By Sarah Townsend
Following the Middle East launch of the world’s most expensive headphones in December, Andreas Sennheiser, co-CEO of Hanover-based Sennheiser, explains how the company is tapping into the region’s audio fanatics and why 3D ‘immersive sound’ is the future.
Almost 40 years ago, German audio specialist Sennheiser set its engineers an ambitious task: to create the world’s best headphones, irrespective of cost.
By 1991, the task was complete and the legendary Orpheus HE90 launched for sale with a price tag of $16,000 – about $28,000 in today’s currency.
Fast-forward two decades, and Sennheiser has done it again. Its updated version of the HE90, the Orpheus HE1, launched in the Middle East in December priced at a whopping $50,000.
Assembled by hand and made to order – there were only 300 in circulation at the time of writing, including promotional sets – the headphones are attached to a Carrara marble base displaying the exposed tubes of the amplifier system.
As with many ultra-luxury products, the design can be customised for an additional cost. One Japanese buyer, for instance, has requested that the base be made from pure jade instead of marble. And, in the weeks following the Dubai launch, the company was no doubt awaiting its first order for a headset clad in gold or encrusted in diamonds.
It may be an impressive status symbol and stylish piece of furniture, but the HE1 is first and foremost the audiophile’s ultimate indulgence. The sound is superb, but there is little doubt that the market for a $50,000 pair of headphones is small.
So, why did the almost century-old family business go to the trouble of creating such a product? Third-generation founder Andreas Sennheiser, who is co-CEO along with his brother Daniel, is frank.
“On the one hand, it’s because we can,” he tells Arabian Business in an interview in Dubai. “We are a private company and can afford to develop a product like the HE1 over 20 years, whereas if we had shareholders and quarterly results we could not.
“One the other hand, it’s because we believe there’s a world out there that appreciates an experience beyond just listening to music.”
The CEO, who admits he was still in his 20s listening to classic rock at the time the Orpheus HE90 was released, explains that the company suffers from what he terms ‘creative dissatisfaction’, “where everyone is permanently questioning the status quo”.
“The reason we developed the original Orpheus was to make a point: to prove that there’s just one company that can develop a product like this to this level. Twenty-five years later, we found out that the world is ready to take another message like this.
“There’s so much clutter out there in the field of headphones that it’s important to stick out. With the HE1, we went to the limit of what was physically possible in terms of sound reproduction and no other company would or could do something like it. That’s the reason we did it.”
It is a noble cause and in keeping with Sennheiser’s brand slogan, ‘The pursuit of perfect sound’. The company was founded in 1945 by Fritz Sennheiser after the end of World War II. Its first employees were seven of Fritz’s fellow engineers from the University of Hanover who worked in a laboratory called Laboratorium Wennebostel – or “Lab W” for short – initially building transmission measurement equipment before producing the company’s first microphone in 1947.
In 1958, the company was renamed Sennheiser Electronic and 10 years later created the first ‘open’ headphones – so-called because they let in a degree of external sound to produce a more natural listening experience. This triggered a boom in headphone sales and the company went on to establish itself as a key global player in the evolution of audio technology.
Today, it produces a wide range of consumer electronics, from headphones and speakers to recording devices and microphones, and also delivers customised audio solutions for musicians’ live tours and corporate events. For example, Sennheiser has produced gold-plated microphones for solo artists, and a sophisticated wireless microphone network for singer Pink to stage her jaw-dropping trapeze act during the 2014 Grammy Awards.
The company is private so only limited financial information is made public, but its latest annual report, published in June 2016 and covering the 2015 fiscal year, claimed turnover had hit an all-time high, rising 7.5 percent to $726.10m. Profit before taxes amounted to $32.25m, the number of employees rose by 4 percent to 2,704 worldwide, and investments in research and development (R&D) increased by 8.5 percent to $49.9m.
According to the report, Europe, the Middle East and Africa is Sennheiser’s strongest region economically, with a total revenue of $378.06m and average year-on-year growth of 1.7 percent. Germany, its home market, saw double-digit revenue growth.
