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What Beats by Dr. Dre teaches us about competition.

Happy Friday, and happy belated International Women's Day! I'll echo many of my peers' sentiments tha
What Beats by Dr. Dre teaches us about competition.
By Cherie Hu • Issue #23 • View online
Happy Friday, and happy belated International Women’s Day! I’ll echo many of my peers’ sentiments that we should aim for every day to be an unspoken “International Women’s Day,” in the sense of intentionally supporting and elevating women as collaborators, leaders, friends and equals. :)
I’m flying to SXSW tomorrow morning, and staying put until the 18th. The adrenaline rush of diving into the panel -> interview -> showcase -> free tacos -> rinse-and-repeat cycle is already hitting me, in a good way.
As for artists I’m checking out this year, I’m leaning heavily towards jazz/funk/soul/hip-hop and their electronic counterparts (Common, Karriem Riggins, MNDSGN, Ezra Collective, Blue Lab Beats, DUCKWRTH, Jordan Rakei, Pat Lok, Kiefer, Tank and the Bangas). Let me know if you’re in town and would like to meet, and/or have any recommendations for artists and panels to see!
Today’s newsletter is inspired by Forbes senior editor Zack Greenburg, whose book 3 Kings: Diddy, Dr. Dre, Jay-Z, and Hip-Hop’s Multibillion-Dollar Rise just came out on Tuesday. I had the pleasure of fact-checking the book from beginning to end, and immersing myself in a thorough, fresh education on hip-hop, business and cultural entrepreneurship in the process.
At his book launch party, Zack revisited the notorious story that brought the Beats by Dr. Dre headphone concept to life. On a beach in Malibu, Dr. Dre was telling Jimmy Iovine that his lawyer wanted him to launch a new sneaker line, just like every other blockbuster rapper out there. In a too-good-to-be-true flash of inspiration, Jimmy exclaimed, “F*ck sneakers—let’s make speakers!”
His reasoning was that there were already so many rapper/sneaker partnerships in the market, and Dre had an opportunity to stand out by releasing hardware instead of apparel, and by honing in on the standalone power of music and creativity instead of resorting to adjacent industries for endorsements.
As Zack points out in his book, that quote “f*ck sneakers—let’s make speakers" is a revelation when it comes to product competition. The direct competitors to Beats headphones are not Bose, Sennheiser, Bowers & Wilkins or other hi-fi headphone manufacturers: they’re Air Jordans, Sean John, Rocawear and other rapper-endorsed apparel lines. The way Dre and Jimmy promoted their headphones was like how you would market any other fashion brand: you had celebs from LeBron James and Richard Sherman to Nicki Minaj and sporting the headphones both on the court and in interviews, whether as shiny jewelry or as a sign of rebellion.
Several people have criticized Beats over the years for the crappy sound quality. To be frank, I agree with them. But Jimmy has said in interviews that these skeptics are missing the point: it’s not about tech specs, but rather all about feel. That’s the exact same thing you would say if you were selling clothes—and, tapping into a basically empty niche in the music hardware space, it helped catapult Beats to stardom (and to Apple’s $3 billion acquisition).
This is one of a million cases in which the way you define your competition can have drastic effects on how outsiders perceive you. There’s no doubt that “positioning” is one of those corporate consulting bullshit buzzwords that many people understandably want to avoid—but, like any other buzzword, it can be extremely potent in a positive way if you get it right.
Here’s an instance of positioning that isn’t so clear-cut: I recently met with someone who used to work at the New York Times, and she said that a recent reader survey revealed that the top two media sources that online news readers pay for are Spotify and Netflix, far before considering any newspapers, magazines or blogs.
Why do you think that is, and how do you think the NY Times should respond and capitalize on these trends? Does this mean that a newspaper like the NY Times needs to position itself as a peer and direct competitor not to other news organizations, but rather to Spotify, Netflix and other streaming services, when it comes to convincing people to shell more money out of their wallet for media? If yes, is something like the recent NY Times/Spotify bundle the best way to handle that positioning?
Comparing the NY Times to music streaming at this point definitely seems ludicrous, as it could potentially downgrade the quality of news and public knowledge. Nonetheless, as you read this, music streaming services are trying to expand their influence beyond their core offering into other audio content (Spotify’s multimedia Spotlight format, with BuzzFeed and Gimlet Media as key partners, is the perfect example), bringing news publishers directly into their financial fold and rendering the news/music connection more concrete. Whether this will actually make a dent in newspapers’ strategy and have significant contributions to their future growth has yet to be proven, but it’s an open debate unfolding in real time.

My writing
Why Music Streaming's Greatest Hopes Are Spotify's Toughest Challenges
Aside from my journalistic ventures, I’ve also joined the team at the Membership Puzzle Project, a special research group within NYU’s journalism department studying how news organizations are diversifying their revenue, with a particular focus on membership programs and optimizing journalism orgs for trust. They’re doing a lot of analogous research into other corners of the world like gaming, alternative currencies, eco/enviro co-ops and faith-based communities, and I’m joining for the next few months as their dedicated music expert. :)
I was intrigued by this angle because I think the rise of streaming complicates the notion of “membership” in music. I would argue that “superfans” want to be “members” of their favorite artists’ lives and careers. What exactly does that relationship entail, and what are the most effective platforms and business models for enabling and managing that member relationship? Are streaming services effective paths to membership in an artist’s or label’s community? When you shell out $9.99 for Spotify Premium, are you a “member” of anything? Why or why not?
If you’re interested in reading initial findings from MPP’s analogous research, here’s a fascinating writeup from September. I would also appreciate any recommendations you might have for people I should talk to (I’m particularly interested in crowdfunding sites like Kickstarter/Drip and Patreon).
Good reads
Lessons from Spotify
Obligatory potato
I’m just going to leave this headline here. 100-year-old woman’s secret to a long life: beer and potato chips
Did you enjoy this issue?
Cherie Hu


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