A New Golden Age of Hi Fi?

by ​EXOGAL CEO Jeff Haagenstad

It used to be, way back in the 60's and 70's, that almost every home either had a big, five-foot wide stereo console or a shelf full of audio components. Audio was a big part of people's lives. The fact that many homes only had one or two TV channels may have been a part of that. But everyone spun records for entertainment. Replacing the needle was as common as getting the oil changed in your car. I remember my Grandma playing Johnny Cash and Marty Robbins while she made dinner.

But times have changed. Now everyone has access to virtually every song ever recorded, on demand.They get it through their phones but at a lower fidelity than was once the benchmark. The common wisdom in the audio industry is that people made a conscious choice of convenience over quality. But I don't believe that's the case. Sure, they made a choice for convenience, but sacrificing the sound quality was a trade-off made by Apple with iTunes; Napster with MP3's, etc. for their own reasons: Memory was expensive. Wireless bandwidth was expensive as well as slow. Delivering a wide variety of high-quality content simply wasn't workable. As far as the consumer cared, the reduced quality didn't matter. They were listening through a phone and with crappy earbuds. There was a bigger loss of quality from the hardware than from the stream.

Meanwhile, the audio industry saw the rise of Pandora, Spotify and their competitors, and became afraid that consumers no longer cared about quality. Some manufacturers developed small, dedicated devices to play higher resolution content (for example, Pono.) Others made add-ons to phones that made for a clunky, cumbersome combination. Others simply dismissed digital music as Walmart-quality content for people too dumb to know the difference. However, online retailers of high-resolution digital content such as Blue Coast records and HDTracks were doing a brisk business selling high-quality music content to discerning customers who had noticed the drop in mainstream quality and were not satisfied. These customers were willing to pay for higher-quality content as well as the gear on which to play it.

But as the larger, high-quality market shrank, manufacturers were fighting over increasingly small pieces of the pie. Some didn't survive. Most saw their sales and market share drop. A very few held their ground but couldn't really grow. The general sense was that the end of high-quality audio was inevitable.

But there were a few bright spots. According to the RIAA:

  • Vinyl records are seeing a small but real resurgence. Physical digital media sales have been steadily dropping.
  • The number of tracks streamed through streaming services has roughly doubled every year for the last 4–5 years.
  • Revenues of the streaming services have also more than doubled during the same period

However much of this growth is also at the expense of the artists who see a very tiny fraction of the revenue from streaming. That's not the subject of this article but do them a favor: buy their albums or CD's!

Anyway, several years ago the first high-quality streaming service, Tidal (originally called WiMP before it came to America), began streaming premium digital content. More recently, another company, Qobuz also sprang to life, also offering high-quality content but taking a different approach than Tidal. Last week, Amazon announced that it too, was developing a high-quality streaming service. And this morning, Netflix announced that it would begin increasing the fidelity of the audio streams in its content. You've gotta believe that Google is watching all of this as well, now that they own YouTube. Google is rarely first, but they always show up to play!

For a dying industry, it sure seems like a lot of players are interested in the idea of improving listening quality! It's clear that they aren't providing this higher quality content simply hoping customers will buy it. There is clearly a demand for better quality music in the world. Bandwidth is now cheap. You could almost argue that in the larger scheme of things, it's free. So much more is spent on content: Apps, games, videos, and especially music. The cost of your data subscription is dwarfed by what you pay for content.

As a guy who runs an audio company, it gives me hope for the future. But in a larger sense: What a great time to be alive! The fact that I can watch a movie or listen to any music I choose, 24/7, is amazing and wonderful.

Human history is rife with examples of someone bringing out some new, high-quality thing. Then someone else figures out how to make it cheap for the masses. Then someone figures out how to make premium quality offerings for discerning customers that can afford it. It's the ebb and flow of commerce; of product development. It's innovation, sales and marketing at its finest.

And that's why I look at the streaming music industry and see hope. We've been through the commoditization phase. Now we're back in the quality phase. Everyone wants the best that their money can buy — regardless of their place in society.

Now, if we can just get those artists paid properly, everything will be fine!

On Innovation...
 

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Tuesday, 12 November 2019

 

 

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