The personal audio sector has seen some decline, largely fuelled by the increasing popularity of smartphones, but there are still profits to be made, especially with add-on products and music streaming developments. Libby Plummer reports.
The personal audio market has experienced tough times over the last few years, particularly as the music playing capabilities of smartphones have improved. Simon Foy, senior account manager for CE at data specialist GfK, explains:
“The personal audio market, comprised of sectors such as Portable Media Players, Headphones, Personal and Portable radio devices among others, was worth £836 million in the latest year ending April 2011. This was 11% lower than the previous year, with the decline coming mainly from the fall in Portable Media Players which represents around two thirds of the value. The uptake of smartphones has been key to the decline in Portable Media Player sales”.
However, Foy is keen to point out that this decline should be viewed in relation to the entire consumers electronics market, commenting: “The decline should be put in context with the performance of the total CE market which was also down over the same time period, declining 9% by value.
“Across other sectors, headphones continue to perform well, being the fastest growing category and now reaching 8.5 million unit sales in the last 12 months (y/e April 2011). Elsewhere, increases have also been seen in clock radios, helped by an increase in the iPod docking stations”.
The way in which consumers buy and listen to music has changed dramatically in recent years – moving from traditional formats such as cassettes and CDs to downloads. Improvements in the music playing capabilities on smartphones have also taken a substantial amount of business away from the dedicated personal audio sector. Daniel Fletcher, product manager at audio brand Orbitsound, says: “If you don’t have to carry around an iPod, a phone and a camera and can get three products into one, why wouldn’t you? Some of us may be happy to carry around three or four devices, but most would rather not. It’s about convenience”.
More recently, music streaming sites, such as Spotify, have started to make their mark. Commenting on the effect that these services have had, Orbitsound’s Fletcher, comments: “Music streaming is accelerating the decline in sales of CDs, but it’s also slowing down digital downloads, as more and more consumers get out of the habit of buying or owning music. On the whole, the concept of music as a service is becoming a reality. It offers everyone easy access to an infinite variety of music they may not necessarily have been exposed to before”.
However, despite music streaming rapidly gaining popularity, it still has a fair way to go before becoming the norm, especially in the personal audio sector. Sony category marketing manager Omar Gurhah explains: “If you want to stream digital music today, you need a PC or a smartphone. Streaming services are generating a lot of noise, but they remain niche – the person who pays £10 a month to stream music over the internet is in the minority versus the masses of people who’ll buy a £30 MP3 player to take on holiday.
“However, both of these situations will begin to change very soon, with the first high profile streaming services launching on MP3 players”.
One such service is Apple’s iCloud, which is set to launch in the UK in the autumn and enables users to buy music which it then stores and automatically pushes to all of your Apple devices, so that there’s no need to sync each one separately. If successful, iCloud is likely to fuel a move to cloud-based storage and streaming services for the audio sector.
As the methods by which consumers buy and listen music change, so too does the design of the products. Recent years have seen plenty of new features hitting personal audio products, including noise cancelling technology and video capability. Social networking and video sharing have led to the emergence of larger screens, while the success of Apple’s iPod Touch and iPhone has fuelled the trend for touchscreen displays.
As well as including features that enable consumers to interact with friends and share their music, Sony has also made use of the social networking phenomenon when it comes to designing the actual products. Omar Gurnah explains: “The biggest impact is that the people who buy them now get to help design them. We’ve been testing the size, shape, colour and features of our range with customers, who were chosen via social networking sites. That’s something which is new for the CE industry”.
Arguably, the reverse is also true – that technology has driven social networking as it’s now possible for people to contribute to their network from wherever they are and on an increasing number of platforms, says Orbitsound’s Fletcher.
