All the other background noise in my life apparently drowned out the recent sound of Bose accusations against Beats. Bose headphones are known for their superior noise-cancelling features. Beats headphones, recently acquired by Apple Inc. (AAPL), make similar claims about their audiophile ear muffs. Bose threatened to fight to block importation of Beats products through the International Trade Commission. Apparently Apple did not like the sound of this and settled privately with Bose.
One cannot help but remember the prominent display location Bose headphones once held in already crammed Apple retail outlets. Recently when I went to apple.com and specifically searched for headphone accessories to go with a new 64GB iPod Touch for my niece, I was not offered Beats or Bose products. A search of all accessories on the Apple site initially turned up neither Beats nor Bose headphones. Eventually Beats by Dr. Dre headgear did show up. I wonder if I was browsing during the implementation of a new policy?
This seems like a very unusual way for Apple to profit from their multibillion dollar acquisition of Beats. Yet, when I went to the beatsbydrdre.com site there was a prominent link “Buy now on the Apple Store” which was functional and took me to a Beats check-out page at apple.com.
Further investigation brought to light the way Beats headphones are offered as accessories for the iPhone but not the iPad or iPod. This strikes me as odd, but perhaps dictated by the terms of some out-of-court settlement?
Next I searched for “Bose Bluetooth Headset” at apple.com. The search box still prompts the user with several Bose products. However the search results included everything except Bose products. A search for “Bose Speaker System” returned only the Beats Pill speaker. “Bose Quiet Comfort” returns Apple Care offers. “Bose headphones” returns only a bluetooth headset by a vendor called “Aftershokz.” In any event, Sennheiser, Bang & Olufsen and even BlueAnt ear candy still appear for sale through apple.com.
Luckily Bose Corporation, headquartered in a very shiny building in Framingham, Massachusetts, is privately held and therefore immune to the fickle tastes of hedge fund managers and other stock traders. Bose achieved $2.5 billion in revenue in 2013. Otherwise the carnage might be even a little too loud for a set of their Custom QuietComfort® 25 Acoustic Noise Cancelling® headphones to drown out. Personally I do prefer their A20® Aviation Headset when sitting in the left-hand seat of my favorite mode of transportation. Apart from weekends up in the air, my daily ride, a Cadillac (GM), sports a Bose Sound System.
In 1977 my buddy in college installed four shelves in the corner of his dorm room and mounted Bose 901s on each, my interest in jazz and rock was forever changed. But that’s another story entirely…
My suspicion is that Apple’s rather experienced intellectual property law team wanted to send a clear message to any other businesses considering future patent litigation claims. Apple’s “you may win the battle but expect to lose the war” message seems to come straight from Sun Tzu. Of course once you shell out $3 billion for a line of products and services like Beats By Dr. Dre you may not necessarily want the top competition sitting in your showroom. I have never seen a Lincoln parked inside the local Mercedes Benz (DAI) showroom though they do get parked in the used car lot quite often.
I think the moral of this story is be very careful with whom you pursue lawsuits. Apple also appears to no longer be selling Bose products in their retail outlets. This could put a serious dent in Bose 2015 sales results but these days saavy shoppers often head over to amazon.com (AMZN), alibaba.com (BABA) or ebay.com (EBAY) prior to making accessory purchases. Reliance on a single channel for a significant portion of sales is a mistake few consumer product manufacturers have made since Tupperware.
In fact these days viral marketing through social networks seems to be the focus of many marketing strategists. Perhaps taking a cue from William Gibson’s cutting-edge novels, Zero History and Pattern Recognition, getting your product seen and discussed on Instagram or Facebook garners more market share than appearing in Apple’s online catalog.
Speaking of Gibson, his latest adventure, The Peripheral, is about to show up in e-readers and remaining brick and mortar shops in less than 10 days. I can’t wait to study it, twice.
Disclosure: This author proudly researches, invests and discusses all manner of businesses, all over the world. From energy firms in Norway to Mexican telcos to Brazilian banks to Cupertino consumer product designers, I learn what makes a firm successful and invest accordingly.