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The Business of Headphones


The Monkey

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It's not always easy to get information about the headphone industry. Feel free to use this thread to post informative articles, market research, etc. I'll post some links here.

- Here's an article on trends from Dealerscope.

- NPD Group on premium headphones.

- NPD Group on celebrity endorsements (Tyll mentioned this in a piece at InnerFidelity.com.)

- HiFi retailers focusing more on headphones.

- Beats and Monster breakup article. Contains some interesting data.

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Perhaps a tad bit disingenuous, Noel?

"Noel Lee, Head Monster, Monster: First, sonic performance for us is the key to why consumers buy Monster products. The expectation of a superior sound experience is the No. 1 reason why people select a headphone. We've shown that if we provide a superior sonic experience they will pay the money to achieve that. Our focus will be to build even higher sonic performance in coming years, building on our consumers' expectations of high sound quality, but at the same time looking for advances in manufacturing so we can keep the prices within reach. It's not sound quality at any cost; it's premium sound quality at a fair price. We think the consumer still values sound quality as the Number One criterion for selecting a headphone."

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Here's an update on what has been happening in the Koss fraud. Probably not too interesting unless you're a legal or accounting geek.

Bottom line is that she got 11 years, and they're doing what they can to recover as many of the assets as possible (sold her house; continue to auction off all of the expensive dresses she bought; grabbed whatever was in her retirement account, etc.).

Meanwhile, the SEC needed to slap Koss, Jr. on the wrist for allowing all of this to happen under his watch (while he was -- inexplicably -- the CEO, CFO, and COO all at the same time), but for whatever reasons, they haven't done a thing to pursue Grant Thornton (the auditors) who were equally complicit IMO for allowing Koss to operate with such antiquated systems.

http://www.apogeeconsulting.biz/index.php?option=com_content&view=article&id=618:update-on-fraud-at-headphone-maker-koss&catid=1:latest-news&Itemid=55

http://www3.cfo.com/article/2012/1/regulation_sec-settlements-under-dispute-koss-sachdeva

Most telling in this video is the explanation given in terms of falsely building up the cost structure from year to year. This makes a lot of sense to me. In order to slip it by the auditors, what you would have to do is create the illusion that raw materials costs were gradually increasing over time. Nearly everything that auditors do in their testing methodology is based on materiality thresholds, which makes incremental fraud nearly impossible to detect.

So she steals $1m the first year (using cashiers checks and wire transfers on the outgoing end, thus bypassing the normal accounts payable system, as well as Koss, Jr.'s review) and hides it on the incoming end (at least as the theory goes) by falsifying some of the documentation concerning raw materials that were purchased during the year. The auditors buy into it. It's a very simple notion: input prices and/or quantities naturally increase over time! Not exactly a "hard sell". But the auditors negligently don't even bother to get confirmations of price/quantity from the vendors.

So in year two when she steals $3m, she only has $2 million to explain because the first $1 million was built into the auditors expectations from last year, and is already documented in their work papers as being "reasonable" and within materiality constraints. $1 million more can be passed off as further price/quantity increases in year two, and this is entirely plausible relative to $20-$30m per year in cost of goods sold. She then gets a little braver and fudges some more figures to make it all tie together. Meanwhile, Koss Jr. is out golfing with the Grant Thornton partner.

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^Sigh. “They have great sound and great ease of use as I love not having wires” (referring to wireless Beats). At least this article mentions Shure, Etymotic, Sennheiser, ...

I was happy to come across a negative review of the Bluetooth Beats in Wired this morning.

"

I wasn’t pleased with the sound. The bass is like a blow to the chest. The lows are brutally upfront, booming and flabby. The rest of the soundfield has been pumped up to compete with the wall of low end, but all this does is gunk things up. The highs are rendered dull and the mids lack any liveliness, making vocals sound hollow and making acoustic instruments sound muddy, processed and not at all natural. Delicate sounds lack the room to breathe, and even the less modest details like hi-hats and snare hits are all splat and thud."

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Perhaps a tad bit disingenuous, Noel?

"Noel Lee, Head Monster, Monster: First, sonic performance for us is the key to why consumers buy Monster products. The expectation of a superior sound experience is the No. 1 reason why people select a headphone. We've shown that if we provide a superior sonic experience they will pay the money to achieve that. Our focus will be to build even higher sonic performance in coming years, building on our consumers' expectations of high sound quality, but at the same time looking for advances in manufacturing so we can keep the prices within reach. It's not sound quality at any cost; it's premium sound quality at a fair price. We think the consumer still values sound quality as the Number One criterion for selecting a headphone."

More from Noel....

engineeringandartofheadphonev160nlab-090522131827-phpapp01.pdf

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But for some audiophiles, one set of headphones isn’t enough. Ronald Shmyr, a U.S.-based banker and a self-professed audiophile, owns several different pairs.(..) The newest addition to his collection is his favorite — the Bluetooth wireless Beats by Dr. Dre ($279.95, www. Beatsbydre.com). “They have great sound and great ease of use as I love not having wires,” Mr. Shmyr said. “They also have a rechargeable battery, and although the bass is a bit too much for my taste, the handy wireless feature is overwhelmingly worth it and makes up for that. They are amazing,” he says of the D.J.-promoted brand, adding that they may be the last set he buys — for a while anyway.

There must be better wireless options for this audiophile bankers no?

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Not economics, per se, but a NY Times article is always noteworthy.

http://www.nytimes.c...l?_r=2&ref=arts

"There are Web forums, like www.Head-Fi.org, devoted solely to discussing high-end personal audio and headphones,..." News to me. The times I pointed out that it might be embarassing having the "headphone vs speakers" threads almost unanimously favoring speakers on the World's largest headphone site, on the high end forum no less, the answer was always "Head-Fi is not a headphone site and the high end forum is not a headphone forum." Has anyone else ever noticed that Head-Fi plays host to a lot of World class assholes? rolleyes.gif

I especially enjoyed being berated ad hominem (for liking headphones at least as much as speakers) by a loud mouthed, rude neanderthal who was ranting on about how in the World a "one inch subwoofer" could ever deliver satisfying bass reproduction. With such knowledgable posters dominating the forums, what is not to love about Head-Fi?

Edited by Clarkmc2
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I have a pair made by maxell that wrap over your ears. They cost $5 at staples. They don't move around at all and you get used to them very quickly. Some recent studies are suggesting that earbuds can cause hearing loss and you should have earphones that sit on the outside of your ear. I don't have a lot of faith in most medical studies, but don't want to take any chances my hearing either.

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