Apr 08 AT 8:44 AM Nick Gray 75 Comments

HTC cuts the cord on Beats headphones as first quarter profits take a dive


The past six months have not been kind to HTC. In late Q3 of 2011, the company announced that it was adjusting its earnings expectations for the quarter to reflect slow sales of its flagship phones. As the new year rolled in, things didn’t get any better. HTC reported results for Q4 of 2011, revealing that the company’s revenue stream was down 2.49% while total revenues for the quarter took a 25% hit as well.

Here we are, three months later, and things seem to have only gotten worse. HTC has announced that revenue for the first quarter of 2012 dropped 35 percent year over year while profits took an even harder hit – plummeting 70 percent in the same time period. Fortunately, there is a bit of light at the end of the tunnel. The HTC One which was unveiled at Mobile World Congress in late February has just gone on sale across Europe. Having received rave reviews, the HTC One X and One S are undoubtedly the best phones currently on the market and will soon be available in the U.S> market courtesy of AT&T and T-Mobile.

But HTC isn’t going to sit back and hope the HTC One can get the company back on track. According to Martin Fichter, product executive at HTC, the company will be cutting back on including Beat Audio headphones with any of their upcoming devices – a change which will help the company increase its profit margins.

An accessory like the headphone doesn’t factor in when someone is buying a smartphone. If they want a Beats headphone, they’ll buy it directly.Martin FichterHTC

Since the takeover of Beat Audio late last summer, HTC has included Beats headphone with the HTC Sensation XE, HTC Sensation XL and HTC Rezound. None of the three phones have been huge sellers for HTC and we can only imagine that the included Beats headphones have reduced HTC profit margins while driving up the cost for consumers- making the phones less appealing and actually hurting overall sales.

While the Beats Audio EQ profile on HTC devices is optimized for iBeats and Beats Solo headphones, the profile does work with other headsets. We do not know if HTC and Beats will continue to include optimization specifically for Beats headphones, but we don’t believe that should add any significant cost the the handsets.

iBeats headphones included with the HTC Rezound

Many may question the value of Beats Audio technology in HTC’s phones, but there’s no denying that HTC seems to be the only OEM interested in making smartphone audio quality better for consumers. Unfortunately, HTC is in a tough spot right now, hoping to get its footing back. Removing Beats headphones is certainly not the end of the world, but we think there may be a better way for HTC to leverage its subsidiary’s dominant brand in the marketplace.

HTC could turn the table 180 degrees and use its smartphones as a way to boost sales for Beats. Rather than including Beats headphone with their phones, HTC could simply include a coupon with every phone, giving customers a substantial discount on Beats headphones at a participating retailer. HTC would still be passing on value to their customers without actually giving anything away and customer would be able to choose which headphones they really want rather than having to go with whatever’s included in the box.

HTC has invested too much into Beats to abandon then on the side of the read. On its own, Beats is still a very profitable company which is should help HTC’s bottom line. What do you think HTC should do to leverage Beats in delivering added value to consumers?

Source: CNET

Nick is a tech enthusiast who has a soft spot for HTC and its devices. He started HTCsource.com (the first HTC blog) back in 2007 and later joined the Android and Me family in the summer of 2010.

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  • Andro

    lol..where was that logic when they signed up with Beats audio ?

    • Taknarosh

      First off, I’m going to say that Beats headphones are WAY overpriced. BUT the matter of fact is that they are still a premium brand that people buy into.

      I don’t see how they could come to a conclusion that the headphones weren’t a factor with such little data.

      Beats headphones were included on a grand total of 3 devices; one of which was a rehash of a device in the later half of it’s life cycle (Sensation), one which never made it to North America and was a rehash of a Windows Phone 7 (Sensastion XL), the last was buried in the flurry of news and rumors surrounding Google’s next flagship device the Galaxy Nexus (Rezound).
      Now how they hell could they come to a conclusion that the Headphones weren’t a factor in the purchase when there weren’t many purchases to begin with.

