Hi-Res Audio: Will Streaming Make the Market? (Part 2)
Retailers, manufacturers, and the music industry weigh in
At a press event during the 2017 CES held by DEG: The Digital Entertainment Group, representatives from multiple industries within the consumer technology community voiced their support for the expansion of the Hi-Res Audio download market into studio-quality Hi-Res Audio streaming.
To gauge the possible impact of this initiative, we polled some leading industry voices who joined the chorus of widespread industry support for Hi-Res Audio streaming during CES.
We wanted to know how leveraging streaming can help broaden awareness of Hi-Res Audio beyond the Baby Boomer consumer demographic that is more familiar with high-quality audio’s benefits.
We also wanted to hear ideas about how the industry can best reach out to the Millennial buyer, and by extension, increase retail sales of Hi-Res Audio-capable products, including digital audio players, headphones, audio components and premium loudspeakers, available from some 100 manufacturers to date.
Yesterday, we featured what retailers had to say in Part 1. Today, we’re sharing comments from executives from the manufacturing and music services communities and from the Consumer Technology Association (CTA) Audio Division Board.
Hi-Res Audio devices, as indeed, all consumer electronics categories, have come down to affordable levels and some are well within reach of the average consumer’s pocketbook. That said, what are some of the biggest obstacles to date that remain, in driving widespread interest in Hi-Res Audio content and hardware?
Mike Fasulo, President and COO, Sony Electronics: While there are now hundreds of different Hi-Res devices on the market that meet virtually every lifestyle need, there is one issue that influences consumer behavior above all: the availability of compelling content. With the emergence of new Hi-Res music-streaming services, we believe that obstacle will be minimized in 2017.
Owen Kwon, President, Astell&Kern: One of the biggest obstacles in growing Hi-Res Audio is the way people listen to music. These days, music is just background noise. Like reading, music requires listeners to slow down, take time and engage it. Once people really listen to music, they can truly appreciate Hi-Res Audio. This is happening little by little.
Will the steps taken by the industry, announced at the DEG event at CES, to make streaming Hi-Res Audio content more widely available make a difference in building consumer interest? How will it drive sales of devices, content and services?
Kwon: Streaming music services are becoming more popular than purchasing music. Once Hi-Res music is available via streaming, there will be greater access and a larger audience who can and will appreciate the true studio sound of the music. Those hardware and technology companies that adapt and embrace this new trend will flourish. Those companies that don’t adapt will not survive.
Fasulo: Content is king. The availability of Hi-Res content via these emerging streaming platforms will help drive the sale of both devices and services. Additionally, all industries are collaborating with vested interest - which is unique in our industry. Key will be distribution and demonstration.
As manufacturers, how are you working with retailers to maximize showroom presence of Hi-Res Audio products by expanding areas of demonstration where consumers beyond audiophiles can experience it? What is in the cards (consumer promotions, contests, other incentives, etc.)?
Fasulo: Sony and Sony Music have joined with other companies - including Universal Music and Warner Music - to place Hi-Res Listening Stations in hundreds of retail store fronts [including in Magnolia Best Buys] and online nationwide. We continue to explore new ways to generate more awareness of Hi-Res Audio in general, along with additional opportunities for consumers to experience compatible products at retail and other venues.
Kwon: We’ve been urging retailers to provide a listening experience to end-users because it is immediate and powerful. The only way to truly appreciate Hi-Res Audio is to listen to it first-hand. This is a very expensive proposition. We also offer retailers and dealers customized support and education programs to underscore the importance of these campaigns.
How are you leveraging social media – and how can it best be used to dispel the myth that Hi-Res Audio is just a single-market opportunity among Baby Boomers, who tend to populate the audio enthusiast shows?
Fasulo: Once “studio-quality” sound is available on emerging streaming platforms, Hi-Res Audio is will be poised to engage a new generation of music fans who can now hear their favorite artist or band with no compromise in convenience. In addition to providing a more emotional connection, this new music platform also has the potential to deliver a host of new user and social features. The resurgence of vinyl records, albeit [it’s] unknown for how long it will trend, is a powerful engagement model for Millennials to get introduced to quality sound in a fun way.
Kwon: We love to listen to the conversations happening on social media, because it provides the thoughts and ideas of current and future customers. Customers and potential customers immediately react when we run a campaign or are posting something new. We get fantastic feedback, which helps us shape and improve our products.
You are right. Baby Boomers have been the core of our customers, but there are even bigger opportunities from other enthusiast groups as well, such as Millennials, who are looking for the best musical experience possible. Social media helps us reach this group and learn what exactly they are looking for.
What do consumer electronics retailers need to know about the music and services that support the Hi-Res Audio streaming initiative that they don’t already know, and that will help them to make the case for sales of Hi-Res Audio products to their customers? Can you provide two or three brief talking points that sales personnel can use that will resonate with consumers?
Mike Davis, CEO, Rhapsody/Napster: Streaming is the future of music consumption. Anyone can access millions of songs digitally from virtually anywhere – their phones, their cars, even from the plane.
There’s an instantly recognizable difference in audio quality with Hi-Res music.
Audio quality of Hi-Res Audio is based on recordings with a higher sample rate (24 bit/96kHz), and differs from those of the standards used in CDs, by starting with higher-quality original recordings starting from the moment artists are recording in studio.
