Apple on its own Beats

Beats by... Tim?

A new report from Bloomberg today, March 5, suggests that Apple is may want to build on the surprise success of its AirPods wireless headphones and make a pair of high-end, Apple-branded headphones.

Apple bought Beats in 2014 for $3 billion, and the hardware and music-streaming service run by Dr. Dre and music executive Jimmy Iovine has become the backbone of Apple's own streaming service, which now reportedly has 36 million paying subscribers. Beats headphones, along with AirPods, have also helped Apple dominate the headphone market. A report last year calculated that Apple has already locked up over 40% of the wireless-headphone market.

A pair of wireless headphones, to rival those produced by Bose, Sennheiser, and Beats itself, seems like a logical step for Apple. Although it hasn't released sales data, it seems that AirPods have sold well: They're included in the bucket of accessories Apple sells, which it labels as "Other Products" on its earnings reports, which has only increased in recent quarters. AirPods and a revamped Apple Watch are the only major products it's released in this category over the last year. The category generated over $14 billion in revenue for Apple in 2017.

Apple also recently released the HomePod, a $350 Siri-powered speaker. It's too early to tell whether HomePod has boosted Apple's sales (check back after its next earnings report in April), but between the speaker, AirPods, and Apple Music, it seems clear that Apple is focusing on music technology. A pair of well-designed, high-end headphones, with noise-canceling technology and Siri built-in, could be enough to convince Apple loyalists to drop yet more cash on the company.

Similar headphones from Beats and others can cost anywhere from $200 to $500. Both Bose's popular QC35 II and Beats' Studio3 wireless headphones cost $350. Even if it meant cannibalizing some of sales from people who might have considered Beats headphones, it would seem like shrewd move for Apple, given that it can charge a premium just for slapping its brand on something. As Bloomberg notes, Apple's HomePod costs about $100 more than a similar speaker from Sonos, so it's entirely possible it would mark up its headphones similarly. There's been no indication yet on when, if ever, Apple would release these headphones. The company wasn't immediately available to comment.

Apple's CEO Tim Cook has previously conflated its Apple Watch and headphones business into one "wearables" category. On the company's most recent earnings call in February, he said that it was the size of a Fortune 300 company, which would mean that wearables are generating at least $9.3 billion in annual revenue for Apple.