      That being said, fiscally I think it was too early to give up on the investment. Headphones are dirt cheap to manufacture, and with HTC owning majority stake in the company I don’t see how it adds that much overhead to the overall price.

      I think had the beats headphones be linked to a true flagship device, like the One X and word got around that you get Beats headphones with a kick ass looking and feeling HTC handset I think it would certainly factor in and sway some people.Just my 2 cents.

      • Derek

        You’re absolutely right. The Beats name is big with urban ghetto thugs. Just watch college basketball or NBA, every single player comes in listening to music with Beats headphones on. Simply because of the Dr Dre name.

        • eallan

          Yeah, those silly thugs are too stupid to know what they like, it must be the name only. Get over yourself.

          • ihatefanboys

            Yes they are too stupid, and just go with the name. Its like any other trendy thing, you either do it, buy it, or wear it, or youre uncool. Havent you heard of the Iphone ? Same story.

          • sam

            I have the urbeats, studio beats, and the htc 8x which has beats audio built in and 1) I’m not a thug. And 2) I’m not silly. Beats ARE really good headphones and I can’t see why people criticize them so much. These people (including you) obviously don’t realise what good sound is. You probably wear jvc’s that cost about £5. You also seem to forget that it is the device you are listening to your music on as well. If you have a cheap mp3 player with bad quality mp3 files on it, then your bound to get a lower quality sound as a result even with beats headphones. When you’ve listened to music on a good quality device with decent audio files, then please come and tell me that ‘beats are rubbish’.

        • kazahani

          I sell electronics for a living. Beats sound amazing. Are they worth $200? Not to me, but I sell them to people who tell me that they are very satisfied with their purchase.

          Sorry, but the world really doesn’t fit into your little box.

          • General Tso

            Beats sound amazing? Lol…no wonder you sell electronics for a living.

          • Dirty_Azkals

            Yeah, they DO sound good and they feel great wearing it too.

            Funny thing is I don’t see Sennheiser or Grados flying off the shelf like Beats. Face it “audiophiles” these aren’t marketed to you so STFU. It’s not like your listening to specifics in R&B / Hip hop / or Rap. I also doubt you get a perfect listening experiance walking down the street with open headphones like Grados with all the ambient noise.

            Cut the price in half on Beats, then it wouldn’t get crap since they can’t justify not owning one now! It think this is where the hate is, making excuses why you bought the cheaper headphone instead of what the cool kids have lol. At the end of the day it is your money being spent.

        • TruFactz

          Umm I’d like to think that was good marketing. Nick Cannon has some made by the same manufacturer known as “N-Credibles” should we wear his as well???? What about Lady Gaga, she has some too, I don’t see people with the poker faces and all the meat lovers going to get hers. not to mention Chris Bridges, also known as Ludacris. He has “Soul” headphones. Dude, get over yourself, Dr Dre tells you what they were designed for on the box: SO YOU CAN HEAR WHAT THE PRODUCER HEARS (WEATHER ITS COUNTRY MUSIC OR WHATEVER) WHEN THEY MAKE MUSIC, oh I’m sorry, let me get my “Thug” on…..WHEN THEY MAKE “BEATS”. Me personally owning a pair that I paid $104 for can say, they do a damn good job.

        • Chad

          Hey Derek instead of saying “urban ghetto thugs” you should just man up and said Black, because that’s what your trying to say anyway. We all know every black person wearing beats is a thug from the ghetto right?..you’re an ignorant racist @$$ Derek

    • Nik

      Absolutely unfair, HTC keeps on bragging about beats audio and shockingly you don’t find beats headphone.! F*%& you HTC. People pay top dollars for your phones and you expect them to be ignorant about the headphone. I was almost ready to buy this phone but now i’ll settle with Sony Xperia. And Mr. MARTIN FICHTER GO BACK TO BE SCHOOL again. You’re a total loser!

      • Nik

        sorry, I meant B-School

  • Shawn Clark

    Maybe they should make the purchase of iBeats or other Monster Audio products optional…or just go out and grab a pair versus paying basically for them on top of the standard phone price tag.