The company does not break down figures by country, but the CEO tells Arabian Business the Middle East, and the UAE in particular, is among the main contributors of overall growth, for three reasons. “First, it’s a customer base that very much appreciates our quality offer. Second, the rate of development here – population growth and the untapped potential that comes with that – is a huge driver of our growth,” Sennheiser says.
“Finally, we have a lot of project business for clients here in the Middle East, and these are one-off projects that bump up the financial figures for a particular period.”
Over the months the annual report covers, Sennheiser manufactured 7,000 receivers (interpretation headsets for conferences) for an auditorium in Turkmenistan; 4,000 receivers and wireless microphone channels for a hotel in Doha, and equipped all of TV news network Al Jazeera’s studios with microphones and other audio technology required for broadcasts. Each contract was worth millions of dollars, Sennheiser says.
He predicts “moderate single-digit” growth to continue in the EMEA region over the next 12 months, although 2017 is likely to be a stronger year than 2016. “Growth was slightly slower last year, mainly because we are in a transition phase for positioning our brand in the higher premium space, which means we are deliberately phasing out some products in the lower end, [with a short-term impact on sales].”
Sennheiser says a string of new product launches are planned for the Middle East in the coming year, in the fields of 3D audio, recording and reproduction. He is vague about the details, but says the company plans to bring new releases from its ‘AMBEO’ category – the next step up from mono and stereo. They include recording and playback devices that give a 360-degree “immersive audio” experience that can be connected up to smartphones, virtual reality headsets and other hardware. The technology will be of particular interest to the region’s numerous YouTube content creators, Sennheiser claims.
Headphones and other audio devices are becoming an increasingly relevant piece of the Internet of Things (IoT), and this is a trend Sennheiser is seeing worldwide, not just in the Middle East, he adds. “Sooner or later, all our high-end products will have a lot more wireless connectivity. Headphones will get smarter, so they are not just a listening device, but also a control device for utilities, entertainment, Google Home, Amazon, and so on.
“They will be the managing interface for speech recognition and need to seamlessly integrate with [other technological systems being created to make our lives easier], and this plays well into our hands.”
Wireless headphones come embedded with cybersecurity software and “so far we haven’t reached the stage where they are being hacked”, says Sennheiser. Still, the issue is of growing concern to anyone operating in the IoT space and Sennheiser says the company is working to keep abreast of security developments. “The level of attention we give to quality assurance, especially on the software side, is sometimes even higher than the effort we put in to get it mechanically right.”
Technological advances have made music “ubiquitous”, he says – the success of MP3, for example, was based on convenience as it made music portable and accessible. However, he believes there is now a counter trend away from digital towards high-quality, high-resolution audio formats, such as vinyl.
“There is a group of people looking for the ultimate experience rather than just the convenience of music consumption. And the ultimate experience is not just how the music is reproduced but also the different facets of the product, be it build quality, materials used and so on.
“That’s why we pay so much attention to this – the leather on our Momentum headphones is handicraft ‘pitara’ and we use the best stainless steel on other products, to create a multisensory experience not just an audio device. That’s a trend we are seeing everywhere.”
Sennheiser is predictably careful when asked which audio type he prefers – digital or analogue – although he seems to have more of a personal affinity with analogue. “I don’t have a preference, to be honest. I love to play the piano and guitar, and when it comes to making music myself, I am very much an analogue person.
“When it comes to consuming music, I like the special sound of vinyl. But I wouldn’t say I rate it over a digital reproduction, particularly if we are now going into the realms of 3D audio, because the digital world can give you a more immersive experience.
“But, for sure, the analogue world has a certain touch because it triggers neurons differently than ‘cleaner’ [digital] music.”
His company will keep its feet firmly planted on each side of the fence, he insists. “Professionally, we will always have our home on both sides, because of our ties to global artists. At the end of the day, the human voice is an analogue device, even if some of the music production and live performance is done digitally.
“But when it comes to distributing that to the consumer, digital formats will probably be the most relevant means.”
