Why Apple May Dump Cheap Beats Headphones

Big shocker: Beats headphones cost $20 to build, and they're made to feel heavy and valuable with four completely nonfunctional pieces of metal, according to a teardown posted to Medium. At least they're actually built to spec; as Gizmodo reported in 2010, the vast majority of under-$50 earbuds are bought from a small group of suppliers.

This has never been a controversial topic here at PCMag. We've long asserted that plenty of $100 headphones, such as the bass-heavy AKG Y50 and more balanced Marshall Major II, sound better than Beats, even for bass fanatics. Not a single Beats product makes it onto our "best headphones" list, even though Beats is frequently cited as owning over 70 percent of the market for premium headphones.

First of all, don't get het up over bills of materials. This meme comes out every time there's a tech teardown, especially of an Apple product: the iPhone 6 "costs" $200 to make. The Samsung Galaxy S5 "cost" $256. Both of these phones sold for $650. What are you getting for the margin? R&D, marketing, software development, inventory, and support, for starters. Apple and Samsung are both building their own CPUs now, for instance. That development work doesn't come cheaply, and the phone sales are subsidizing it in ways that don't show up on the BOM.

OnePlus has actually shown with the OnePlus One that if you use off-the-shelf parts, keep no inventory, and forego almost all profit margin, you can sell a top-class smartphone for $299. But that price meant it couldn't put its phones in stores, make deals with carriers, or even satisfy online demand for more than a year. Yes, if we didn't have the carrier middlemen hiding up-front prices through subsidies and monthly payment plans, the price of a good smartphone might now settle between $400-$500. But let's at least acknowledge there's a lot to building a product beyond the bill of materials.

The Power of Brand
Over-the-ear headphones worn in public aren't really primarily a function-oriented product for most people, anyway. They're a fashion product.

This fact drives some people totally nuts, but it's simply true. Many fashion products have functions. Take jeans. Jeans run from five to five hundred dollars. They obviously have a function, and if they didn't perform their basic function of covering and protecting your body, they wouldn't sell. But the difference between $50 and $250 jeans is look and label—that might be the look of the jeans yourself, or the way your body looks in them. Expensive jeans exist to be looked at by others.

Ditto for Beats. The company's iconic marketing campaign, with its buckets of paint, is totally visual: Beats paint you as a Beats owner, in a community with all the other Beats owners, a tribe of taste. Beats leak sound because they know their owners want you, the bystander, to know what they're listening to. They're young, brash, assertive and in-your-face. They're the giant car subwoofers of headphones. They remind me of when teenagers were obsessed with Nextel, as much for the public chirp of "I've got a message, everyone!" as for the free push-to-talk calling.

You might hate that, but let's not pretend you're not making your own headphone fashion choices. Take the Bose SoundTrue headphones. I've often heard Bose called out as the alternative to Beats, but they're also decent but not best-in-class designs. They do, however, show that you're a Bose user, or aspire to be one: an upscale professional, maybe a frequent flier. Bose won our Readers' Choice award not because it has the best headphones, in my mind, but because of the demographics of our Readers' Choice voters, who tend to be older male professionals.

Once more, this is fine. Don't pretend a fashion choice is not a valid choice. It may not be a choice you want to make, though, and the rub for Beats is that it's increasingly looking like a choice Apple doesn't want to make.

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The Pros and Cons of Apple Music

Forget About Dre
It's clear that the Beats brand is not the Apple brand, and the position of Beats headphones in the Apple stable is getting more and more uncomfortable. Apple scrubbed away all the Beatsiness of Beats Music to create the new Apple Music, but if you wipe the paint off Beats headphones, you won't be able to charge $200-plus for them any more.

Apple didn't buy Beats for headphones; it bought the company for music industry connections. Jimmy Iovine came out on stage at the Worldwide Developers Conference, rambled for a while, and then went back to doing what label executives do best: screwing artists, who won't be paid for the first three months of their presence on Apple Music. It's a powerful testament to Iovine's skill and relationships that everyone except Taylor Swift seems to be staying with Apple Music nonetheless.

But that leaves me wondering where Dr. Dre, and his brand, now lie. When Apple bought Beats, Dre was very visible. But we haven't heard much from him recently. According to Variety, around 50 percent of Beats employees have left their jobs since the acquisition and Apple has already started to kill new Beats hardware lines.

Beats' loud, divisive fashion personality doesn't fit with the broader, calmer, more inclusive Apple brand. I wouldn't be surprised to see, over the next year, Apple shut down the headphone hardware business and Dr. Dre move on to his next entrepreneurial project, with Iovine staying as head of Apple's music empire.