  • NamelessTed

    yeah, signing with beat audio was a terrible idea. I was looking at getting one of the HTC One phones in the next couple of months but I just don’t want a phone that has the beats audio logo on it. I know that might sounds ridiculous but I like a clean looking phone and I really really don’t like the entire beat audio brand. I think they are marketing bullshit and are way too expensive and I want absolutely nothing to do with it. Having that logo on my phone would make me feel like a hypocrite and I would be embarrassed to be seen with it.

    • http://www.infotainmentempire.com pekosROB

      Just get a case that covers the back. Problem solved.

      • NamelessTed

        Yeah, no. I absolutely hate putting cases on my phones. It adds way too much bulkiness and makes you look fucking retarded when you pull it out. I also shouldn’t have to pay extra money to get a different backplate to make the phone not look stupid.

        I just want a simple phone with simple aesthetics.

        • thel0nerang3r

          If a case looks retarded to you, then why do you care that it has the Beats logo?

          • eallan

            How the hell do those two things follow in your mind? He doesn’t like bulky cases or beats logos. That makes perfect sense.

        • Good_Ole_Pinocchio

          Oh get a life man.

        • http://www.infotainmentempire.com pekosROB

          Use white-out.


        • ihatefanboys

          you’ll be wishing you got that case when you drop your phone and it breaks into a billion pieces on the subway. Besides, how old are you ?? what do you care what random people think of you ? And if your friends are that critical, then you need new friends.

          • NamelessTed

            I don’t ride the subway, I drive a car. Also, I haven’t dropped and broken any of my phones yet. And I am 25. It isn’t about what other people think as much as how I think about myself. I just hate beat audio, and bullshit marketing in general and I would hate myself if I bought any product that would support beat in any way shape or form. I would be a massive hypocrite and that would just be unacceptable to me.

            Also, if the phone is so fragile that it would completely shatter and break from a drop, then I want nothing to do with it. I dropped my G1 a handful of times and had nothing more than a couple of scratches.

        • sam

          Then get a shitty old Nokia and stop moaning…

  • DJm25

    signing with a crap quality company like beats is what did them in ,i think it was a smart choice to cut loose dead wight

    • http://mihai.discuta-liber.com/ tmihai20

      Just like the article says, the Beats headphones don’t add too much to the overall price. It is a shame they decided to do it, they could still include them in the flagship phones. Using a coupon is not bad either. I hope they’ll keep the Beats audio technology inside their phones.

    • kazahani

      Have you ever put on a pair of these? I listened to “Wolves at Night” by Manchester Orchestra on a pair of Beats Solos. I discovered a guitar part that I didn’t even know was there before, since you can barely hear it in the background on cheaper headsets.

      Yes, they are too expensive, but that’s only because people are paying that price, because they work as advertised.

      • DJm25

        yes i have used them ,sony makes better head phones with a cheaper price tag

  • b

    There is a slight improvement with beats software on the phone.

  • http://www.healthytiger.com Healthy

    As someone who works at a pro audio company I have to lump beats-by-dre in with Bose.

    You are paying for “better sound through marketing”

    • Zagrash

      “no highs, no lows, must be BOSE”

    • thel0nerang3r

      I’ve worked at a medical facility, it does not make a Doctor. So, you working at an audio company, does not in itself make you an audio expert. You could have been a door man for all we know.

  • Foxy

    They should have figured this out in the first place. Beats feels like a gimmick and is a gimmick. Should have put in a real good sound chip instead of just making an equalizer with the Beats brand.

    • Fulaman

      I agree kind of like what they did with the original Galaxy S series.

      • NT_

        Also agree. The sound in my O.G. Galaxy S is considerably better quality than my iPods ever were (and I did directly compare them). The software is buggy as hell (Vibrant), but that’s a different story.

        Maybe the beats EQ works pretty well, I don’t know. However, I do support HTC dropping the headphones to recover a little margin. I, and probably most frequent users, already have my preferred earbuds and wouldn’t even unravel the cord on anything that was bundled for free with an electronics device.

