Sol Republic CEO Optimistic Apple Distribution Will Continue Post Beats

Sol Republic CEO Kevin Lee, who was instrumental in the initial discussions that led to the headphone manufacturing relationship between Beats Electronics and Monster, is banking on a continued distribution relationship with Apple stores after Apple’s $3 billion purchase of Beats. But Lee, whose company manufactures speakers and headphones, has heard nothing from Apple about how its headphone mix might change now that it owns the Beats brand, he told Consumer Electronics Daily.

Asked how Apple’s headphone selection might change now that the company owns a premium headphone brand, Lee said, “I have no idea, but I hope they'll continue their current strategy.” He said Apple already carries a broad selection of Beats headphones, and we counted some 13 models at Apple’s e-commerce site on Friday. The Apple website listed a single pair of Sol Republic Tracks HD on-ear headphones at $129.95. Lee wouldn’t say what percentage of Sol Republic’s revenue comes from Apple stores but said Apple “is an important retail partner for us.” Sol Republic launched two years ago exclusively through Apple and Best Buy, he said. It has broadened distribution to 27,000 storefronts worldwide in 56 countries, Lee said.

While Sol Republic hasn’t heard what distribution changes might be made, Lee expects Apple to stick with its retail strategy: to offer Apple products but also provide a “nice curated selection of the best products around the Apple ecosystem.” That has included more than one brand, style, type of headphone and price point, he said. He noted that Apple stores don’t carry other manufacturers’ computers or MP3 players but do carry cases and power supplies from third-party companies along with Apple-branded ones.

Lee said, “When we started Beats, we didn’t know if it would work.” Lee was at Monster when Andre Young (Dr. Dre) and Interscope Chairman Jimmy Iovine first approached him to make loudspeakers. With Monster having just come off a failed attempt of its own with Monster-branded speakers, Lee told Young and Iovine that headphones were the new loudspeakers due to the growth in portable music players. “We didn’t even know if people would care about sound,” Lee told us. When Monster and Beats split two years ago, it was widely reported that Monster got the very short end of the stick financially, but Lee today says he’s proud to have been part of Beats’ “phenomenal success.”

Lee hopes that Beats’s success thus far “is only the beginning” of overall success in the headphone market. “Everyone should have a decent pair of headphones to listen to music, but the majority of people still don’t know that sounds even matters,” he said. Beats began the awareness of “sound matters” with the headphone generation and Apple’s ownership of Beats will only multiply that awareness through its “tremendous influence,” Lee opined. Putting a positive spin on the Apple-Beats deal, Lee said he’s “looking forward to the light that Apple can shine on the importance of sound and how that would help us."

From the outset, Sol Republic left the premium segment of the mainstream headphone market to companies that could out-muscle it on the marketing side, including Beats and Lee’s father’s company, Monster. Lee sees the biggest growth opportunity in headphones in the in-ear segment, where consumers are just beginning to grasp that quality is important to the music listening experience, he said. Sol Republic just introduced a $40 model and a sport model at twice the price “that won’t fall out of your ear,” he said.

The headphone category generating the most buzz is wireless, Lee said, and while wireless headphones have been around for a while, “good-sounding wireless headphones have not.” Sol Republic just introduced its Tracks AIR wireless headphones at $199. While wireless is “already driving quite a lot” of the headphone business, the mass consumer is largely unaware of the category, Lee said. Company research shows that consumers are familiar with wireless speakers but they're “incredibly surprised about a wireless headphone,” he said. “That’s definitely green grass for us,” Lee said. Wireless typically adds $50-$100 to a headphone’s cost, he said.

Sol Republic is working on what headphones can do “beyond just music,” Lee said. He cited wearables as a category that’s ripe for headphone development. “Our hope is to be ahead of the curve, to figure out what the consumer really cares about if their headphone did more than just play music,” he said.