INTERNATIONAL BRAND

MANAGEMENT

BEATS ELECTRONICS
An analysis of the famous Dr. Dres brand

Ismaiel Ahmed PEKASSA

Ismaiel.pekassa@inseec-france.com
 BEATS ELECTRONICS

I. COMPANYS PRESENTATION
Beats Electronics is a division of Apple which produces audio products.
Headquartered in Culver City, California, U.S. the company was co-founded by
rapper and hip hop producer Dr. Dre and Interscope-Geffen-A&M Records chairman
Jimmy Iovine.

Beats' product line is primarily focused on headphones and speakers, marketed under
the brand Beats by Dr. Dre (rendered beats by dr. Dre); in particular, its headphone
line characteristically places a heavy emphasis on bass, which, in advertising material,
Dr. Dre stated allows listeners to hear "all" of the music. The company has also licensed
audio technology to other companies for use in their own products, including HTC and
Chrysler, and expanded into the online music industry with its 2012 purchase of MOG,
and the subsequent launch of an in-house music streaming service known as Beats
Music.

From left to right: Jimmy Lovine (co-founder), Dr. DRE (co-founder) and Luke Wood
(president)

Beats' popularity was primarily influenced by its marketing practices, centered on

product placement and branding deals with celebrities that were accessible due to
Iovine's professional network. In 2012 NPD Group reported that Beats' market share was
64% in the U.S for headphones priced higher than $100, and the brand was valued at
US$1 billion in September 2013.

For a period, the company was majority-owned by Taiwanese smartphone maker

HTCthe company reduced its stake to 25% in 2012, and sold its remaining stake back
to the company in 2013; concurrently, Carlyle Group replaced HTC as a minority
shareholder, alongside Dr. Dre and Iovine, in late 2013. On August 1, 2014, Apple Inc.
acquired Beats for US $3 billion in a cash and stock deal, marking the largest
acquisition in the company's history.

Formally created in 2008 and cofounded by the Hip Hop musician Dr. DRE and Jimmy
Lovine, Beats Electronics is an American company, division of Apple since May 2014,
selling products like premium consumer headphones, earphones, and speakers as well
as patented Beats Audio software technology and streaming music.

II. ANALYSIS OF THE PRODUCTS

1. Personal audio

Beats' original product line were Beats by Dr. Dre headphones. In promotional
materials, Dr. Dre outlined the line's advantages by alleging that listeners were not able
to hear "all" of the music with most headphones, and that Beats would allow people
to "hear what the artists hear, and listen to the music the way they should: the way I
do." In comparison to most headphones, Beats products were characterized by an
emphasis towards producing larger amounts of bass, and are particularly optimized
towards hip-hop and pop music. In October 2012, Beats unveiled its first two self-
developed products, the Beats Executive noise-cancelling headphones (to compete
with similar offerings by Bose and Sennheiser) and the Beats Pill portable speaker.

The company actually sells four types of personal audio products

Headphones: like the Beats Studio, Studio wireless, Solo, Solo Wireless, Mixr and
Pro, are a kind of headphones characterized by the reduction of external
sound different of the sound coming from the audio headphone.

Earphones: with the Powerbeats, Powerbeats Wireless, Tour and Urbeats, Beats
Electronics wants to offer compact audio headset designed for classic music
lovers, with the particularity of being intra-auricular and ultra-lightweight music
headset. This is more recommended for classic music lovers and sportsmen who
like hearing music when practicing a physical activity.
 An earphone Powerbeats

Speakers: with its portable speakers like Pills and Pills XL, lets people play their
sound everywhere for an individual experience or either for a party.

A Speaker Beats Pills

2. Beats Audio

The company has also licensed the Beats brand, under the name Beats Audio
(rendered Beats audio), and technology to other manufacturers. In 2011, HP began to
offer personal computers equipped with Beats Audio systems, beginning with its HP
Envy line. The system features a software equalizer with a preset that HP marketed as
being optimized for higher quality sound output.

An authentic HPs computer produced in collaboration with Beats Electronics

Following its acquisition of a stake in the company, most new HTC smartphones began
to be released with Beats Audio software, beginning with the HTC Sensation XE/XL with
Beats Audio in September 2011. The software was to be included in most new HTC
devices, such as the One series. The Sensation XE and Rezound were also bundled with
Beats by Dre earbuds, but HTC abandoned the practice on future devices. A HTC
product executive claimed that despite the prominence of the Beats brand, "an
accessory like the headphone doesn't factor in when someone is buying a
smartphone."

An authentic smartphone produced in collaboration with Beats

3. Car audio

In 2011, Beats reached a deal with Chrysler LLC to feature Beats-branded audio
systems in its vehicles. The first vehicle under the partnership was its 2012 Chrysler 300S
luxury vehicle, which included a 10-speaker Beats by Dr. Dre sound system. Beats
speaker systems have also been included in models from Chrysler LLC's other marques,
including Dodge, and parent company FIAT.

4. Beats Music

On July 2, 2012, Beats announced it had acquired the online music service MOG, in a
purchase reported to have been between $10 million to $16 million. Beats stated that
the acquisition was part of the company's goal to develop a "truly end-to-end music
experience." The acquisition did not include the company's blog and advertising
network, the MOG Music Network, which was sold in a separate transaction to the
broadcasting company Townsquare Media in August 2012.

