In 2006, rapper-producer Dr. Dre and his partner, music mogul Jimmy Iovine, decided to expand beyond the reeling record business and spotted a niche in the high-end headphones market. Having spent millions to produce perfect-sounding records, they were frustrated that listeners often experienced the music through flimsy earbuds. Dr. Dre had been considering a shoe endorsement, but Mr. Iovine told him, "[Expletive] sneakers, let's make speakers."  Everybody laughed, and five minutes later, Mr. Iovine was on the phone with 43-year-old Luke Wood.  Luke Wood at the Beats studios in Santa Monica, Calif.  At the time, Mr. Wood was the chief strategy officer for Interscope Records. A technology guy who had spent 20 years in recording studios, Mr. Wood began his music career as a guitarist, and then joined Geffen Records as a publicist. As an executive at DreamWorks and Interscope, he signed the singer-songwriter Elliott Smith and hit rockers Jimmy Eat World and AFI.  The team formed a new company, Beats Electronics, with Mr. Wood as an adviser (he would leave Interscope to become Beats' president and chief operating officer in late 2011). Mr. Wood understood high-tech ideas and, crucially, was able to communicate them easily to the multitasking Dr. Dre and Mr. Iovine, who says: "One thing about me and Luke, we just tell it like it is."  The headphones, shaped in a seamless "U," made their debut at $350 a pop in 2008. By last year, they accounted for roughly half of the market for premium models, according to the NPD Group. (Prices today range from $200 for the Compact model to $400 for the Pro.) Basketball stars LeBron James and Kobe Bryant have worn them in public, and ESPN suggested the headphones were "replacing the Maybach as the must-have item for pro athletes." Beats generated $1.6 billion in 2012, up 30% from 2011, NPD reported.  Beats recently added wireless speakers to its lineup; here, speakers in testing.  The research started with Dr. Dre, Mr. Iovine and Mr. Wood trying out more than 200 headphones then on the market. The three men were veterans of hundreds of sessions. Mr. Iovine, 59, had engineered Bruce Springsteen's "Born to Run" and produced Tom Petty's "Damn the Torpedoes." Dr. Dre, 47, had been a member of the seminal gangsta-rap group N.W.A, and then produced landmark albums such as Eminem's "The Marshall Mathers LP."  As they listened to the music, they talked in thick studio-speak: "The bottom end sounded boxy" (meaning the bass had too much echo), "the imaging is leaning left" (meaning the stereo sound wasn't properly balanced). "It's basically about making thousands of correct decisions," says Mr. Wood.  Meanwhile, Robert Brunner, 54, a former Apple designer who was hired early on as Beats' product designer, was making prototypes. He found that existing models had to have a certain shape to accommodate the sound equipment. "What I really wanted to do was almost ignore those kinds of requirements and develop something very simple and iconic and original," he says. Mr. Brunner's idea was to build a "consistent surface" from one ear to the other, rather than the traditional bracket connected to separate cups.  Dr. Dre initially picked the design for Beats from about 25 sketches—but on prototypes with sound equipment, the band stuck out too far from the head. Designer Robert Brunner and Luke Wood talked Dr. Dre into some tweaks, while keeping the seamless 'U' shape.  After roughly four months of trial-and-error, Beats' sound trio decided on their final specifications—the "print" moment, as Mr. Wood calls it. Sometimes, he says, producing records in the studio, "you'd have this magical moment. That's exactly what happened to us with the headphones." That moment came, he says, when the headphones made a song he knew intimately, Jimmy Eat World's "23," sound just right. (Mr. Iovine had a similar feeling with Tom Petty's "Here Comes My Girl," as did Dr. Dre with his client 50 Cent's "In da Club.")  Finally, with the help of Beats' manufacturing partner at the time, Monster Cable Products, the first model came out, and a hit was born. Beats' latest offering, the $300 Executive model, has aluminum trim and attempts to expand the brand to business travelers.  The knock on Beats from some audiophiles is that the headphones overemphasize bass. (Last week, heavy-metal star Lemmy introduced the U.S. launch of Motorheadphones, focused on midrange sounds, in response to bass-heavy products.) Yes, Interscope is famous for bass-heavy productions by the Game and Black Eyed Peas. But, says Mr. Wood, "Jimmy made Patti Smith records! I signed Elliott Smith! The idea that we're making bass—that has nothing to do with it. If we lost the emotion of the vocals, we'd sooner die."  Corrections & Amplifications Luke Wood didn't visit a supplier's factories in Taiwan before the first Beats headphone model came out. An earlier version of this article incorrectly said he did so.  A version of this article appeared January 12, 2013, on page C11 in the U.S. edition of The Wall Street Journal, with the headline: The Honcho of High-End Headphones.
How do you make a pair of headphones into a hit? Luke Wood, Jimmy Iovine and Dr. Dre played it by ear.