just one more geek in a sea of austin techies

October 5, 2017

The Verge Overlooks the Beats Angle #HeadphoneGeek

In a post earlier today, The Verge's Vlad Savov argues that Google's dropping of headphone jacks from the upcoming round of Pixel phones "proves Apple was right".  Vlad is a prolific contributor of tech-related reports and opinions and, in my opinion, is often right on the money in his assessments.  However, I take exception to today's article and wonder how Mr. Savov could have possibly forgotten to mention the huge elephant-in-the-room that is "Apple/Beats".

Steady yourself, because I'm about to delve into some tech conspiracy theory I think is borne out by Apple buying a company that produces wired headphones and then electing to drop the wired headphone jack from future iPhones.  Read on for the full story...

The Statement
In today's Verge post, Vlad begins by stating, "We might not like it, but Apple's prediction that we could live without headphone jacks is proving correct"

I agree.  I don't like it, but I could live without a headphone jack on my phone.  I've used both wired and wireless phones with my current phone and I will continue to use both, depending on the situation.  I like having that choice but, if pressed, I *could* live without one or the other.

To be clear: I completely agree with Vlad's opening statement.

The Reasoning
Here is where I take exception to Vlad's article.  He cites Apple's claim that the primary reason to drop the headphone jack was to free up space for other, more important components.  Vlad correctly points out that such space saving probably isn't critical to current phone models but will, eventually, prove helpful in future models as Apple works to minimize bezels and whatnot.  He also correctly points out that many (most) phone makers provide low-quality audio components for the headphone jack so the wired listening experience is typically not what it should be in terms of sound quality.

While it is true that leaving things out will inherently free up space, Vlad somehow completely overlooks Apple's 3-billion-dollar acquisition of Beats headphones in 2014.  This oversight might be forgivable if it weren't the single biggest reason Apple dropped the headphone jack.

Drop the Jack, Jack Up the Profits
The demise of wired headphones will yield a new profit stream for Apple.  In fact, this has already come to pass after being several years in the making.  Consider the following timeline of events:

* 2006 - Beats brand is formed in partnership between Dr. Dre (and Jimmy Iovine) and Monster Cable.  Monster will design, produce, and distribute Beats products.  Dr. Dre's primary job is to lend his name and promote product.

* 2008 - The first Beats headphones hit the market ($350). Note that these are wired headphones - more on that in a bit.

* 2011 - HTC, the cellphone manufacturer, buys 50.1% (note: a controlling interest!) of Beats from Dre/Iovine and then, within a year, sells back 25% to Dre/Iovine.  That quick sell-back seems strange until you consider the original contract with Monster:  the contract allowed Beats to terminate the deal with Monster if there was a "transaction that resulted in a bona fide change in control (of the company)".  HTC's purchase of 50.1% allowed Dre/Iovine to cut Monster out of the picture, never mind that HTC sold back controlling interest to Dre/Iovine within 12 months.

* 2012 - Beats releases its first round of non-Monster products.  Wow - that was fast... almost as if these products were planned well before Monster was dumped from the partnership via Dre's stock sell-off/buy-back shenanigans.  Monster eventually sued Beats, by the way, but that's another story.  Also Bose sued Beats but then had to contend with Apple -- another another story.

It's notable that Beats released its first Bluetooth-enabled product in 2012: the Pill speaker.  Still no wireless headphones, though.

* 2014 - Apple shocks everyone by buying Beats for 3 beeeeellion dollars ($3,000,000,000).  This was far above the value of the company at that time but Apple had plans to make that money back...

Finally, here's where the headphone jack conspiracy comes in:

* 2014 - Following the public announcement of Apple's purchase of the company, Beats suddenly shifts away from it's seven-year practice of preserving audio quality by sticking to wired headphone connections (versus signal-compressed Bluetooth).  The "Powerbeats 2" wireless ear buds are announced within weeks of the Apple announcement.  The company also releases in 2014 the "Beats Studio Wireless" and the "Solo2" wireless headphones.

* 2015 - Beats continues to expand and promote its lineup of Bluetooth headphones.  Insider confirmations begin to leak to the press early in January, 2016, detailing Apple's plan to drop the headphone jack on the upcoming iPhone 7.

* 2016 - Beats becomes largest manufacturer of Bluetooth headphones in the U.S.  Read that again:  In just two years, Beats went from having *no* wireless models to being the largest Bluetooth headset vendor in the country.  This success was despite numerous articles during the same time period from notable publications (New York Times, PCMag) revealing a staggering disparity in cost of Beats' parts versus retail prices.  One such article went into great detail showing how just $17 of parts made up a $200 Beats headset -- and also revealed that weights were hidden inside to make the headset feel more substantial than it actually was.  Despite such reports, the brand's popularity continued to rise.

* 2017 - Beats accounts for 46% of all wireless headphone sales in the U.S.  Apple-branded wireless headsets account for another 3% of sales.

So... half of all wireless headset sales dollars in the U.S. now go to Apple.  How convenient for the company that it just so happened to decide to drop the wired headset port -- purely for design purposes -- around the same time it happened to buy a wired headphone company and happened to reorient that business to producing wireless headsets.

It's also worth noting that more than half (54%) of headphone dollar sales are now for wireless headsets.  Wireless headsets still only account for 17% of all headsets sold, but their high cost means that the majority of headphone dollars get spent on wireless units.

Regarding the numbers cited above, Christian Thomas shared these in a great post several weeks ago over at Android Authority.  There are even some pretty infographics I was tempted to steal for this post. (disclosure: I do not personally know Christian Thomas or Vlad Savov -- I simply enjoy reading their articles.)

In Closing
When talking about Apple's reasons for dropping the headphone jack, how did Mr. Savov forget to mention Apple's huge monetary incentive to move consumers towards buying wireless headphones?  Especially after previously posting that "Apple killed the headphone jack so it could resurrect the Bluetooth headset"? (But also somehow overlooking the Apple/Beats connection in that article.)

I think a better story would be how Google's dropping of headphone jacks from upcoming Pixel phones plays into Apple's hands by driving additional wireless headset sales, 49% of which generates more money for Apple.

Final note:
Vlad Savov is a champion of high-quality sound.  I quite enjoy his articles detailing mobile devices that embrace and emphasize good audio.  My post is not meant to detract from any of Mr. Savov's work.  Rather, this post is intended to highlight the Apple / Beats connection and express how much of a head-scratcher it is that Vlad does not mention this highly pertinent connection when referencing Apple's decision to drop the headphone jack.

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