Is audio “streaming along” or just going round & round?

By Jess Brunette June 01, 2014 Home entertainment

Audio remains a strong category but things move fast in this category and, if you don’t keep up, you may be left behind. Jess Brunette reports.

To view a PDF of the complete feature as it appeared in Wares magazine, click the download button at the bottom of this page.

Audio is one of the fastest moving categories in consumer electronics right now. It also has some of the most diverse end users in the channel – music after all appeals to a massive demographic range, from fashion conscious teenagers to well-heeled baby boomers or obsessive audiophiles. And each segment has its own needs and wants when it comes to listening to music. 

This provides a huge and growing range of options for retailers and suppliers to meet those different needs. But, with the market only so big and trends and technology moving fast – not to mention stiff competition – it’s easy to get it wrong.

Monaco Corp’s Pat Lee neatly sums up the current feelings of many players in this category: “Traditional home theatre and hi-fi systems have evolved to create new sub-genre categories,” he says, citing the example of Bluetooth speakers as one of the key products now expanding the audio category. 

Lee also points to a resurgence in soundbars as an example of a product that has had found a welcome home in the networked and wireless streaming technology that is now beginning to dominate the audio and home entertainment categories.

Connectivity, both to home networks as well as streaming internet services, is now a given for most of the new products being produced by the main brands in the audio category.

Pat Lee agrees: “Connectivity across all devices is now a must, as well as products which can easily integrate into a customer’s current home environment, and which can be expanded in the future,” he says, emphasising that, these days, “products without network or mobile connectivity are not an option. 

“Consumers want today’s technology in their home. Product lifecycles are becoming shorter with new tech developments and those all-in-one audio solutions which don’t allow future upgrades will become redundant pretty quickly.”

 

ENTER THE MULTIZONE

If connectivity is one of the most crucial concepts used in the consumer electronics game in recent years, what’s the next step for the connected audio consumer? 

Multizone systems seem to be the next frontier in this arena, with consumers wanting total control of the music in each part of their home at their fingertips. 

Mark Kruck at Sound Group Holdings has seen success in his Yamaha AV receivers which are being used by consumers in new and different ways. 

“What’s driving that success now is not just home theatre performance but the multizone capabilities that an AV receiver offers. So you aren’t just listening to five speakers and a subwoofer in one room any more. People are buying them for that plus a second and third zone and integrating wireless and app control and streaming services. So, while our AV receivers have always been strong, they have been picking up more in recent years as they become a true hub for a house system.”

For those specialising in multizone or looking to enter this market, seamless, user friendly products are the way to go. While Sonos Audio is perhaps the most recognised brand in this field, the likes of Panasonic are also entering the arena to try and take a slice. 

Another category mover & shaker, Amber technology’s Brent Malone also teases that Amber is currently developing a multiroom system with Lenco that should give Sonos a run for its money by the end of the year.

 

RETURN OF THE SOUNDBAR 

In line with a shift toward these streamlined wireless products, the soundbar has been a surprise hit after a lull of a few years. 

I’ve been talking to a lot of people about the soundbar market and it’s an unexpected win for everyone at the moment,” says Graham Pudney at Pudney & Lee.

He continues: “It comes down to the fact that the bezels on new TVs are so slim that manufacturers are putting very small speakers either facing down or even backward in some cases. So, when you get them home, you find that the sound quality is pretty low end compared to what you are used to with forward facing speakers on a wide bezel TV. 

“So a soundbar is almost essential buying when you buy a TV these days. And it’s an add-on along with a soundbar mount which is another piece that can go on every sale.”

Vaughan Winiata from Avalon Audio has seen the soundbar evolve from a piece of home theatre to a high end unit that does very well on its own. It has also opened up areas for several of the most loved loudspeaker brands to shine after steadily losing traction in recent years.

“Two years ago, a soundbar was something we sold for $299 dollars because nobody wanted to invest in a home theatre receiver [but] today we regularly sell $1,500 soundbars because heritage loudspeaker makers like Kef have realised that it’s a market where they can bring over their expertise and sound quality. And, if you can do it right, there is a premium space in that area.”