        And, I have to say, I am seriously considering the HTC One series, versus waiting for the Galaxy S III. I know that the S II is an awesome phone, but that’s not what I have & I’ve got a chip on my shoulder with Samsung from pulling the battery at least once a day for more than a year and a half.

        • kazahani

          I went from the Vibrant to the Galaxy S 4g, and the upgrade to Gingerbread fixed 90% of the bugs I ran into on my old phone.

          My advice to you would be to root your phone and get Gingerbread on there! I never did this, because I didn’t think it was worth the risk of bricking my phone or screwing something up, but now I really wish I had done it.

  • donger

    They need to make a phone without HTC sense, a pure vanilla google experience phone just like the nexus one again. And the beats headphones should have been an additional option, sell them cheaper than the regular beats.

    • Derek

      What would be nice is if you could just turn off Sense. If it wasnt so integral to the entire operating system. That way people could choose. Some love sense, some hate it. I like some of the widgets but hate how it is a total resource hog and its so intertwined in the OS that you really cant get rid of it. Even using an alternative launch doesnt do it. That gets rid of the sense launcher but thats about it.

  • R.S

    Now I’m not saying that having the iBeats are worth paying a premium price when buying the phone.

    However, I doubt that by excluding them, the price of HTC phones will be lower to the consumer. So even though iBeats are overpriced, having them included with phones is probably better than what the consumer will now get.

  • http://youtube.com/user/jawckamoe Marcus

    I think its sad that HTC is losing so much profit. They’re my favorite manufacturer at the moment. But I like Nick’s idea that they should add a coupon to discount the beats. That’d be cool.

    • eallan

      How awesome would it be if they started selling awesome well built phones without sense, and people rewarded them with massive profits, and other OEM’s started following.

      Sigh, I can dream.

      • dcds

        We all dream together.

  • Mustin

    Audio has definitely been frustrating on my Android phones. It’s something that Apple certainly does right. Their DA converters are way better and the volume can really max much louder and more clearly than any other phone I’ve heard. So I’m glad HTC, which is currently my favorite mobile device manufacturer, has taken an interest in audio quality. But I think like someone else already said, Beats is like Bose – most would think it’s better but it’s not.

  • WlfHart

    I think that coupon idea is definitely better than force including them.

  • rashad360

    In my experience, people are very picky about their headphones, I think it is a good decision to stop bundling those in with the smart phones. The coupon idea sounds like a good compromise, though.

  • ZzX44

    They shoulda signed with V-Moda imo. Superior quality (Build + Sound), better price, and no advertising on their headsets plus VoIP support and customizable plates.


    • kazahani

      ^ Huge headphone geek…

      No joke: V-Moda Crossfade Headphones are super-legit! They sound better than Beats by Dre or Soul by Ludacris. I have tried all 3 and the V-Moda Crossfade is my favorite headphone of all time!

      Don’t buy their earbuds though… waste of money. Get Klipsch S-4 earbuds. Only ones worth your time.

  • Nathan D.

    Well I never did like beats anyways and I got myself a good pair of headphones to, and I like skull candies way better then beats since they have a lifetime warranty and are cheaper to.

    • redraider133

      I love my skull candies. I think this is a smart decision on HTC’s part. Just focus more on the software and allow it to work with all apps/headphones and not just select ones.

  • Asbjørn

    This is what you get when you don’t care about your existing customers, only about sales numbers. HTC’s record regarding software updates is pretty terrible (not that any Android OEMs are much better). They are lazy and take ages to release even small patches and they’ll never admit to releasing a buggy update. The latest example being the Sensation XE’s update to ICS which has several known bugs. HTC has neither acknowledged them, nor fixed them.
    One reason Apple is so successful is that they got the update story right – unfortunately it seems that other manufacturers still don’t get that. But maybe a hurting bottom line will do the trick…
    If HTC had delivered prompt and frequent updates for existing customers, they would be more inclined to buy HTC again. As it is now you might as well go for one of the other brands – they are equally terrible. Frequent updates would show that they care about their users and want them to buy HTC again.

