The Premium Mass Market | CanJam 2022

Now that the dust has settled on IFA and market analyst, Arian Bassari gathers his thoughts, we thought we’d take a look at another event Arian attended recently. Earlier in the year, Futuresource were invited to deliver a presentation on the premium mass headphones market, and our very own Arian took to the stage.

Using Futuresource’s latest edition of the Audio Tech Lifestyles consumer survey, Arian’s presentation delivered insight from the report to discuss the current state of play within the audio market, focusing on the following topics:

• The current state of consumerism in Audio
• The headphones mass premium market
• How value is growing in headphones
• Who’s playing in mass premium?
• Features in mass premium
• What is driving mass premium
• Premium in the future

The Current State of Consumerism in Audio

 The impact of audio streaming cannot be ignored. Subscription-based audio has grown massively over the years. In fact, 68% of consumers worldwide listen to some form of streaming service.

With gen z and millennial's being the most prominent in the streaming services space, it’s clear that streaming is very widespread.  

“As we moved toward the convenience of streaming over CD formats, there was an initial sacrifice of sound quality,” says Arian. “This is something that streaming companies including Apple, Spotify and Amazon, are now actively trying to reverse, with lossless and HD.”

In fact, sound quality is such an important factor to consumers that around half of ATL respondents stated that it was the most important factor when choosing headphones – more important than price, brand, style or battery life, even. Consumers value sound quality, either in the source music or the device they use to listen to it, and as such are willing to pay more for premium features.

The Headphones Mass Premium Market

The mass premium market focuses on headphones priced between $200 and $500, mass produced for the consumer market. These headphones usually host premium features, such as active noise cancelling (ANC), spatial audio and better build quality. Within this market, true wireless stereo (TWS) and over-ear headphones account for 98% of volume share.

However, the most competitive segment in the headphones market space is the ‘under $200’ price range – and this is where TWS vendors are focusing their attention. In fact, the average selling price point of TWS products has declined, showing the space in a downward trend, as brands focus on competing in the lower price point range. On the other hand, over-hear headphone vendors are making an active effort to present an alternative to consumers looking for classic premium headphones, with a focus on good sound quality.

The mass premium market saw consecutive year-on-year growth in 2019 and 2020 before the impact of the pandemic and supply chain issues caused a decline in the premium market. However, as things are slowly beginning to return to a place of normality, the headphone space is once again expected to grow year on year at an anticipated 39%, primarily due to the launch of some premium models by leading competitors, Apple and Samsung. 

How Mass Premium Value is Growing

The next point on the agenda at CanJam for Arian’s presentation was what the actual value of the mass premium market is and how it compares to the global headphones market as a whole?

The mass premium space represents a big share of the overall headphones market, reinforcing the fact that consumers are willing to spend more.

“Looking at the over $200 market in terms of volume and value share, we can see that the market has consistently grown since 2017,” says Arian. “However, there was a dip in 2021 due to the pandemic and supply chain issues. 2022 has been a year of recovery, with both value and volume shares back up.”

The Major Players in Mass Premium

The mass premium space includes a variety of very well-established companies. Within the over-ear category, Sony leads the market. Bose, Beats and Apple all follow, with the remaining players accounting for around 22% of the market. The over $200 TWS market is dominated by Apple, namely due to the AirPod Pro, giving remaining players a relatively small share to compete over.

“Generally, consumers are more willing to opt for traditional audio brands – particularly in the over-ear market,” says Arian. “While Apple entered this category with the AirPod Max, they simply didn’t have the same level of influence as they do in TWS.”

Features in Mass Premium

The mass premium space will see a flurry of innovation that will begin to register on consumer’s radars in the future. ANC has become a hygiene factor in the over $200 space, with an 83% penetration rate in 2021. This will increasingly become a set expectation for the consumer at this price point.

Equally, while biometrics are yet to hit the mass market, they will likely be a premium feature. Although, the likelihood is that biometrics will remain relatively niche, even in the premium space. However, Arian speculates that it may become more of a differentiator for consumers in the future, as implementation costs decrease.

Spatial audio is the natural evolution to surround sound, which Arian indicates, we’ve seen from a variety of different brands. Apple, Sony and other headphone manufacturers have included support for spatial, which has natural use cases in video content and gaming. Although, it does require more support in source audio – and there is still a discrepancy between hardware and software.

“Sound personalisation is another feature on the consumer’s radar within the premium market,” says Arian. “This feature allows for personalised audio based on a person’s hearing profile. We expect this will grow in prominence in the next few years as the costs to incorporate this feature decrease.”

He continues.

“Lossless audio and conversation enhancements are also expected to grow in penetration. Utilising medical grade technology to improve audio, reduce noise and improve speech clarity is something we’ve seen with Jabra – conversation enhancements in particular sit within in the premium space.”

What is Driving Mass Premium?

Using Futuresource’s latest edition of the Audio Tech Lifestyles consumer survey, Arian discussed how consumers ranked features when choosing a new pair of headphones.

At the top of the table, 76% of consumers agreed that comfort was the most important feature, followed by 69% thinking that battery life was the key factor when purchasing. At the other end of the table, it was spatial audio that 48% of people thought was the most important feature. The mass premium market is being driven by more than just music. Usage in gaming as seen by Sony means these features push the product from being just a music listening device to a device that is a necessity for day-to-day life.

The Future of Mass Premium

Lastly, looking toward the future, Arian breaks down his predictions for the future of the mass premium market to close off his presentation on a high note. Features for premium models are expected to evolve, as well as new products on the market to compete with existing competitors. Consumers will be exposed to feature-rich products in which the mass premium market will see spikes in sales, heading towards an even more lucrative future

“Looking ahead, the over $200 market is expected to continue to grow in terms of retail value between 2022 and 2026, at a CAGR of 9.4%, resulting in an addition of 11 billion dollars of value added to the premium mass market.”

About the author

Arian Bassari

Arian joined the Gaming team at Futuresource in 2021 as an analyst, where he conducts research to understand market dynamics and provide data-driven insights.