 

WHEN BIGGER IS BETTER – LET’S PARTY

At the other end of the product spectrum from such modest scaled music sources are the large, loud and flashy party machines and boom boxes which were a surprising hit for some players last year. By all accounts, their popularity this has continued into 2014.

Panasonic exemplified this trend last year with its Max700 model, a physically big, powerful and feature rich beast that made no effort to hide itself away that has been updated this year to meet demand (see Products). I asked Panasonic’s Rhys Trusler who was buying these less than discrete units.

“Mostly young people, but interestingly a lot of farmers as well. On our recent roadshow we started in Invercargill and down there the retailers said it’s all farmers buying them as they have plenty of space and when they have a get together, they like to go the whole hog and have the music be as loud as possible.”

Direct ImportsAdam Turner has also found some success with powerful TEAC portables for a younger market with striking rather than subtle design.

“We are putting focus on really cool units and boom boxes that people can take on the move with them that have good sounds quality and loads of features, with Bluetooth connectivity, microphone inputs for karaoke as well as flashing lights which seem to be a bit of a trend.”

 

HEADPHONES GETTING CROWDED

A less surprising trend is that headphones continue to be a lucrative area for many players, especially as consumers don’t seem to be stopping at just one or even two pairs anymore. 

Pudney & Lee’s Hamish Andrews reports good margins in his range of Philips headphones and Graham Pudney confirms this with good growth over the Christmas period within the affordable but not bottom end $50-$100 ranges.

At Direct Imports, Adam Turner has also done well in this space: “We came later into the headphones game so it’s the more price-focused models under $100 that have done well as the big name brands like Beats tend to have that high end dominated. So we do well in the bright colours and affordable ranges that parents are buying for kids or kids are saving up and buying for themselves.” 

Not everyone feels the headphones market is an easy space to be in however.

“It’s a tough market,” says Sound Group Holdings Mark Kruck. “There’s been a gold rush in the space of five years where you have seen an absolute proliferation of headphones and there’s a lot of money being spent on it but I think people get a bit carried away and it’s a lot tougher than it looks at first glance. We have certain models that do particularly well but they tend to be further up the food chain and out of the scrum at the bottom.”

While Digital LogisticsGrant Eveleigh is has seen good uptake in sales of Dynamat sound deadening products thanks to the Auckland housing boom, headphones like the very high end Parrot Zik remain a steady seller. 

Imation’s Ranjit Sohoni is another who, while seeing success with TDK’s new TREK brand outdoor waterproof speakers, still sees more business from TDK headphones despite all the competition. 

“Headphones is definitely an overcrowded market but what TDK has is some legacy, so it’s seen as a very reliable, good quality middle of the road type product,” he says.

 

NAME BRAND OR OWN BRAND?

For those longstanding middle tier brands like TEAC and TDK, the market is becoming extremely tight and many are seeing the development of own brand as one of the major contributors to this.

“There used to be a clear segment for us to be able to place something on the floor but the own brands are doing a very good job of taking that position away and the big, well-known brands are killing opportunities as their price points are so aggressive,” says Direct Imports’ Adam Turner.

For some of the players I talked to, it seems the best answer is to diversify into both name brand and own brand.

“As a distributor we are getting squeezed from every angle currently with more retailers doing private imports or private label. So with a couple of major importers we are handling their private import programme,” explains Graham Pudney. 

“Some would say you are selling against yourself, and in some cases we are, but at least we are able to add our expertise and knowledge and facilitate with our retailers. So we become relevant to them, and are still an essential part of the supply chain. 

“And for people who are wanting to do private import programmes I am suggesting that, instead of dealing direct with the Chinese yourself, we’ve had 30 odd years’ experience dealing there and have all the right contacts and know the mistakes you can make so let us handle it.”

As hinted at previously in these pages, Amber’s Brent Malone also expresses open interest in providing a similar service to retailers. 

“There are a number of companies that would be critical of the success of say The Warehouse’s own brands but you can’t be critical of success or a model that is profitable. I believe that shelf space will continue to come under pressure and companies will either need to diversify their offer and their service or they will implode. I think the shape of the industry will be a very different model in two years’ time and unrecognisable in five.”

Still, Carey Dixon from Connected Media (previously Audio Products) has been doing well with his Naked Cable brand of accessories and stresses that not all products in this area are the same. 

