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2017-12-05 11:54:38
Smartspeakers and wireless ear buds are sending the audio industry horizontal
MUSIC lovers do not typically go to the opera to buy a speaker. But at the
Palais Garnier in Paris they now can: Devialet, a local maker of high-end
speakers, on November 29th opened a store in the 19th-century music venue to
sell its most sophisticated product, called Phantom. Looking like a dinosaur
egg, this supercomputer for sound (priced at $3,000) is considered one of the
best wireless speakers available. It also comes with a dedicated streaming
service for live performances, including some at the Palais Garnier.
This Phantom at the opera is the latest example of how digital technology is
transforming speakers, headsets and other audio devices. Once mostly tethered
to hi-fi systems, they are now wireless, increasingly intelligent and capable
of supporting other services. As a result, the industry s economics are
changing.
Only a few years ago the audio industry was highly fragmented, says Simon
Bryant of Futuresource, a market-research firm. Hundreds of brands offered
their wares, both premium and basic, often with identical components. As with
other device businesses, the industry was a vertical one: if speakers used
any software at all, it was specific to the product.
All this started to change with the advent of smartphones, which made music
more portable by connecting music-streaming services such as Spotify with
wireless speakers. Smartphones have also given a boost to headphones, which are
becoming ever more versatile, with features now ranging from cancelling out
ambient noise to real-time translation.
These new possibilities have proved hugely popular: the global market for audio
devices has rocketed in recent years (see chart). According to Futuresource,
only about 200,000 wireless speakers were sold in 2009; this year the number is
expected to be 70m. Headphones have been on a similar tear.
Smartspeakers, which were pioneered in 2015 by Amazon with the Echo, will be
even more disruptive. Nearly 24m of these devices, essentially voice-controlled
remote controls for everything from music to lights, will be sold worldwide in
2017, estimates Strategy Analytics, another market researcher a number it
expects to quadruple by 2022. Once households have one, they buy more to spread
them throughout their homes (apparently nearly a tenth now live in bathrooms).
Smartspeakers are pushing the audio-device industry to become horizontal . The
voice that emanates from Amazon s Echo or Google s Home is not just a digital
assistant, but a platform for all kinds of services, of which most are
developed by other firms. Alexa, as Amazon s version is called, already boasts
more than 25,000 skills , as the firm calls such services. These range from
ordering goods and finding a mobile phone to turning up the heating and (early
next year) asking The Economist for the latest on any given topic. Similarly,
wireless ear buds, such as Apple s AirPods and The Dash by Bragi, a startup,
may become so clever that more and more people will leave them in all day, for
instance to monitor their health or for constant access to a digital assistant.
Conventional speaker firms are trying to catch up. In September at IFA, a trade
show in Berlin, booths of various makers were adorned with logos of Amazon or
Google, signalling that they already have or will integrate a digital assistant
in their products. But if the history of the smartphone is any guide, such
platforms will turn the hardware into a commodity, with most of the profits
going to the providers of software and services. Having sold 75% of all
smartspeakers (at low prices that are thought to be close to the cost of making
them), Amazon is now the world s biggest speaker brand. Incumbents will also
have to contend with Apple, despite the delay of its smartspeaker until early
next year.
The dominance of a few platforms is not a forgone conclusion, says Mr Bryant of
Futuresource. More specialised ones are likely to thrive, too like Microsoft s
Cortana, which is good at understanding business jargon. But some audio firms
feel the need to branch out. Sonos, which pioneered wireless speakers a decade
ago, now wants to become an ber-platform, integrating all voice assistants and
streaming services, so consumers who like Sonos speakers have a choice. Harman,
which in March was bought by Samsung Electronics, has similar plans for
entertainment systems in cars.
And then there are companies which do not build their own speakers, but offer
technology to enhance other products. Dolby and DTS, for instance, are busy
creating software for what is called immersive audio . Combining several
speakers, Dolby s Atmos technology first introduced in cinemas, but now
available for home use already places sounds in space. The next step is
separate personal sound zones for each listener in a room, in effect creating
invisible speakers.
So why does Devialet, which last year got 100m ($106m) in fresh capital, think
it can succeed by selling expensive high-end speakers? The answer is that it
wants to be a platform, too. The speakers are mostly meant to demonstrate its
technology, in the hope that other companies will integrate it into their
products. The first example, launched last month, is a soundbar (a slim
loudspeaker) it has developed together with Sky, a broadcaster. If you see
yourself just as an audio company, says Quentin Sanni , Devialet s chief
executive, your days are numbered.
This article appeared in the Business section of the print edition under the
headline "Sound and software"