While MOG indicated that it would continue to operate independently with no

immediate change in service, Beats subsequently announced a new, subscription-
based online music service known as Beats Music, which launched in January 2014. In
comparison to its competitors, such as Spotify and Google Play Music, the service
emphasizes recommendations by music professionals alongside algorithmic
recommendations. MOG was shut down on May 31, 2014, and existing users were
directed to Beats Music.

The company Beats Electronics has different types of products that we classify in 2
types: the products line extension and the brans line extensions.

III. ANALYSIS OF THE COMPANYS LINE EXTENSION

By selling different types of products such as headphones, earphones, speakers
and streaming music service, the company Beats Electronics is characterized by
three category of products line extension: organic line extension for the different
kinds of headphones, inorganic line extension for the earphones, speakers and
organic category extension for the music streaming service.

a. Organic line extension: in this category we can find the different types
of headphones sold by the brand, like the Beats Studio (classic and
wireless), Solo (classic and wireless) and the Pro.

The different kinds of headphones

 b. Inorganic line extension: in this category we can find the different kinds
of earphones like Powerbeats (classic and wireless), the Tour and the
Urbeats. These products are particular because they are all intra-
auricular earphones so the consumer has a particular comfort hearing
music with them by the fact that they have a high level of noise isolation,
are ultra-lightweight and are easy to transport and use. With these
earphones, Beats Electronics targets most the sportsmen who need to
have a practical meaning of hearing their music while doing sport.

c. Organic category extension: with its streaming music service named

Beats Music, the brands objective is to integrate the huge and
developing market of musics streaming services, which is dominated by
three giants which are the Swedish Spotify Music, Google Music and the
French Deezer.

IV. ANALYSIS OF THE PRESENCE OF THE PARENTS BRAND IN THE BEATS BRANDS
PROCESS

In February 2014, Apple has bought the company Beats Electronics and has become
the main owner of the firm. Nevertheless, Apple is not really present in Beat Electronics
brands process because, most of the decisions of the brand are still taken by the
board of Beats, especially by Dr. Dre and Jimmy Lovine. For example, any of the
products sold by the company includes the brand name Apple, but still Beat by Dr.
Dre. Nevertheless, Apple started selling Beats Products inside the Apple Store,
especially headphones, earphones or even speakers.

So, Apple, which is the parents company of Beats Electronics, is not very present in
the brands process because Apple want to leave the prestige Beats Electronics has
on the market, but in the same way, also uses the notoriety of this brand to sell its
IPhone with the Beats by Dr. Dre products in its Apple stores.

V. SWOT Analysis

1. Strengths:
o Beats Electronics main strength is its brand name used ender a famous
hip-hop singer and producer who is Dr. Dre. People buying headphones
or speakers produced by the company are usually attracted by the
brand name, because Dr. Dre has been a famous hip hop singer. They
also know that by purchasing its product, they will have a particular and
unique hearing experience, especially for Rap/Rnb songs.
 o Beats offers to its customers the best quality product in terms of materials
and sound (due to the noise cancellings technology)
o Has many important partners like HTC, HP or Chrysler and celebrity
endorsers like P-Diddy, LeBron James or Justin Bieber
o Belongs to Apple: the company can have the necessary investments it
needs due to the fact that Apple is its parent.

LeBron James wearing Beats earphones in an ad

2. Weaknesses:
o The price is a weakness for Beat because the headphones sold by its
competitors are most sold at a cheaper price
o The vulnerability of the products: Beats by Dre products usually damage
quickly and when this happens, it is very difficult and expensive for the
consumers to repair them.
o End of its partnership with Monster, who was known as a very good
headphones manufacturer
3. Opportunities:
o Trust in Dr. Dre as a leader in the music industry
o Always new partnerships and celebrity endorsers, factors that give a
premium status to the brand;
o Expanding line products: there are always new types of products that
are produced by the brand and others that are usually updated
4. Threats:
o Strong and influent competitors like BOSE, SENNHEISER, SONY who sale as
Beats Electronics almost the same types of products (such as SONY who
even has his own musics streaming service)
o Unauthorized dealers or counterfeits products that dirty the reputation
and the image of the brand.

An example of a counterfeits product

VI. ANALYSIS OF THE BRANDS VALUE WITH THE LOGO

Beats by Dr. Dres logo is very simple and represents a b that is at the middle of a red
circle. The red, that represents the dynamism, youth and speed represents perfectly
the values of the brand, that target most youth, sportsmen and businessmen. The letter
b at the middle also express the values of the brand.

On this logo, we can also notice the sentence Beats by Dr. Dre, that is the name of
the brand. This sentence shows that the brand is more focused on music and is owned
by a famous rap/Hip-Hop musician.

The name Beats is also a great symbol of this brand because it directly describes the
kind of product the brand sells, because it is very simple to pronounce, especially for
young people, and express music. A beat refers to volume fluctuations due to
interference between sounds of different frequencies.

VII. IS BEATS ELECTRONICS A CONCEPT OR AND OBJECT?

The company is actually dominating the headphones markets with the different kinds
of audio products it sells like the Beats Solo, Studio, earphones and speakers. With Beats
Music, the company also wants to take some market shares in the big musics
streaming service market that is actually dominated by Spotify, Google Music or even
Deezer. Beats has also experimented other kinds of audio services like cars audio
system, computers and smartphones audio systems with Chrysler, HP and HTC.

Today, the brand Beats Electronics is clearly seen as a concept product specialized in
music and audio services because the brand is presently present in all the segments
an activities linked to music and audio services, even if some of them like cars audio
systems are not currently very well-known.