Audio Category Overview (US)

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Audio Category Overview (US)

While technical expertise will continue to be important, in the future, audio companies will increasingly need to be aware of and design for developments outside their category. Some examples of these developments are the importance of balancing smart assistants with consumer control of their own data; the convergence of content providers and what that might mean for partnerships; the need to constantly be able to provide immersive experiences; and the need to address changing consumer values around sustainability. Several companies like Apple, Atmos, and Sony are already moving in this space, but there is still more than enough room for JBL to stand out given their expertise and heritage in innovation. The trend around increasing immersion, in particular, may be of interest given their launches of products targeted at specific uses (as mentioned in the early findings).

Insights on the Future of Entertainment

Smart Devices vs. Data and Privacy

  • There is an increasing focus on the importance of data and privacy when it comes to entertainment. There is an opportunity to resolve this tension by leading the category in being the (and partnering with) the most stringent partner for voice-activated or smart devices, even if that's simply addressing consumers' pain points on transparency or control.
  • This is illustrated by how Americans know data is being collected about them and don't think they see great benefits from it, but they also believe they can't do anything about it and that they have no control. For example, 79% of American adults said they were at least somewhat concerned about what corporations were doing with their data, although 81% said they felt very little to no control over what was being collected, and only 5% of Americans say they benefit greatly from the data collection.
  • In July 2019, Google admitted to (and defended) letting humans listen to voice recordings between consumers and their Google Assistants. The issue came to light because a worker had leaked snippets of confidential audio to the press. Data issues can lead to concrete consequences as well. 23% of US households were hit by cyber crime in 2018.
  • However, consumers seem to accept that this is inevitable. 62% also said they knew it was impossible to go about daily life without companies collecting data about them.
  • This is especially important in light of the rise of smart devices. 1 in 4 US adults now has at least one smart speaker. In particular, JBL sells speakers with Google Assistant already built-in.

Convergence and the Fight for User Loyalty

  • The future of the entertainment landscape is one of convergence. For example, companies with their roots in traditional radio and newer podcasts are competing to put out audio content. Brands as well are competing to put out their own content that lets them capture more listeners. This will only speed up as 5G rolls out, making even more content innovation possible.
  • In terms of companies, behemoths are snapping up as many companies as possible via mergers and acquisitions (for example, Disney and 21st Century Fox).
  • In this competitive landscape, heavy competition may force complementary products and content producers to make a choice- ex. choosing to partner with Disney+, Hulu, Prime Video, Apple TV, or Netflix. In a very basic way, this is already present with Beats/Airpods and Apple TV, since Apple already owns the former two products. The effortless pairing is one of the touted pros for consumers.
  • According to Mark McCaffrey, PwC’s U.S. technology, media, and telecommunications head, as categories blur, it'll become critical for companies to be able to re-envision what they do. It will no longer be enough to specialize in their category, but winners will need to "have access to the right technology and premium content, delivered in a cost-effective manner to an audience that is engaged with the brand... There’s a lot of focus on user experience and loyalty, with companies trying to create a more direct relationship with consumers of content."

Trends and the Competition

Trend 1: Increasing Immersion

  • As technology advances, one of the main trends is making content even more immersive. This is bolstered by the rise of extended reality, which encompasses augmented reality (AR) and virtual reality (VR). Spending on this channel is expected to grow by 78.5% next year compared to this year. This is not limited just to consumer applications- professional applications are actually driving growth, with 65% of companies developing enterprise solutions vs. consumer-facing ones. Of these, healthcare is a really promising field, as the value of AR there is expected to grow 38% year-on-year until at least 2025.
  • Several companies are already making heavy investments in this space. Apple is planning to launch two separate headsets in 2022 and 2023, focused on streaming, gaming, and ultra-high-tech video conferencing. It will come with a cinematic sound system.
  • Closer in, Sony announced its 360 Reality Audio technology during CES 2019. It is specifically aimed at mobile music platforms and designed for compatible earphones. Rather than stereo, which has two channels, their technology offers 24 potential "objects" allowing for true 360 sound that is customized to each listener.
  • Creative also has a competitor in this space with its Creative SXFI Air headphones, which aims to provide a sense of space and open-air sound that most headphones can't match.
  • In terms of home theaters, Atmos is bringing the same 3D sound technology cinemas use to consumer's couches. Speakers fire up towards the ceiling which enables "object-based" sound. While this has been around since 2014 the price was exorbitant and there was a lack of content optimized for this technology. However, those barriers have been removed. Atmos recently launched its first below $500 unit, Apple's 4k TV supports Atmos, and both Amazon Prime and Netflix stream Atmos-friendly content.

Trend 2: Eco-friendly Audio (Apple, House of Marley)

  • Consumers are increasingly concerned not just with the performance of their product but the values it represents. Nearly 70% of consumers in the US and Canada believe it's important for a product to be sustainable or eco-friendly. They are willing to pay for this as well; while 80% of them want to know product origins, 69% of those are willing to pay a premium for it.
  • Several companies are already capitalizing on this trend. Apple quadrupled its US recycling capability in 2019 and in 2018, Apple diverted more than 48,000 metric tons of electronic waste from landfills. Their recycling program includes Airpods and Beats headphones.
  • House of Marley has also expanded its line, launching its first smart speaker at CES 2019. The brand is known for its use of eco-friendly materials like bamboo, aluminum, and a proprietary fabric made of organic cotton, hemp, and recycled plastic.