“You always have two levels of unnamed brands: there are good quality products that you have control of the design and the build like our Naked Cable brand; and then you have the ‘down and dirty’ stuff, which is the lowest possible price.”

Connected Media still sticks by its name brands for the majority of its products however: “I still think a brand is everything and has equity that you can’t create in a market the size of New Zealand.”

Mark Kruck feels the same: “I think in audio people still want a trusted brand, especially if they are spending a little more.”

Another strategy that continues to offer traction is to enter areas that the own brands don’t cover, as Direct Imports’ Adam Turner has seen with TEAC. 

“The longevity for TEAC is to continue to look for a point of difference and provide products to the market that not a lot of people are catering to, such as a record player we have at the moment which is going extremely well [see sidebar]. Other record players in the market are in the high end, so we have a clear segmentation in that position.”

 

STREAMING AND VINYL STILL GOING STRONG

Last year’s issue brought up the massively different, yet strangely complementary, worlds of streaming music services and record players that illustrated some of the key ways that people listened to music in 2013. Since then, both areas seem to have grown and done well for those equipped to handle it. 

Tony Chandler from International Dynamics does well with high-end AV receivers, dedicated DACs and Blu-ray players that work with streaming services (as well as just about everything else) but also does excellent business with Project Audio record players.

“We are big on vinyl and we sell more record players than anybody else in the market,” Chandler says. “We have a model at $500, our biggest seller at $700 and our second biggest seller at $1,000 that sells through hi-fi specialists, record stores and a little through Harvey Norman.”

While Tony Chandler admits to being slightly mystified by the strong resurgence of record players, he has a few theories on why it has taken off in the higher end audio market.

“There are plenty of people in the industry just like us thinking ‘where’s it going to go?’ And we are still seeing hesitancy with consumers not knowing which way to go and the bizarre thing is that with vinyl they know the way there. I worked in Real Groovy on Record Store Day this year and they had 7,000 people come through the door that day that were largely there to buy vinyl,” Chandler says.

Chandler reports that from the year 2000, record player sales increased 20% each year then spiked a massive 80% from 2007-2008. The GFC saw sales plateau from 2008 to 2011.

“Record player sales have been seeing solid growth of about 35% growth each year ever since [2011] and that 35% is off a much bigger base now. And in turnover terms we will sell nearly 10 times the amount of turntables this financial year than we did in 2000.”

 

THE QUESTION OF QUALITY

One of the aspects that appeals to the vinyl enthusiasts/purchasers of record players – and all the high quality cables, speakers and amplifiers that tend to go with them – is the issue of sound quality. 

The MP3’s ability to compress and reproduce songs in a small file format was a boon in the days of slow internet and expensive data storage but for many this came at a (some would say unacceptable) cost of diminished sound quality. Storage is cheap as chips now and broadband internet is the norm so some in the music industry are now asking why doesn’t most music  sound better now? 

While audiophiles have generally been disparaging about MP3 since its inception decades back, it has been less of an issue for most consumers happy enough to just have their entire music collection in their pocket. 

As ever happy to swim against the tide, music legend Neil Young’s PONO player and music service may be setting about changing that outlook. 

A Kickstarter project that gained significant exposure through social media (and no doubt helped by Young’s already high profile), PONO is a portable music player capable of playing a range of high quality lossless (non-compressed) audio files such as WAV and FLAC that, while up to 6 times larger than an MP3, can arguably reproduce the same or similar level of quality produced by artists in the studio. It remains to be seen if PONO, which is scheduled to be released later this year, will be a success but it has brought the question of quality audio to a more mainstream audience.

Some claim lossless audio is a form of modern snake oil while others swear they can hear the difference. The issue is complicated by the chain of quality that needs to be maintained each step of the way if you are to claim a truly lossless audio experience. Starting from the files themselves through to the DAC, amplifier, cable or wireless connections and finally speakers, there are plenty of chances to compromise quality (spot the opportunity). 

But can consumers really hear the difference? Mark Kruck from Sound Group Holdings: “If you start with the same track on a well recorded CD, rip it off at 128, 256, and 320 kbps MP3 then go through to the lossless formats and compare it, you will notice early on that the changes are quite easily noticed. But once you are up to a certain point you can get an improvement in performance but it will cost you quite a lot extra so it’s down to that old saying of diminishing returns.”

