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Your Ears Belong to Dr. Dre: That'll Be $300 (Update 1)

Stocks in this article: HPQ AAPL MSFT

My own limited market research here -- OK, I asked my daughter and my niece -- is that kids are buying them both for the quality of the sound and for that modest, musical-looking "b" on the side, Dre's imprimatur.

Beats have problems. Reviewers have noted the cords break and the other materials appear to be a little cheap, plus the balance of the sound isn't always to individual tastes. If you searched, you could probably find headphones more to your liking for less money.

But on the whole, Beats have earned a solid reputation as a reliable brand with better-than-average sound quality that is cool to wear -- to be seen wearing. Quality and fashion feed into each other.

This is the same approach that propelled Apple (AAPL) products to complete dominance, the same one Microsoft (MSFT) can't seem to get right.

Other companies have benefited from Beats' success. Founded in 2003, Skullcandy has a wide line of headphones appealing to the exercise crowd, professionals and young people. Its lower-priced, colorful, distinctive products have wide distribution.

Recently, Skullcandy came out with its colorful Aviator headphones line, sporting a sponsorship from rapper/producer Jay-Z and touting an improved audio experience.

A Beats partner, Monster, recently split with the company and unveiled its own line at the Computer Electronics Show in Las Vegas. A showpiece is a product by an Italian designer -- maybe a little too frou-frou for a hip-hop crowd item, but building on the same theme of fashion and audio quality.

Beats has the first-mover advantage -- 51% of the $1 billion headphone market, according to Forbes. Next move: expanding its market reach, licensing its technology to partners in new sectors.

Beats didn't even bother to put up a display this week at CES. Didn't have to. Its partners did it for them, advertising like crazy.

Phonemaker HTC has a little black number with a Beats "b" on the back. Computer maker Hewlett-Packard (HPQ) debuted a new monitor featuring built-in speakers with Beats technology and plans to include it in a complete line of computers.

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