The Hearables Market – a Covid Update

“It was the best of times, it was the worst of times…”  Dickens’ could have written that opening line to preface an account of the Covid year for the hearables industry.  Over the last six months consumer demand for earbuds has risen to an unprecedented level.  In contrast, hearing aid manufacturers have been dealt a body blow, with sales tumbling by up to 75%.  As one industry executive put it “we’d have done better if we were an airline”.  Covid has also had unexpected effects on the service industries which have been traditional drivers of hearables growth.  Audio streaming services like Spotify have seen listening times go down, while video streaming and video conferencing have experienced unprecedented demand.

As countries came out of lockdown during the summer, we saw further shifts in usage, but it’s apparent that overall, hearables have done well out of the crisis.  That trend looks set to continue as we face a second wave of the pandemic and further lockdowns.

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Bluetooth Covid Contact-Tracing Apps

In the previous article I looked at the tools the UK Government has available to deal with the coronavirus pandemic.  Essentially, they have two.  The first is to increase the number of ventilators and ICU beds, which gives more people with severe respiratory infections a chance to recover.  That means that doctors and politicians can avoid the unpleasant choice of deciding who gets treated and who does not, but only if the number of infections are curtailed in the first place, so that we don’t run out of ventilators.

The second is the lockdown tool.  It is currently a crude On/Off switch, which limits infections by keeping everyone at home.  At the moment, it’s not flexible – you’re either locked down, or you’re not, unless you’re a key worker or in an essential industry.  The hope is that few key workers will be infected, either because they have sufficient Personal Protection Equipment, or they’re able to social distance whilst doing their jobs.  Everyone else has to stay at home.  A lucky few can continue to work, but most are either furloughed or become unemployed, putting the economy in stasis.

The Government, quite rightly, is desperate to find ways to ease the lockdown.  The question is how to do that without immediately seeing infection rates rise?

The flavour of the day is to roll out smartphone apps which can trace whether you have come into contact with someone else who is infected.  The theory goes that if you do, you can be alerted and stay at home until you’re tested.  If you have coronavirus, you self-isolate.  If you don’t, you’re free to go back to work.  Like many proposals for phone apps, it sounds simple, which is why it’s so appealing.  Particularly to people like Matt Hancock, who has always had a bit of a penchant for phone apps, which he believes will save the NHS.  What nobody is mentioning, is that for contact-tracing to work, we will need the ability to provide at least half a million additional tests that can be administered at home every day. 

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Hearables market to reach $80 billion in 2025

Who could have guessed, back in 2014, that a Kickstarter campaign would lead to an $80 billion market segment in just over a decade?  But that’s what is happening with hearables, where a new report predicts that it will reach that size in 2025.

The growth of earbuds, which are now the “must-have” hearable for around 80 million users, has turned into the fastest growing consumer electronics product sector ever, eclipsing even the iPhone.  That growth is set to accelerate even more with the launch of a new Bluetooth LE Audio standard at CES 2020, which allows designers even more freedom, higher quality and new audio applications.

It all started when Bragi managed to raise almost $3.4m dollars for a new concept – a set of stereo earbuds which could stream music as well as measuring your vital signs.  A raft of other startups managed to raise over $50 million in crowdfunding investment between them before Apple arrived with their AirPods, and the rest is history.

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Forget 5G and the IoT – MWC 2019 was all about audio

Mobile World Congress is an odd event.  It’s where the GSMA attempts to set the mobile agenda for the coming year, where major infrastructure deals are done behind closed doors and where the rest of the industry shows off its latest products.  This year, the big message was that 5G is coming, whatever that may be.  The IoT was relegated to something that’s mainly happening in China and the startup community.  What I found interesting was that audio was far more prominent than I can recall in any of the last 30 years of MWC and its predecessor shows.

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What’s next for AirPods?

There’s growing speculation that Apple will be launching their next generation of AirPods sometime this year, so I thought it would be interesting to try to predict what might be in their next generation of earbuds.  The hearables market is moving very quickly and there’s no shortage of technology for Apple to choose from.  But the AirPods are a little different to anything else that Apple has ever brought to market.

The biggest difference is the way it has changed their development model.  Historically, Apple is a follower.  They don’t invent product categories – they wait for other major companies to create the market, then come in with a slicker product which delights customers.  They concentrate on everything which is needed for people to feel that Apple invented the experience.  After that, they create clear water between themselves and their competitors by constantly increasing the level of delight.  The AirPod is arguably the first product where Apple have made the market themselves.  There was a smattering of crowdfunded earbuds before the AirPods were announced, but they were only shipping in tens of thousands.  In contrast, AirPods are shipping in the millions.   For once, Apple wasn’t competing with established industry giants, but small, often poorly funded startups.  That’s what makes the question of what might be in an AirPod 2 or AirPod 3 so interesting.

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Hearables sales could reach $45 billion in 2020

Back in 2014, when I reviewed the emerging wearables market, I suggested that the sector with the greatest potential would be hearables.  Over the intervening two years it has seen intense activity.  Over $45 million has been pledged in crowdfunding campaigns for earbuds and stereo headphones from almost a quarter a million backers.  The value of sales of wireless headsets has overtaken that of wired headsets and now Apple has added momentum by removing the 3.5mm jack on the iPhone 7, as well as launching their own earbud – the Airpod.

One of the key reasons hearables are doing so well compared to other wearable sectors is because they don’t need to work out what to do with the data they generate.  Every other wearable is a slave to the treadmill of quantitative feedback, where it needs to make the data it produces compelling, or else risk being consigned to the drawer of doom.  Hearables are bought for consuming existing content in the form of music or videos, giving apps developers much more time and freedom to play with the accompanying data.  That is a massive advantage over anything that you wear on your wrist.

I’ve just published a report on the hearables market which takes these new developments into account.  It shows a growing opportunity, even greater than I’d suggested two years ago, which could rise to sales of almost $45 billion in 2020.  You can download the report – The Market for Hearable Devices 2016-2020 here.

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