanksgiving football games with the song resulting in millions of dollars in broadcast advertising exposure.
Co-marketing deals at its finest
Not only does Beats work fast on its creative promotion it has another ace up its sleeves - co-marketing deals with big brands. Since the beginning Beats put their audio in products raging from cars like Chrysler 300s, HTC cell phones, to HP laptops. With such big brands came the big brands marketing budgets, it got to a point that Jimmy Iovine himself said once "We sold half a billion worth of product before we paid for one ad."
Beats was selling in bulk to their partner brands they almost couldn't make them fast enough - and that was just a part of the tip of the iceberg.
How one video almost broke the deal with Apple
Even though Beats Electronics had a mayor streak and was secretly negotiating with Apple regarding the largest acquisition in Apple's history there was a scandal that almost broke the deal. Apple being one of the biggest companies doesn't like leaks of their secrets. But one night Dr. Dre and couple of his friends got a bit buzzed and made a video in which they boast that Dr. Dre became a billionaire before they sealed the deal, news quickly spread. For a moment it looked like Apple was about to pull the plug on the deal, but in the end they sorted it out.
Apple already had Spotify as a competition in the music streaming business, the launching of Beats Music was seen as a threat and Apple sealed the deal. Beats Music stopped accepting new subscriptions and was shut down when Apple launched Apple Music on June 30, 2015. All subscribers were moved to the new service.
All that fast paced creative marketing paid off
Even though Beats Electronics didn't invent anything new in their creative marketing efforts, they sure did master it. Looking for opportunities and using them as fast as possible did attracted a lot of attention and sold a lot of Beats products. In the end resulting in 70% of the headphones market and their big buyout by Apple for $3 billion dollars in short 7 years. A part of the success can probably be partly on timing and luck, but those were not the main reasons the magic worked.
Beats Electronics found their market, took their chances, lead incredibly creative marketing strategies and it paid off big time. And the rest is history. Now owned by Apple Beats Electronics continues on its path of taking the world by storm and continuing their brand placement in countless music videos, ads and with names like Kendrick Lamar, Conor McGregor and many more. That's why Beats Electronics is a marketing done right story.