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Will Bundled Premium Headphones Kill the Premium Headphone Aftermarket?

Steven Stone Looks at Futuresource Study on earphones…

Last week I received a link to a data study done by Futuresource Consulting titled “Increased Bundling of Premium Headphones by Mobile Handset Vendors Could Impact Audio Retailers’ Bottom Line” written by Rasika D’Souza. The basic message was that manufacturers of “premium” level smartphones are including better quality earphones with their units. Because they are better quality than the usual bundled earphone, these better-quality ones reduce the chances that a consumer will buy a better set of earphones, which imperils the vigorous growth we have seen during the past several years in aftermarket earphone sales. 

AR-bundle1a.jpgAccording to the research paper, Apple’s wired Earpods which have come standard with iPods and iPhones for several years “have become the world’s top selling SKU in the retail aftermarket for headphones (so additional to those bundled with phones). They accounted for 6.4% of unit sales in H1 2017, generating revenues of $533 million off volumes of 22 million units.” In comparison “The handset market is worth over $330 billion in trade value and the cost to bundle headphones – even premium models – is negligible…the headphones aftermarket is much smaller ($9 billion at trade level this year), so there is the real prospect that bundling strategies in the mobile handset market (which shifts 1 billion pairs of headphones per year) could adversely affect the retail aftermarket, which shifts barely a third of this total.” 

So, what could be wrong with these conclusions? On its face, these outcomes seem pretty obvious – include a better, less breakable, earphone and consumers will buy fewer replacement sets… 

But this study does not consider those music lovers who have a premium tier streaming service or plan to listen to higher-quality music files through their phones, where the supplied “premium” earphones may not be so premium when compared with aftermarket options. Also, it’s very likely that the transducers bundled with a smartphone will be wired in-ears. Many users, especially those who use music while working out or exercising, want wireless in-ears, which as far as I know, are not bundled. 

AR-bundle4a.jpgA second reason that aftermarket headphone sales may not be as impacted by bundling is due to the fact that depending on where and when you want to listen to music, one pair of earphones isn’t ideal for all situations. When I’m on a plane I want maximum isolation from outside noise. When I’m jogging or riding my bike I need situational awareness, so maximum isolation is not wanted. In my world, you need at least two pairs of earphones. 

Finally, I have to wonder about the study’s author’s working definition of “premium” earphone. If an Apple Earpod is a “premium” earphone, so are $15 MSRP Knowledge Zenith in-ears. In my world “premium” earphones’ prices begin at $100 and go up from there…Would a true premium earphone really add negligibly to the phone’s final cost? I suspect that would not be the case. 

AR-bundle5a.jpgBecause I’m an upbeat guy I will end this blog on a positive note. Better quality bundled earphones are a good thing for all consumers and I applaud any and all efforts to include a better-quality earphone with all portable playback devices. 

I guess the issue for audiophiles and music lovers becomes at what point will they hear an audible improvement in sound as a result of “better” bundled earphones? If “premium” only means the earphones will last longer, it has little value besides reducing the number of replacement earphones purchased. But if “premium” also refers to sound quality this brings us one step closer to that point where smartphones and other wireless portable devices will be the primary way that we all get our music. And the better that quality can be, the happier music lovers will be…

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