In simple terms, Hi-Res Audio provides another option for people to experience music in a unique, personal way, by allowing them to feel like they’re sitting right in the studio with their favorite artist or band. Likewise, Hi-Res Audio allows artists to preserve the integrity of their sound, and share their music exactly as they intended people to hear it, ultimately deepening their connection with their fans.
There’s a strong appetite for Hi-Res Audio from music-listeners across the globe. Studio-quality sound has been one of the most requested features from Napster subscribers and other listeners around the world.
Napster is working with music labels and CE leaders at the forefront of sound engineering to bring licensed Hi-Res Audio formats to streaming.
Ty Roberts, Chief Technology Officer, Universal Music Group: Hi-Res Audio is shifting from downloads to on-demand streaming, which will bring access to a larger catalog of music that spans a wide number of genres.
The major record companies and many of the independents have committed that Hi-Res Audio will be part of most future releases. As well, the industry is working to create Hi-Res versions of its most popular catalog albums.
In some cases, audio conversion isn’t even necessary. Some studios have been recording with Hi-Res specifications for more than 20 years. Only now, consumer technology is becoming widely available that will let audiences hear music as it was originally created in the studio, by the artist.
Another benefit to Hi-Res Audio streaming is that there is a much lower barrier to entry for many consumers, who need little more than a smartphone or a tablet and a high-quality pair of headphones to get started. However, there is also a need for additional equipment in the home – for example, only one in four consumers own a hi-fi music system equipped to process Hi-Res Audio.
What do hardware retailers, in your view, need to do to get Millennials excited and on board about Hi-Res streaming content availability?
Roberts: Hi-Res Audio already has broad appeal. In a recent U.S. survey, 85 percent of consumers, from ages 13 to older than 55, stated audio quality is very important to them when it comes to listening to music.
That said, the survey found that younger music fans are highly interested in accessing better audio quality.
“Studio Quality Sound” was the most popular feature demanded by consumers in the survey, with the biggest group between the ages of 13 to 24. And among those consumers willing to pay more for better sound quality, the largest group (62 percent) was among those between the ages of 25 and 34.
Davis: Hardware retailers should focus on several things to get Millennials excited and on-board about Hi-Res streaming content:
Educate consumers on the noticeable difference in sound quality in the simplest terms; develop form factors and accessories optimized for high-quality sound and mobility/convenience - i.e., smartphones/portable devices/wireless headphones - that won’t break the bank; secure support from music labels and artists who support Hi-Res Audio and can advocate publicly on its behalf (á la Neil Young).
The Consumer Technology Association (CTA) Audio Division is in support of the Hi-Res Audio streaming initiative. Specifically, would you articulate the Division’s views on the value it collectively sees in the initiative that will grow consumer interest in Hi-Res Audio products?
Robert Heiblim, Principal, Blue Salve Professional Consulting & Chairman, Audio Division, CTA: The way consumers get and use audio is changing. Together, this means both Baby Boomers and Millennials actually need new hardware and software solutions that work for them while also giving them high quality, which they want. Fortunately, costs and technology now allow us to give the quality along with the convenience. That is a significant opportunity, and we have identified well over 20 million U.S. consumers, to start.
Talk about the Hi-Res Audio Pavilion, which was located in the Central Hall at CES 2017. Were you able to gauge its effectiveness and impact in getting the message out to dealers who might ordinarily not visit The Venetian’s audio demo rooms? Will it be repeated next CES, and at other CTA-sponsored shows over the year?
Heiblim: Yes, my hat is off to the DEG and the exhibiting partners, and they have also signed up for next year. Having spoken to some of the companies, they got great traffic, leads and action due to their participation. We are discussing more ways to bring audio as a focus to more of the CES attendees. As well, this is also a focal point at other CTA/CES-focused events around the globe.
What will the CTA Audio Board’s next moves be in keeping the momentum alive?
Heiblim: We are just completing marketing work to inform a promotional effort we are working on with all our partners. However, like all things, this will be made of many parts, so we intend to provide retailers, manufacturers and content partners tools to help them locally and nationally. Look for more development on fronts such as streaming (where we had those big announcements at CES), and tools and ideas for local promotions, as well as some other surprises.
Can you summarize the opportunities that this Hi-Res Audio streaming initiative presents for retailers?
Heiblim: The MP3 revolution made audio convenient, but with compromised sound quality. Those limitations have now gone away, and the amount of storage and the speed of the processors have also eliminated limitations. And the smartphone has made it possible for people to consume audio everywhere, in places they never could before.
The point of Hi-Res Audio, beyond just sounding better, is to offer the best-possible sound with the convenience of a single system.
But it has to be recognized that consumers are not concerned about things like bit rates – they just really love music and research shows that many would pay for a higher-quality experience.
Retailers need to engage with that. So much of it is education. This provides lots of opportunities, especially for smaller retailers who can focus on it.
And record companies are willing to give retailers access to demo materials free of charge so they can show the differences between an MP3 file and a Hi-Res Audio file. They are cranking out content.
It’s noteworthy that the last time industry groups like manufacturers, retailers and record companies worked together like this was in the ’80s, for the introduction of the Compact Disc format.
But it is a marathon, not a sprint, and it will take time. We are a long way from people walking into a Target and saying, “I want the Hi-Res one.’ But it must be recognized as an opportunity.
The average U.S. household spends $1,400 on electronics, and pricing on everything is down. That means there’s available disposable income to spend on sound.
So audio is looking pretty good.