Despite rapid takeup of MP3 players in recent years, is there any danger that the market is reaching saturation? Although sales in certain areas may have slowed, there is certainly still plenty of scope for profit, driven by demand and product innovation. Sony’s Gurnah argues: “As smartphones get cheaper, the number of MP3 players sold at the higher end of the market will come down. That’s already happening in the UK and the US. The sales at the entry to mid-range are pretty flat and that is because people are buying MP3 players as a secondary music player. You don’t want to go running with a £500 smartphone on your arm or use all of your phone’s battery on the daily commute. That is where dedicated music players come in, and will continue to do so for some time yet”.
Sony’s W Series offers wearable, wire-free, water resistant players, which are ideally suited to sports, especially running. The brand also produces the E Series – aimed at younger consumers – which comes in a variety of colours and includes a karaoke mode. The trend for cheaper, secondary MP3 players is also evident in Apple’s current range, which includes the iPod Shuffle, with prices starting at just £40, while Samsung offers the pint-sized TicToc player for just £20.
Aside from the players themselves, the sales potential of the add-on market for the personal audio sector is huge. As a spokesperson from accessory brand Griffin explains: “With more and more people using their products to stream films or TV, Griffin Technology has seen an increase in sales in the products stand market as well as more demand for portable power. Headphones and portable speakers have also proved to be a growth area so that people can listen to their music on the go”.
Headphones have performed particularly well over the last year and are ideal for independent retailers thanks to their attractive and compact packaging which means that they can be stocked in relatively high numbers and displayed in the perfect spot, in store. A wide selection of models is available ranging from affordable earphones from the likes of JVC and Panasonic to noise cancelling cans from Bose to retro styled headphones such as the i-Mego Retro Heavy cans (see products to watch).
Speaker docks are also proving to be increasingly popular with many people using them as secondary systems for the office or kitchen or even replacing their primary home audio system. Products range from high-end speakers such as B&W’s Zeppelin Air right down to cheap speakers that can be picked up for under £20. Philips offers something in between with its new DS3020 speaker dock for iPods and iPhones which can also be used for playing other MP3 players (thanks to a 3.5mm input). A free app can be downloaded from iTunes adds extra features such as alarm clock functionality and the ability for users to share what they’re listening to via Facebook and Twitter.
Griffin offers the AirCurve Play which is an innovative, battery-free amplifier that ups the volume of the user’s Apple device when docked, while Orbitsound will soon be launching its T14 soundbar, which includes iPhone/iPod docking.
Personal DAB radios make up a relatively small segment of the personal audio sector, although they benefit from a solid, but somewhat niche, fan base. Director of marketing at DAB specialist PURE, Colin Crawford, comments: “Radio remains incredibly popular for the UK consumer. There are many diversions, but none of these replace radio as a ‘companion’. We see these kind of additional features and services as extras that top up the average users’ listening time rather than replacing the amount of time they spend listening to radio”.
PURE’s rechargeable PocketDAB 1500 (£89.99) is the best-selling personal digital/FM radio on the market. Crawford remarks: “Not everyone wants convergence; there’s a solid demand for audio-only products such as the PocketDAB 1500 whose sales are consistently strong”.
Owen Watters, sales and marketing director at Roberts Radio, explains that power consumption is one of the key issues when producing personal DAB models, commenting: “One of the main ongoing challenges is to keep the power consumption of DAB radios to a minimum, something we continue to be very strongly committed to. Our Ecologic 7, for example, offers 150 hours of battery life – more than any other portable radio on the market. With this in mind, we put the same focus onto our personal audio DAB products and our SportsDAB 2 DAB/FM model offers an impressive 18 hours of battery life.”.
Roberts’ SportsDAB 2 is available in black or white (the latter being introduced in 2010) and can be listened to either through the headphones or the speaker on the front of the radio.
While the personal audio market shows signs of reaching saturation point in some areas, there are still plenty of compelling options to keep driving profits forward, not least the potential offered by add-on products such as headphones. We can also expect to see lots of developments around streaming capability and cloud storage over the next 12 months, so there’s plenty of innovation to keep the punters interested.