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Beats headphones' obscene margins

by on23 June 2015

Apple overlords are amateurs

When Fruity Cargo Cult Apple bought Beats headphones it was not clear how much of a marriage in hell the arrangement was. While Apple was famous for its obscenely high profit margins it was a bunch of amateurs in comparison to Dr Dre.

A tear down has revealed some fairly embarrassing truths about the gear which show that not only is the market-up obscene, it is also designed to cheaply look expensive.

The analysis was put together by engineer Avery Louie, who has loads of experience helping startups figure out how to refine their designs and get their products manufactured.

He said that the most expensive thing about the headphones is the box it comes in.

A pair of Beats headphones that retails for $199 costs about $17 to produce. However it gets much worse. That price includes the packaging -- the manual, soft case, box, and sleeve which costs $7. The headphones cost less than $10 each to make. Also when you chuck out the box, you are getting rid of nearly half the phone's value.

Apparently what makes a cheap pair of headphones feel more expensive is that they are loaded with metal to add weight. This gives the illusion that the product is worth more cash than something else on the rack. In fact the metal strips only cost pennies but account for 30 per cent of the total weight.

Louie says there's no real reason they need to be made from metal. It's all about creating an illusion.

So when an Apple fanboy tells you that you "get what you pay for" you can point out that you are paying $200 for a $10 pair of headphones. If you see someone wearing a pair of beats phones you can laugh and point knowing that you are looking a fool who has been parted from his money. Still if they are plugged into an iPhone you could have guessed that already.

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