Headphones to Generate Nearly $21 Billion in 2018, According to Futuresource Consulting's Latest Headphone Report

October 22 2018, 01:10
The headphones market continues its recent trend of solid growth in volumes and substantial growth in revenue. Units are projected to grow 4.1% this year to 377 million, to generate retail revenues worth $19.9bn, a sizable increase of 27% y-o-y. Headphones continue to be a dynamic market, as average price growth is accelerated by demand from consumers for new premium features and form factors such as true wireless and noise cancellation, which provide further strong growth opportunities for the future.

Futuresource Consulting has published its latest Headphone Report, providing an updated outlook for the worldwide audio headphones market. It supplies market data for 2016 and forecasts until 2022, addresses key product trends by form factor and features, with pricing trends and segmentation analyzed globally and at the country level. Product categories in the report include Sport, Wireless and True Wireless headphones and earphones, as well as headphones with Voice Assistants, noise-cancelling, USB Type C and Lightning connector.

According to the new industry report from Futuresource Consulting, the appeal of audio headphones continues to attract consumers, with a 4% increase in shipments forecast for 2018. However, this will be eclipsed by 23% growth in retail value. "Our data shows a history of steady development in the headphones market, with both value and volume riding strong in our charts," says Luke Pearce, Analyst at Futuresource Consulting. “By year end 2018, the market will have generated annual revenues close to $21 billion worldwide.”

“Across the globe, when consumers buy headphones as a standalone purchase rather than bundled with a device, they are looking for an improved audio experience,” says Pearce, “and they are willing to pay more to get it. As a result, the worldwide average price for headphones continues to rise. We’re going to see the ASP grow by almost 20% in 2018 alone.”

Wireless Leads the Way
When it comes to the feature set, wireless is top of the list for most people. This is being helped along by increased choice, and is a vendor response to the removal of the headphone jack by smartphone manufacturers. More recently, true wireless (with no wires between the individual headphones) has started to gain real momentum. In H1 2018, True wireless accounted for 12% of wireless headphones and is set to capture more than a third of this segment by 2022.

Futuresource recognizes that true wireless is a new emerging form factor, with nearly every major headphones brand introducing one or more SKUs in their product line-up with advanced features and user interfaces. Currently, Apple has been instrumental in driving the segment and occupies 83% unit share.

Noise-cancelling is also a much sought-after feature, driven primarily by Sony, Bose and Beats. Noise-cancelling (NC) will ship 23.8m units in 2018. Futuresource research has identified varying levels of complexity within the technology, with many brands devising their own approach to the challenge. Most are pre-programmed active noise-cancelling devices, which block out all noise. Others offer adaptive noise-cancelling, which requires algorithmic alterations to create the optimum sound for a particular setting. Some units also provide app-based presets to enable users to control noise levels as desired.

Consumers globally are willing to pay more to upgrade for better features, particularly wireless and more recently true wireless. The worldwide average price for headphones is projected to grow by 19% this year to $55 (higher than previously reported at $52 for 2018). Wireless headphones are projected to grow by 30% this year to reach 174.4m units, and account for 47% of worldwide headphones demand. Revenues are set to reach $14.8bn (up 44% y-o-y), accounting for 71% of global retail value.

“Looking to the world regions, North America will be the largest headphones market this year, accounting for nearly one-third of all global demand,” says Pearce. “However, its growth is slowing due to high market penetration.” Rapid increases in Asia Pacific lead Futuresource to conclude that by 2020, this region will have taken the lead. Asia Pacific will witness highest growth of 7% this year (excl. China’s white label shipments) and is expected to overtake North America in demand by 2020. Penetration of aftermarket headphones is relatively low and reliance on bundled is high in this region.

Futuresource projects that 154m headphones with voice assistants will ship by 2022. “Watch out for voice assistants, which will be the next big trend for headphones in the not too distant future. Apple, Bose, Sony, Google, JBL and Microsoft are already offering access to assistants by incorporating push-to-talk buttons in the earpiece. We’re still waiting for wake word technology to make an appearance. It’s currently hampered by costs of integration and power drain issues, but we believe it’s likely to emerge in 2019,” adds Pearce.

In terms of market share, Sony, Apple and Harman brands (Harman, JBL, AKG and other brands combined) accounted for 29% of units; whilst Sony, Apple and Beats dominated revenues with a 44% share. Philips has lost share this year owing to financial trouble earlier this year. JBL captured some share from Philips. Futuresource has increased the longer term outlook to 422m units by 2022 (from previous projections of 400m) as a result of growing demand from emerging markets. Retail revenues are also forecast to grow by CAGR 11% (higher than previously expected at CAGR 5%) to generate $31.7bn. Growth in true wireless, voice technology, noise cancelling and an overall improvement in the durability and quality of headphones will encourage growth in prices throughout the forecast period.

The new Futuresource report surveys the global landscape for aftermarket headphones. It breaks out six regions and 18 countries, and provides data on feature sets, price segmentation, brand shares and distribution trends out to 2022. To view all latest Futuresource reports, visit this portal here>> www.futuresource-consulting.com/reports

The continued growth of the headphones market will be a discussion point at the fifth annual Audio Collaborative conference. Hosted by Futuresource in London on November 8, 3018. The event will bring together analysts and industry heavyweights from both professional and consumer audio to explore all the technologies, markets and strategies that are opening up opportunities. Click here to find out more.
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