Apple's wireless headphones, Airpods, went on sale earlier this week. The buzz surrounding the launch was limited, given that the product was delayed for close to two months leading to significant inventory constraints. However, we believe that there is a possibility that the 

Airpods could overtake Apple’s high-profile wearable product, the Apple Watch, in terms of overall revenues and profitability in the long-run. Below, we size up the revenue potential of the Airpods and compare it to the Apple Watch.

Deep Integration With The Ecosystem Makes For An Easy Cross Sell

Airpods enable users to listen to music or phone calls wirelessly, much like other Bluetooth headphones in the market, while also providing deeper integration with Apple’s product ecosystem. For instance, the headphones offer a seamless pairing process with Apple’s iDevices, the ability to access Apple’s digital assistant Siri, and provide longer wireless range and battery life when paired with Apple devices. Apple’s ecosystem effect and the large base of affluent iPhone users could provide a sizable target market for the Airpods. Moreover, the relatively accessible $159 price tag and Apple’s wide distribution footprint should make Airpods fairly easy to cross-sell to iPhone customers, who typically pay upwards of $650 for their smartphones.

Estimating The Revenue Opportunity

While Apple is unlikely to disclose sales figures, we believe that it should be able to ship roughly 22 million Airpods in the first year, assuming an attach rate of 10% with the iPhone. We believe this figure is reasonable, as Barclays projects initial production figures at 10 to 15 million units. Assuming an ASP of $159, this would translate into revenues of roughly $3.5 billion in 2017.

Source: Forbes