 

WHAT ABOUT STREAMING QUALITY?

As reported at length in last year’s issue, streaming music services such as Pandora, Spotify, Rdio and Google Play All Access are seen by many as one of the biggest factors behind increasing sales of music. So how does the issue of quality affect something you can’t even see on your computer? 

At present, the highest quality offered by any streaming service is 320 kbps which is also the highest quality offered by MP3 if encoded properly. Spotify is currently the world’s number one streaming music service and its premium service offers 320 kbps streaming. However only some of Spotify’s tracks have actually been encoded at this rate (it’s a work in progress apparently) so Spotify Premium users may still be listening to the same 160 kbps quality as free users in many cases.

With the recent  purchase of Beats by Apple, Spotify may have a contender on its hands, at least in the quality game, as most of the 20 million tracks that Beats has on offer are encoded at 320 kbps or 256 kbps for a “small minority of tracks”. And with Apple now behind the service and Beats headphones already in the hands of many a young music fan, this will be a development to watch. 

Still, 320 kbps is nowhere near the quality of lossless audio files that can be purchased from websites such as hdtracks.com. But with a limited range of music on offer, high prices and no streaming content at this stage, lossless audio sites aren’t exactly giving streaming music services (let alone iTunes) a run for their money.

Vaughan Winiata from Avalon Audio appreciates both sides of the coin: “It’s good that people are passionate about that quality but sometimes, in the real world, near enough is good enough. After all you can only listen to that first pressing of Dark Side of the Moon so many times! And something that’s easy to access and use is something that you will enjoy.”

So, while lossless audio might be a reality for many in the future, we certainly aren’t there yet. As someone with both a record player at home and a Spotify premium account on his mobile (Telecom is now offering it free with some packages!) I can say that the PONO offering isn’t really tempting me yet, though time may tell. 

Mark Kruck sums up the current situation well. 

“Give me convenience or give me death! Would you rather have access to Spotify (and 20 million songs) wherever and whenever you want or would you rather have everything tied up to your home?”

Since the last Audio & Accessories feature a year ago some trends have matured, (streaming audio and wireless models) and others are reaching their peak (headphones), while newer ones have emerged as surprise contenders (wireless soundbars). 

What hasn’t changed is that audio remains a good place to be if you have your finger on the pulse.  

 


 

PANDORA MAKES INROADS ON KIWI SOIL

In January this year, internet radio service Pandora boosted its growing New Zealand presence with the addition of Account Directors Stephen Old and Rita Steel to its New Zealand team which includes Commercial Director Melanie Reece and in-house publicist, Chris Henry.

With a global following of more than 76 million listeners a month, Pandora is the largest internet radio service in the world and is seeing dramatic increase in usage numbers since the New Zealand service officially started here in December 2013. 

“Pandora currently has 215,000 registered users in New Zealand, split approximately 70% mobile and 30% desktop with a rate of growth across the NZ and Australia region of one download per thirty seconds,” explains Chris Henry.

We believe Pandora is unique being the only music streaming service to have staff on the ground in New Zealand. And the Pandora team is currently working with RMNZ (Recorded Music NZ) to add Kiwi artists to Pandora’s music collation delivery service, potentially exposing them to a far larger worldwide audience.

“Australia and New Zealand are the first markets outside the US to have Pandora and that’s because RMNZ are a very progressive licensing rights provider and they immediately saw the advantage of having Pandora here,” says Pandora’s Melanie Reece. 

And what does this mean for New Zealand’s audio and accessories channel? Reece continues: “You don’t get to be the size we are without having relationships across all kinds of consumer electronics. Pandora is in over 1,000 connective devices on the planet. We are in fridges, jacuzzis, TVs and in two thirds of all new cars touching down in New Zealand. 

“So we work with all different types of electronics manufacturers giving them lots of reasons to be shouting about why having Pandora on their products is a very marketable and desirable thing for consumers,” she says. 

And we have a great team here so if people are interested in talking business development we are very open to that.” Email sales-nz@pandora.com to find out more!

 

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