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Fake Dr. Dre's Beats Headphones Bonanza

By Johan Nylander for CNN | 10/14/2013, 3:57 p.m.
Three weeks ago, hip-hop star Andre Young -- better known as Dr. Dre -- made news as his Beats Electronics ...
In an attempt to trick customs officials, counterfeiters send fake Beats in two boxes; the outer box, on the right, has a made-up name to hide the real goods. Photo by Johan Nylande/CNN.

"Today, the premium headphone market is defined by fashion and brands as much as it is by sound quality," Ben Arnold, director of industry analysis at market research firm NPD Group said in a recent report. "One third of premium headphone buyers are under the age of 25 and many of these consumers view headphones as equal parts listening device and fashion accessory."

Richard Kramer, analyst at Arete Research, added that better audio quality in smartphones is also one of the main driving forces behind making high-end headphones viable.

In the U.S., sales of headphones rose by a third last year to $2.4 billion, with Beats by Dr. Dre making up almost 70% of all high-end headphones during the Christmas period, according to market research firm NPD. In Europe, sales of headphones hit an all-time high in the first quarter of the year, figures from market research group GfK show, with premium headphones leading the way. Total sales increased by 9% during Q1 on Europe's 17 main markets to 304 million euro (US$410 million), according to GfK.

Real or fake headphones?

At another Shenzhen store, a sales executive at a factory and trading company, connects a pair of fake Beats Pro to her iPhone and puts them on the reporter's head. The sound quality is surprisingly good. In the U.S., an original pair would cost $400. She offers her best quality headphones for the wholesale price of $70, medium quality for $45 and "so-so quality" for $30.

"Medium quality is most popular, but the trend is going towards high-end. Consumers want good sound," she said, adding that she can deliver 100 units of any Beats product by the following day. For 1,000 items it will take a week. "Since it's copies, we don't want to have too much in stock," she said.

On the streets and down in the subway, in-ear Beats headphones are sold for as little as $1. According to the company website, real in-ear Beats sell for $100 and up.

Beats Electronics, the company behind the Beats by Dr. Dre brand, said in an email to CNN that the company shows "a fierce commitment" to fight piracy and that it works in close collaboration with anti-counterfeiting organizations, police and customs authorities to identify counterfeit sellers, distributors and manufacturers on key markets. They also scan online marketplaces for unauthorized use of Beats trademarks.

"Since efforts began, Beats has seized hundreds of thousands of counterfeit products in more than 50 countries," the company said.

The U.S. government has long complained about the theft of intellectual property in China. CNN reached out to authorities in Shenzhen to ask about counterfeit sales activities, but they have not yet responded. However it appears that Chinese officials are moving to crack down on counterfeit trade. A month-long joint operation with U.S. Customs in July resulted in the seizure of more than 243,000 counterfeit products using trademarks from Beats by Dr. Dre., Apple, Blackberry and Samsung. U.S. Customs and Border Protection said the operation was the biggest bilateral customs enforcement effort ever conducted by the U.S.