Tell us more about Sennheiser’s India story.
Sennheiser has a tradition -- a legacy, if you will -- of being in markets very early, usually when they are not yet fully developed, because we believe that a premium brand needs to be present not only there when there is a lot of money to be earned but also to develop the market by itself. This is why we went to China 25 years ago and that is why we went to India 12 years ago (in 2007). Even in India, we had two different journeys. First was our consumer journey, where headphones were perceived as just a giveaway accessory with a phone. We built that category from scratch. Being there from the beginning is a strong reason why we have a premium positioning now. For the professional segment, Sennheiser products were reaching the market even before we officially set up shop. But it was the first time when we had our own crew on the ground plus the service plus all the installation support. So that was the beginning of being serious about building the audio infrastructure in India.
What is the biggest advantage and disadvantage of being a family-owned company?
A big advantage is that because of our independence, we are 100 per cent self-financed and that means we can really focus on what customers need. A good example of this is the first true wireless earbuds that we released in 2008. The market was just not ready. Not in India and not anywhere else in the world. But it [wireless earbuds] was invented by us at the time and we kept refining the technology. We have now launched the Momentum True Wireless earbuds when the market is ready.
About a disadvantage, from purely an investor's point of view, one could argue that new trends allow you to assimilate quick money. But then again, grabbing some of these trends can be unhealthy in the long run.
You and your brother Daniel took over as co-CEOs some years ago. Do you spar with your brother?
Does Sennheiser prefer contract manufacturing or own factories?
We do have four of our own manufacturing plants -- in Germany, Ireland, Romania and the US. But we also have strong manufacturing partners in China. We outsource certain steps to China. We do all the acoustically relevant components like the transducer while our China plant can do the final assembly and the packaging. The effort is to use the best supply chains to have a fair price point and maintain our centres of quality.
Last year, there was there was some talk of Sennheiser setting up an India manufacturing plant. Is that still on the cards?
We are always looking at how mature a market is and whether it makes sense to localise production. We do not feel like there is a short-term opportunity to manufacture here at the moment. That being said, we explore this option every two years. So it is still a possibility.
Headphones need to be heard before they are bought. How do you get around that obstacle while selling them if you do not have your own stores here?
Our share of online sales is increasing but we have a good footprint on the ground. With large format retail partners like Croma, customers have the opportunity to try out our headphones before buying. When it comes to online, we have a fair return policy in place with partners like Flipkart. If a customer feels he or she has misjudged something, it can be returned within 10 days.
Sennheiser’s India catalogue includes a wide range of products, starting at Rs 600-700 and going all the way up to HE1 priced at Rs 45 lakh. Does such a wide price range dilute the brand?
This is something we extensively discussed. We are on a journey to premiumize our portfolio. The entry-level products you see in India are not available in many other countries. At the same time, because we are customer-oriented, we do not want to be elitist. Our goal is to offer the Sennheiser experience at all price points. As the buying power of a customer develops, he or she can upgrade to a higher quality and a higher price model.
Depending on whom the product is for, there is a perception that how it looks can be more important than how it sounds.
There was a time when the ‘flashiness’ of the product was rated higher than the quality. Since the past couple of years, we are seeing a higher importance being placed on sound quality. It is also important to have stable wireless connections and better integration with other ecosystems like iOS and Android. This change is just in the last three to five years -- a shift back to preference for higher quality products.
Which price bracket sees the bulk of sales in India?
We see the strongest growth in the upper categories, especially on the wireless side. Our portfolio has changed to include more wireless products -- about four times more wireless products this year than the same period last year.
Traditional audiophile logic has always claimed that wired connections are better than wireless. So how do tenets of audio quality and wireless connections reconcile with each other?
We can see that the younger group of audiophiles have no negative connotation with wireless. Technically speaking, we have been working hard to ensure our wireless connections offer the same level of transmission quality as a copper cable. But it is true that many still perceive it as being inferior.
Sennheiser makes a microphone for virtual reality (VR) applications, the Ambeo VR Mic. Why is this important and are there other companies making similar products?