    • uknowme

      I guess that depends on what phone you are using. I know my Evo 3D has had at least 3 updates so far. I do like the coupon idea though. I don’t know if I would use it, but it is a nice incentive.

    • http://htcsource.com Nick Gray

      I may be biased toward HTC, but that doesn’t change the fact that your statement is completely wrong. HTC is currently the OEM to beat when it comes to releasing updated for its phones. HTC updated more phones to Gingerbread than any other OEM and it ahead of the competition when with ICS updates.

      Yes, there are bugs which need to be addressed, no one is denying that. But as with all large companies, bugs get prioritization based on severity. If it’s something minor, HTC will focus on releasing more ICS update first before going back and fixing an issue that causes a problem for a small number of users.

      • Asbjørn

        No, HTC is not the OEM to beat regarding updates, Apple is (and no, I don’t own an iPhone and never have). Apple releases a major (or minor) version of iOS for all devices on the same day and they are updated independently of any carriers.
        Android 4.0 was released in November 2011. Having to wait until late March 2012 – and then only getting Sense 3.6 rather than Sense 4.0 – is not stellar performance. It is a clear signal from HTC that they are punishing existing customers for not rushing out to buy a new phone with Sense 4.0.

  • Dave

    Well I didn’t care either way because I feel like Beats by Dre are overrated, overexposed, & overpriced, so I’m good on not having them. Not like I was gonna use them anyway. I have my own pair of high quality headphones & earphones, like will go on. But, I do think it would’ve been a good idea to at least include a reasonable discount via. coupon. Whatever it takes to save HTC is good for me. I rather then give beats so-so headphones the boot, than them to drive HTC down with them.

  • Jeff donuts

    I’m shocked I tell u

  • Hakon

    I think they should just do as this article suggests! Cut the cord on beats headphones! Wireless beats would make me buy another htc!

  • Derek

    I have a Rezound and the iBeats are better than most headphones that come bundled with phones. But in all honesty, the number of people who use their phone as an ipod must be low. The battery life is already so short just sitting their idle with no display on, who can listen to music on it? I have an old school ipod I use for music and it lasts days on one charge.

  • tao.lviv

    Personally speaking Beats Audio was the only thing why I preferred HTC over Samsung. Now it seems that Samsung is taking my favor.

    Sound is important for me especially when You pay 500-700$ for the cell.

  • yankeesusa

    Beats headphones sound great and they are meant to compete with bose headphones but attract a more younger more technologically savvy crowd. Even if they don’t included it with their phones htc will still do good and beats headphones will do good also. I know a lot of people who bought them just as a style and not because they may sound good. To me I would never spend as much money as they cost. I’ll just wait till I can get a pair on one of those daily sites or buy a pair that gets good ratings and then pair them with my beats htc lte phone. Either way if htc is saving money this way and passing it on to the consumer then I’m all for that.

  • http://www.infotainmentempire.com pekosROB

    Wow, after reading the article and the comments… there are so many stupid people in this world.

    They get so upset over a PHONE?? C’mon, son!

  • spazby

    i would much rather separate the purchase and buy good quality headphones that i would use with all devices…. no need for the bundle

  • SarahBee

    Give me that coupon so I can choose what I really want. The Rezund went on sale for $300. Yeah it has a great display and a dual-core processor, but the commercial was centered around the headphones and the music experience. Don’t charge us for things that we don’t want or may not even need.

  • ihatefanboys

    Beats dont bring anything to a smartphone. Theyre a name brand that is trendy, so everyone is wearing them, whether they have a smartphone or not. Just look at your local subway or bus, people buy them because of the name, or because their friends have them and they dont want to look uncool. Im sure the quality is no better or worse than a Sony pair of headphones. When you spend that much money on something, you convince yourself its THAT much better. Ive listened to music through a Beats headset and then through a $5 dollar pair of headphones i bought in a local bodega, no difference at all. I dont need Beats in my phone either, my G2 has amazing sound, and its been out almost 2 years….its HTC that makes the quality sound, not Beats.

