“What is so troubling is that in spite of Beats having dominated the market for high-end headphones, there’s significant doubt regarding the audio quality of these headphones,” Paulo Santos writes for Seeking Alpha. “Audiophile site after audiophile site says… Beats sells because of branding, not because of audio quality.”

“Indeed, with just 30 employees back in 2010, it seems obvious that Beats took the OEM route to build its products. What this means is that Beats probably only customized the looks of generic audio products produced in China, while not providing much in the way of technical advances to justify a higher qualify breakthrough,” Santos writes. “So Beat’s success, much like Skullcandy’s, was just a matter of branding/fad.”

“If Apple was serious about quality, Apple could have bought other players. For instance, Sennheiser is a reputed maker of quality headphones, and it had revenues of around $800 million in 2012, so not much different from Beats and with a wider presence around the world. Sennheiser has a long list of patents in the space. Whereas Beats’ patents are seemingly more along design cues,” Santos writes. “$3.2 billion is a rounding error for Apple, but the change in priorities is not. Apple faces tremendous risk if it starts to give more importance to branding and image, than to the underlying quality of its products.”

Full article here.

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