The Ambeo ecosystem starts from the recording side -- through processing, mixing and playback. Currently, there is no other company that covers this full chain. We also do training on how to record immersive audio and provide the right software tools in the middle and the playback devices that allow you to enjoy appropriate ambient sound. The word Ambeo is a play on the word ambience (a 360-degree audio experience). We also see it as the next logical evolution after mono and stereo. Have you ever wondered how we can hear 3D sound despite having only two ears? It was only a matter of time till we found the sonic algorithms and knowhow to convert 3D sound to a binary signal.
Do you see augmented reality (AR) and VR as viable segments?
Absolutely. They are small right now but there is a big opportunity. We are seeing so many companies focused on visuals (getting the images and artificial worlds right). No one has focused on the audio so far, which gives us a chance to chip in with our solution for every AR and VR company. Even with AR and VR, sound gives you the cue about where to look. If something happens behind you in a 3D world and you do not get the appropriate sound from the appropriate direction, you might miss it. So think about products like Magic Leap, VR goggles, Oculus and Microsoft HoloLens. They all have the need for perfect audio in order to make their experience seamless.
Sennheiser seems to be getting into a new category. We heard about the Ambeo Soundbar -- a premium, 2,500 Euro one-piece speaker system with Dolby Atmos. Is there a market for this in India too?
Currently, we are focusing on the European and American markets. That does not mean it is not coming to more markets like India at a later stage. It’s just a matter of sequencing. It is our first product in this category. Plus, it is not really a sound bar. We like to think of it like a multi-speaker system in the form factor of a sound bar. It projects sound from nine speakers into the room and there are speakers on the sides and the top in addition. When it comes to this product, it is common to see people turning their heads around, looking for speakers that just are not there. The idea is to give you a powerful multi-speaker installation without wiring.
How do you decide which products to launch in India and when?
India is a market where we learned a lot about adopting new technologies. For instance, for electronic news gathering and mobile journalism, India was faster than most of the Western or mature countries. Plus, users are smart and smartphone usage is on the rise. Our conclusion is that when it comes to mobile applications, India is a better market. For other products like the Soundbar, India may not be the first market we launch in.
How big is the professional market for Sennheiser? How do reach those consumers?
For professionals, we have two divisions. First is business communication. Our main partners are integrators, architects and system planners. We would like to showcase to end users how great it is to have a ceiling microphone installed in a boardroom and not bother about a mess of cables on the table. Next, for pro audio, our customers are sound designers, engineers, movie producers, artists on stage and so on. These are the people we work with because they share our passion of entertaining people. We stopped making aviation headsets a while ago. This was a tough decision to make. Being a pilot myself, it was tough to stop making something I used regularly. It was a necessary decision after many years of staying at a relatively small market share.
Sennheiser is nearly 75 years old. Did you have any missteps?
In 75 years of our company, we have been at the forefront in many categories. The first wireless microphone in 1958 came from Sennheiser. We made the first hi-fi headphones in 1968. These were both commercial successes. The first surround system also came from Sennheiser in the 80s. But it was a commercial failure because at the time, there was no content available. I mentioned this previously, but the first true wireless earphones were launched by us in 2008. They never did too well either.
Was price a reason for the failure of the first true wireless headphones?
Those were about $299, which is roughly the same price point as the product we have today. It was not about the price or the technology challenge but more about social acceptance. At the time, was it okay to walk around with individual earbuds in your ears? Ten years later, it is perfectly fine to walk around with earbuds.
Is there higher interest for Sennheiser from tier 1 or from tier II and III cities?
We started our efforts with tier I cities but we are also present and available in tier II & III thanks to the online market. For the pro segment, there are a lot of smaller installations. But for those, we rely on system integrators.
What is next for Sennheiser?
If you look at the three generations that have been in charge of running the company, we have had three focus points. My grandfather was the researcher and inventor. At the time, there was a market for everything he could think of and build. When my father took over, he took charge of expanding the company. And now, since my brother and I are in charge, we focus on collaborative aspects -- integration with other companies. By that I mean our headphones are connected to Google and Apple cloud services. Another example is Amazon. They have their own smart assistant now. We have to fully integrate with and co-develop with such companies, which is probably our task for the next decade.
The next generations of products will have smarter services built in. One example is simultaneous translation. You speak your language and I speak mine -- we just sit across the table from each other and have a conversation with everything being translated and fed into our ears in real time.
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