Nearly Half of all Headphone Purchases Are Over $100

“When I was your age, there were these little white earbuds…”

If Apple transformed the market for portable music, Beats Electronics is transforming the market for its most important accessory.  According to recently-released data from NPD Group, 43 percent of all headphone purchases now involve price tags above $100, with plenty soaring into the $350+ range.  Overall, NPD estimates that Beats now controls 51 percent of a premium headphone market now estimated at $1 billion in the US alone.

Like most things in this space, the high-end headphone story isn’t happening in isolation.  Instead, NPD draws a strong connection to the booming tablet market: this year, the research group found that 29 percent of higher-end headphones were being connected to tablets, up from 16 percent last year.

It’s almost as if better quality mobility begats better quality headphones, especially amongst those with the cash to dispose.  “As consumers shift more consumption to mobile devices, and tablets in particular, quality headphones are a logical addition to the hardware profile,” explained Ben Arnold, director of industry analysis at NPD.  “By adding better quality sound, premium headphones can enhance the overall content experience for users of these devices.”

The takeaway is rather harsh: fans will fight tooth-and-nail against a $9.99 album purchase, but they’re more than happy to surpass $99 on a pair of fashionable headphones.  Or, much, much more: the NPD study also found that the average, premium headphone user owns 2.3 pairs of high-end headphones, suggesting rapid replacement and intense opportunity for specialization (ie, bass-heavy, workout-friendly, celebrity-emblazoned).  And, lots of room for other heavyweights like Skullcandy.

Step outside the ecosystem of technology, and there’s also the highly successful branding story.  Indeed, Jimmy Iovine’s brilliance at alchemizing celebrity into profits has extended into consumer electronics, and everyone from rappers to Olympic athletes are now voluntarily sporting Beats.  That, according to NPD, is translating into serious profits.

“Though many consumers are gravitating towards more expensive, premium headphones for better quality sound, the emphasis on design and celebrity endorsement have also contributed to them being viewed as fashion accessories. Thirty-eight percent of premium headphone owners say their device is part of their personal style and one-in-four say it is important that their headphones are fashionable.”

The question is where the once-ubiquitous white earbud fits into this upgraded picture.  The streets of places like New York used to be a sea of white cords, but even Apple is moving ahead: during its iPhone 5 announcement Wednesday in San Francisco, the company unveiled EarPods. These next generation buds will come packaged with the iPhone 5, but they’ll also be quickly cast aside by upgrading buyers.

14 Responses

  1. Avatar
    James M

    It’s a shame that Beats are so atrocious, or else I’d be happy about this. They’re practically a small step up from Skullcandy, especially considering their heavily inflated asking price. This is the power of marketing, I suppose.

  2. Avatar
    jw

    I think there’s a couple more things at play here.

    The iPhone wasn’t a direct transition from the walkman, it was a transition from the blackberry (or comparable device). People had to get used to the idea of using their phone as a music player, & during that period it was more fashionable to be discrete. Headphones became smaller, less comfortable, & audio quality suffered in order to compensate for people not necessarily wanting to broadcast what they’re doing. Now that it’s more socially acceptible, & people are finding themselves more dependent on then, more people are buying better sounding, more comfortable headphones. The last decade where “earbuds” reigned made no sense to a lot of people who weren’t willing to sacrifice. I don’t think it’s as plane as “headphones are the new sneakers” or anything along those lines, although that’s probably true to some extent.

    Also, earbuds are always breaking. The more you use them, the more they break. The ones with the microphones are notoriously susceptible to water/sweat. So the opportunity to upgrade comes along fairly often.

  3. Avatar
    Casey

    I don’t believe it. Ever walk in to a gym or a college and you will see that cheaper headphones/earbuds dominate without a question.

    • Avatar
      jw

      Yeah but when were all of those purchased? I don’t think the article is saying that nearly half of all headphones out there are $99+ (this obviously isn’t the case), only new purchases, probably over a short period, which isn’t necessarily going to have an observable impact out in the real world.

      • Avatar
        paul

        Both really excellent points, and yes @jw your clarification is correct. Not sure of the exact numbers, but I’d hazard that a dramatically large percentage of white earbuds are pre-packaged with iPods/iPhones and not purchased independently.

        Casey you’re opening a really interesting insight here, which is that those motivated to go out and purchase headphones – beyond the white earbud – generally mean business. They don’t necessarily want a tinny alternative to the white earbud, though personally I have a crappy $30 pair I use for intense workouts (and because earbuds don’t stay in my ears, another story entirely for a subset of this market).

        Also, gyms are a little bit different, simply because buds are a bit more workout-friendly than a decorative Skullcandy head ornament. I see a ton of more sophisticated headphones on airplanes, for example.

        /paul

    • Avatar
      Toy Needle

      I, for one, do not wear my Beyerdynamics to the gym or even around town. At home, train, traveling, yes.

  4. Avatar
    Sleego

    This is bunk. Entirely. NPD uses customer panel data collected through online surveys. They don’t use actual scan/sales data from retailers like Best Buy, Amazon, Fry’s, WalMart and on and on. I think the headline should read: People Who Spend More Than $100 on Headphones Are More Apt To Take Survey’s About Headphones.”

  5. Avatar
    SOL brother

    The most decorated Olympic athlete of all time chooses SOL REPUBLIC headphones.

  6. Avatar
    Anthony Burbidge

    It’s funny because I was just thinking about this exact topic in the past few days. My local electronics flyer arrived this week and I was stunned by the prices of the headphones; all in the $300 – $450 range.

    As an audio engineer and music producer I wonder what kind of files are these consumers listening to when using their $400 headphones? They seem to be marketed to a younger crowd who would most likely be playing MP3 files.

    Having recently done an honest comparison of MP3 format songs (192 kbps) against their CD quality (16 bit, 44.1) files, I am stunned that anyone would waste hundreds of dollars on headphones only to listen to sub par audio files.

    I’ve gotten used to listening to MP3’s in recent years but after teh recent comparision I did, I’m really concerned that teh day is coming soon when I won’t be able to purchase full audio quality songs. No need for great headphones if the the source files are crushed down fidelity files.

    • Avatar
      Visitor

      Some of these headphones are crap and you will pay high prices and yet still be unable to hear the difference.

      Some headphones are well built. Maybe these headphone companies are doing musicians and engineers a service.

      Maybe people will hear the difference and then purchase high resolution digital music and not compressed crap…..

      Then again I doubt it.

      The average music consumer doesn’t care about the quality of the recording. To them music is a brand of lifestyle and expensive headphones are just the latest accessory