Many Middle East countries are in the thick of digitisation, but, paradoxically, that has created the reverse trend of which Sennheiser speaks. “The region has reached a stage where there is a strong focus on digital, which then evokes a counter-reaction from audiophile enthusiasts that raise the flag for the analogue world. That’s good, because it balances out the opposing trends.”
Meanwhile, the rise of live-streaming events has forced the company to adopt new skills to disseminate recordings to an internet audience. “The products in artists’ hands need to seamlessly tie into that process, so we have had to learn not just how the microphone connects into a mixing consul, but how does the signal flow run from detection of the voice right across internet channels to somebody who’s 10,000 miles away? It’s no longer about doing a perfect conversion of nano to digital.”
The company has adopted a “conservative” approach to business and is fully self-financed and debt-free, the CEO says. “We take the pace we can afford. We earn first and spend later, and that’s why you’d never seen a 40 or 50 percent growth rate at Sennheiser, because growth per se is not the target.
“In the boom years, people came to us and said, ‘Why don’t you take money, why don’t you participate in this huge growth?’ And then, in the slow years, everyone turned to us and said, ‘How did you know, how have you survived?’ And the answer is, we are just entrepreneurs with what we believe is the right risk profile and the right attitude to growth.”
The company has no ambitions to go public because it values its independence and believes having shareholders and quarterly results would threaten its “innovative spirit”, Sennheiser says. “IPO is not for us. We believe it’s for the good of our customers that we focus on them and not on analysts and banks.”
As it approaches its ninth decade, Sennheiser would be forgiven for wanting to see its fourth generation founders take up the reins. At present, Andreas and Daniel’s children are “too small to realise what the family business is about even if they are naturally inclined to music”, but there was a period of external management between the current CEOs and their father and they would not be averse to this again. “Just carrying the name Sennheiser does not necessarily qualify you for the job. There’s got to be other criteria,” says Andreas.
However the family decides to head up the company in future, Sennheiser looks to be in a strong position to spearhead the next chapter of audio development in the years to come.
Review: Sennheiser Orpheus HE1
‘The most expensive headphones in the world’
There is an element of theatre to Sennheiser’s new Orpheus headphones – the previous model of which was produced in 1991 with a price tag that even in today’s currency would make the driest eyes water.
The new version, which went on sale in the Middle East in December costing $50,000, come mounted on a slab of Tuscan Carrara marble – the same type used by Michelangelo to carve the statue of David and which has unique acoustic properties - and they take two-and-a-half minutes to power on.
During that time, the volume knobs and exposed tube amplifiers rise slowly and regally from the dustproof box, giving the listener time to fully admire Sennheiser’s handiwork. And so they should, for the German firm has spent 12 years on a mission to create the world’s best headphones - no matter the cost – and they look as beautiful as they sound.
Before I donned the extremely comfortable leather headset, I was prepared to be underwhelmed. What headphones could cost $50,000, the price of a BMW 5-series car? Within seconds of listening, however, my assumptions fell apart. This is a pair of headphones that will ruin all other headphone experiences.
The sound is crystal clear – almost alarmingly so, because it is both delicate and powerful at the same time – and the reproduction is the truest I have heard. I chose tracks that I have been listening to since I was 16 years old and knew like the back of my hand, but I still heard intricate layers of music I had never noticed before.
This level of sophistication is due to the combination of technology used – the HE1 is an electrostatic headphone system with an innovative amplifier concept that combines a traditional tube amplifier with a transistor version. It has a frequency that extends well beyond the range of human hearing (8 Hz to over 100,000 kHz), according to Sennheiser – you could turn it up full volume and, literally, blow your mind.
“I am very proud of this exceptional product,” co-CEO Andreas Sennheiser said during the launch last year. “It is able to deceive our senses...creating the perfect illusion of being directly immersed in the sound.” Unlike most promotional statements, this one rings true.
It may be a preposterous way to spend money, but if I had a spare $50,000 knocking about, would I buy the HE1? Over a BMW – any day.