It is quite easy to identify Luke Wood at any Beats by Dr. Dre event: simply search out the quiet figure in the midst of an ostentatious rap entourage or a mob of hormonally charged teen groupies. But don’t let his mild-mannered appearance fool you; pair him up with a Stratocaster and he will rip out a bad-ass tune from his days as a punk rocker. Give him a seedling of a startup and he will build it into a multinational corporation.
Although he had worked closely with Beats’ co-founders, Dr. Dre and Jimmy Iovine of Interscope Records, since the company’s start in 2008, Luke Wood did not officially join Beats until February 2011, when he stepped in as President and Chief Operating Officer. Many industry insiders have credited Wood with the recent purchase of MOG, a subscription music service and Beats’ first major acquisition.
In light of mounting competition within the market for premium audio accessories, Beats was still able to hold onto its 56% market share for North America, with a revenue figure of over 300 million dollars. In part, it is thanks to Wood’s ability to drive up momentum for the brand, both here and now overseas.
During Beats’ most recent launch event in China, we sat down with this songwriter, guitarist, and one-time music exec to chat about the success of Beats Electronics, future challenges, and the how-to on staying ahead of the competition.
We’ve all heard of the job title, CEO, or, Chief Executive Officer. Tell us a bit about your position as Chief Operating Officer for Beats Electronics and how you got here.
As you know, the company was originally a concept between Jimmy Iovine and Dr. Dre. In addition to Beats, Jimmy is also the Chairman of Interscope Geffen A&M. When Beats first started in 2008, I was still over at Universal Music Group (parent company of Interscope Records), where I managed the Rock Music genre and worked as the Chief Strategy Officer for Interscope Geffen A&M (IGA). In fact, I was still at Universal until two years ago, when I became a “full-timer” at Beats. The transition, however, was quite easy for me. I’ve worked closely with Jimmy ever since 2003, when I moved from DreamWorks Records to Interscope. Once at Interscope, I got to know Dr. Dre quite well during in the process.
Officially, I’m known as Beats’ Chief Operating Officer–I oversee the company’s day-to-day operation, from product designs, marketing ideas, to logistics and customer service. The thing is, we do not follow the typical business managerial structure, so you’ll find any one of us doing anything and everything just to get the job done, much like a Silicon Valley startup.
You majored in American Studies while at Wesleyan University. So, what attracted you to the music industry after college?
Music was the reason why I went on to major in American Studies. I started off as a guitar player but was into hardcore punk. Around the same time, I thought a lot about certain political ideologies and their associations with music. That was how I ended up at American Studies. Near my final years at Wesleyan, I got an internship with A&M to learn about the commerce side of music. I got sucked in and have stayed with it ever since.
Do you still record your own materials on the side?
Yeah, I have my own recording studio and everything… I don’t think I will ever not play…
In addition to Beats by Dr. Dre (headphones) and the recently purchased MOG (online music service), what are Beats Electronics’ other business components?
So, Beats Electronics is really the umbrella company. Underneath Beats Electronics, there is the product side, which manages all the hardware, like headphones and speakers. In addition, we have Beats Audio which focuses on optimizing sound quality through software. Some of the best examples are the special Beats Edition laptops by HP, HTC cellphones, and hi-fi systems in certain Fiat, Chrysler, and Jeep vehicles. MOG is actually the foundation of Beats Music, a business venture co-owned by the owners of Beats Electronics. It will be something you hear more about soon.
In 5 short years, Beats by Dr. Dre grew from just an idea to a multinational brand with a revenue of $350 million (2011 figures). What are the few key points that you think made Beats by Dr. Dre so successful?
The success of Beats is based on two fundamentals: great designs and great sound. The brand’s proliferation came from marketing. But if the product wasn’t great, no amount of marketing would’ve made it work. The way I see it now, there was a “white space” in the market, and nobody paid attention to it ‘til Beats came along. Take, for example, consumer electronics. If you look at television display size–the move from standard resolution to hi-def, graphic processors, and so on–the incredible amount of investment companies poured into R&D [research and development] and marketing for better display resolution…yet, sound was getting smaller and smaller to the point of, you know, the iPod Nano. You saw a sort of commoditization of sound, where the earbud headphones that came with your mobile devices were less about quality but mainly for convenience. It is one thing to have both the visual and the audio. It is another thing to have audio only.
How do you stay ahead, then?
We saw the problem and found a solution. First, we designed a great product with great sound quality. Then, we promoted that product like it was another Eminem, Jay-Z, or Lady Gaga. Lastly, we innovated with a lot of R&D into the technology side and continue to do so today. But because we’re “record makers,” we have a different take on what innovation is. You’re a music fan, so you know every record sounds different and the sound of a musician changes throughout his or her career. That’s like what we do here at Beats. We’re really proud of Beats’ peerless quality when it comes to sound, but we’re really passionate about how we can build upon that in our next product.
As Beats expands onward to various international markets, what are some of the foreseeable challenges you will be facing?
One of the key challenges going forward is to have the patience that as we scale the brand, we do it correctly. Take China for example: for us, it wasn’t the question of when to come here. We needed to be here yesterday. The market and culture in China are moving so quickly that we have to be part of it. But at the same time, we have to have the right approach. So, we will be working with local artists who understand the DNA of our brand, to market our products correctly through channels like Weibo, and learn about customers’ habits. It is really about having the patience to do things right from the start and not just rush in.
Why have you decided to enter the Chinese market now? How do you envisage it?
We’ve always had a strong presence and connection to China since the start of our brand via the grey market to the explosion of counterfeits on the black market.
Now, as a young a company transitioning from a licensing business to a freestanding manufacturing company, we have an opportunity to spend more time on global expansion and legitimizing and educating consumers on the quality and authenticity of our product and brand.
China is a natural fit for us because of the cultural connection its people has with music, as well as with quality and luxury.
How would you like to integrate Beats with Chinese culture?
We see everything through a global lens with a local perspective. So, China is no different than how we approach any market – by being a part of the daily culture and conversations around music and sound.
Specifically for China, we’re starting with the social conversation, launching our first Weibo channel where we’ll be producing content.
As we spend more time here and experience and grow as a brand in China, I’m sure it will inspire us on the product side, impacting our portfolio development.
When you plant yourself and your team in a new culture, you become smarter and it opens you up creatively. We have no doubt that will continue to be inspired by the market.
You’ve launched the pink Beats by Dr. Dre portable Pill speaker with Nicki Minaj in April, followed by the release of Beats Solo HD with artist FUTURA just a few weeks ago. Can you give us a hint of what else to expect from Beats in the coming months?
This is just the start for us. Going forward, we want to do a lot more artist and athlete collaborations. We came out with Powerbeats by LeBron James not too long ago, but we’re going to have more projects with him in the near future. For Beats, it is a combination of interesting collaborations and certain sectors. One of the first collaborations we did for the Beats Pill Speaker was with Girl & Chocolate Skateboards, co-owned by movie director Spike Jonze. That was unusual because no one expected it. But, rather than the obvious, we want to surprise our customers. The second thing is, we want to be more localized. Soon, you will see Beats products with high relevancy to the local or regional culture–so you will have designs with only New York City, London, or Shanghai in mind.
Thank you for your time and enjoy your stay in Shanghai!
Special thanks to Luke Wood, Beats by Dr.Dre Team, Nikki and Davena Mok