  • abusedtortoise

    I will end up buying the HTC EVO 4G LTE REGARDLESS of the lack of Beats ear phones. Also, I will want to maximize my experience and will walk over to Target or Radio Shack and pick up a pair of Beats Audio headphones/earphones. HTC is not making friends with this but I will buy Beats headphones so I suppose it was a good business move on their part

  • WowBiased

    Seems way too biased against HTC. They actually said that the Beast headphones were not included to keep the price of the One X down, not to increase profit margins. Too much opinion that seems uninformed and biased. Oh wait, cnet… that explains it. Are they still whining about how the U.S. only got a dual core even though the S4 processors outperform the Tegra 3? Perhaps they would suggest Intel’s original quad core over the more advanced i7′s if they are only dual core. Their ignorance is shameful.

  • Dre beats

    Good artical.

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  • jacbetts

    Just thought I should say something here, I am typing this on the HTC sensation xe, my old phone was the HTC sensation, I have it and it still works. I am a musician, so audio quality if very important to me, and while I agree beats are very overrated, the beats equalizer and headphones really do make a difference, I have listened to the same song on both phones. first time using a pair of skullcandy hesh headphones with the equalizer on on my xe, and with my sensation. Xe won. non biased my friend helped me I couldn’t see the phones. and then I did the same but I used beats and similar senheiser headphones, beats won. so Yeh while beats are overrated, they are still good, and The phone itself is worth the price I pay each month, far as I see it I get a decent pair of headphones for free.

  • Gaz

    I have the sensation xe with beats audio, i didnt get the ibeats though. I was pretty miffed as the sales man said i would then told me that they stopped when i went back. The phone is awesome, everything is quality,mand to have a 1.5ghz processor in a phone, thats sweet. I have sennheiser in-ear buds, and they do it for me, i paid £60 for them, a fraction of the ibeats. and with the beats enhancement, the sound quality is immense. Well done HTC for there best phone i have owned yet.

    Previous HTC phones: Wildfire, Wildfire S, ChaCha, Desire, Desire S, Desire Z and Sensation XE with Beats.

  • Dano Mc

    what are ya all giving out for if people wanna buy beats its there choice footballers wear them earnering like 200.000 a week they nt thugs as yur man put it they. are quality head fones i love mine quality sound blocks out all sounds gt a pear of sonys before got me beats they were rubish could hear d music in gym more then wat i was listen 2 and doz who say beats arent worth it yas obvisouly havent read d story bout d kid who had hearing problem his parents gt him beats and he can hear his music wen he couldnt with anyother headphones

  • Tim C.

    iBeats earbuds sound great and they DID tip the scale in favor of the HTC Rezound vs the Razrs. Listening to music while working is a must. However, periodically I hear an anoying static hiss (interference?). It lasts for a quite a while. This occurs no matter what connection type used even if the unit is powered off (sleeping). I think the phone is great. It has many functions it can perform, but I will consider not buying HTC again if they let this problem linger without resolution.

  • raw

    They cheated us out of the headphones almost all other phones come with headsets

  • patrick

    can i just point out that most of the “magic” behind beats inst actually the headphones its the beats software on the device my wife has a sensation xl with beats turn the beats audio on with the beats plugged in it sounds better do the same with a pair of £3 headphones sounds exactly the same when you switch on beats audio on the phone,

    also the beats that came with the phone died after 5 days while her fake beats gaga’s she paid £20 for from china are still going strong after 2 years and sound better than the proper things

  • doogie md.

    I can say its not the software I have a one x but kept my sensation xe beats headset the standard headphones sound destorted at high vollume the beats sound clearer no matter high I turn the vollume up..

  • jman

    I have the sv one and when I plug headphones in it pushes them I have some senhieser headphones and they are alright but beats is reputable from my perspective it does what it Is supposed to do so no complaints here