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Aug 24, 2015

Summer’s End No Match for Stereo Headphone Sales

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The signs are all around us.  Back to School displays at retailers are firmly in place, coffee lovers have begun talking about the return of Pumpkin Spice Lattes to Starbucks and we’re down to a precious few pool days in the season.  Yes, summer is coming to an end.  But as much of the country prepares for fall and the (merciful) cool down of the weather, the stereo headphone market remains red hot.

Despite concerns that consumers have become saturated with headphones or that the trend in lifestyle focused premium headphones has run its course, the market continues to thrive.  For the 12 months ending in July, headphone sales have grown 18 percent to $2.9 billion, making it CE’s sixth largest product category according to NPD’s Retail Tracking Service.  In fact, to date, the headphone market is growing faster than it did last year.  During this time, the market has faced some headwinds. Consumers are buying fewer tablets (tablet sales and adoption help fuel demand for headphones) though 13 percent growth in smartphone sales, according to NPD’s Mobile Phone Track, has likely offset that impact, and competition from low-cost brands entering the market have challenged more established brands competing in higher pricing segments.  Fortunately for companies making and selling headphones, none of these things significantly affected sales.

Instead, consumers looked to add to their headphone collections this year.  Sales of wireless Bluetooth headphones have more than doubled through July compared to last year, while water/sweat resistant fitness headphones grew by an astounding 88 percent.  The growth stands out not so much because they represent new products on the market, but because they address new listening occasions and needs for users. For instance, buyers of Bluetooth headphones looking for the convenience of wireless cannot replicate that experience with another pair of wired headphones.  Many over the ear, on the ear, or in-ear headphones are difficult to appropriate for working out.  These new headphone segments have given consumers a reason to go out and buy a new pair of headphones- not simply to replace a lost or broken pair.  Additionally, Bluetooth and fitness headphone average selling prices of $106 and $65 respectively, are both significantly higher than the rest of the market, providing a lift to overall ASPs.

Premium headphones ($100+) have maintained their momentum as well, growing 24 percent in the last 12 months.  Leading the premium segment are Beats by Dre and Bose, which collectively command 81 percent of the premium segment.  They have also become the two leading brands in the market overall, regardless of pricepoint, accounting for 44 percent of total headphone dollars- an increase from a year ago.

And there is still plenty of room for innovation ahead.  50 Cent’s SMS Audio has partnered with Intel on earbuds embedded with biometric sensors designed to measure heart rate, an effort to capitalize on the momentum in the digital fitness market. Skullcandy, seeing that female consumers now account for half of all headphone spending (from 45 percent 2 years ago) designed a line of headphones tuned and fitted especially for women. And upstart companies like Bragi are making their wireless earbuds, the Dash, a standalone device with fitness tracking capabilities and an embedded 4GB MP3 player- effectively liberating the headphones from the smartphone (key for fitness).  These new features, which seek to both broaden the use case and appeal of the category, should help keep consumer demand for headphones high through the coming year.  Sure the early signs of fall mean another summer is in the books, but it’s an endless summer for the headphone market.

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