High-resolution audio movements from Apple and Amazon signal market maturation [MARK MULLIGAN]
Apple and Amazon’s moves to add high-resolution audio at no additional cost were as much about a mature streaming market as it was about beating Spotify, says MIDiA analyst Mark Mulligan.
Through Mark Mulligan of MIDiA and Music industry blog.
Apple and Amazon caused a stir this week by incorporating Hi-Res Dolby Atmos audio into the baseline levels of their streaming services.
The timing, i.e. right after Spotify started raising prices, is – how to put it, interesting. It also dealt a blow to the music industry’s long-held hope that Hi-Res would be the key to increasing subscriber ARPU. While this may be true, for now at least, this decision is an inevitable consequence of two flow market dynamics: commodification and saturation.
Music streaming contrasts sharply with video streaming. While the video market is characterized by unique catalogs, a variety of prices, and diverse value propositions (including a host of niche services), music streaming services are basically the same product. When the market was in its hyper-growth phase and there were enough new users to go around, it didn’t matter that streaming services only had the brand, curation, and interface to go. differentiate from each other. Now that we are approaching a slowdown in high income developed markets, more is needed. This is where Hi-Res comes in.
Now that streaming is, as Will Page says, in the “ fracking phase ” in developed markets, success is defined by how you keep subscribers rather than how you acquire them. As all key DSPs operate on the same base model, they need to innovate around the base proposition in order to improve adherence and reduce churn rate. Spotify has started the ball rolling with its podcast hub, but the fact that its podcasts can be consumed by free users means that it is not (yet) a tool for reducing subscriber churn.
Additionally, when podcasts are mapped with other pillars of positioning, Spotify’s competitive differentiation gap is relatively narrow. Since Apple and Amazon both now have high resolution as standard, they not only improve audio quality but also value for money (VFM). Keeping in mind, both companies have already performed well on VFM as they have Prime Music and Apple One in their respective armories.
Amazon, however, appears to be the best-placed of the four major Western streaming services. In addition to audio quality and VFM, it is expanding its podcast playback (compared to the Wondery acquisition) and it has the potential to fit into the world’s leading audiobook company, Audible. As spoken word audio consumption has grown almost twice as fast as music in 2020, being able to play in all audio channels will be crucial to compete in what will become saturated streaming markets.
Immersive audio narration
Finally, Dolby Atmos is more than just Hi-Res audio; it is an immersive format that enables the creation of spatial audio experiences. If we are truly on the verge of an audio-to-speech revolution, then immersive audio may have a central role to play. Surround sound has been a slow burner for home video, but that may be because the video experience itself has improved so much (bigger screens, HD, more shows than ever before) than the component audio has been less important (although the growing soundbar market suggests so, which may be starting to change). However, in audio formats, there is only audio to do the narration. This could mean that tools like immersive audio are becoming essential to audio storytelling, which means, you guessed it, that Amazon and Apple would then have a competitive advantage in podcasts and audiobooks than Spotify does. would not.