Spotify HiFi: Why it's a Big Deal and What it Means for the Consumer Audio Market

Spotify HiFi: Why it's a Big Deal and What it Means for the Consumer Audio Market

During its "Stream On" event, Spotify announced that it plans to launch a Hi-Fi streaming plan offering lossless streaming in CD quality later this year in selected markets.

Alexandre Jornod- Market Analyst- Futuresource Consulting

This announcement is significant. Spotify has been historically reluctant to offer lossless streaming, which demonstrates a shift in consumer expectations. As Spotify is the leading streaming player with 155 million subscribers globally, it means that high-quality audio will finally be within reach of mainstream adoption. This is particularly true as if both Spotify and Amazon Music are offering lossless streaming, Apple Music could also launch a similar plan, which would corroborate with its positioning as a premium audio brand, notably following the launch of the AirPods Max.

Amazon Music HD has been available for over a year now, which has helped driving mainstream awareness around high-quality streaming and has ultimately created favourable grounds for Spotify to launch its HiFi plan.

The timing is also interesting. In 2020, consumers had more time to consume content due to COVID-19, which drove a desire for having good sound at home to improve comfort during this period. Futuresource has notably seen a surge in demand for premium audio products in 2020, for instance shipments of $1,000+ soundbars jumping 32% year-on-year in the period Q1-Q3 2020. Moreover, adoption of fast internet is accelerating, with the roll-out of 5G in many markets, coupled with people upgrading to fibre for remote-working, which further facilitates the consumption of high-quality audio at home and on the move.

In July 2020, Futuresource published the results of its consumer research Audio Tech Lifestyles, which interviewed 10,000 audio hardware owners across the US, UK, Germany, Japan and China. One of the key findings was that amongst streaming users, higher audio quality was by far the most requested feature respondents wished they could add to streaming services. Spotify also confirmed similar findings amongst its users, which highlights that the desire for high-quality audio is not solely exclusive to audiophiles and that sound quality expectations have increased, notably amongst the mass-market. Futuresource will be updating this survey in Q2 2021, further exploring attitudes to premium audio.

The way Spotify will price its HiFi tier will be key in determining its success. Price sensitivity with streaming plans is high and competition in the lossless streaming market has intensified since the launch of Amazon Music HD, forcing other lossless players such as Qobuz or Deezer to match their pricing with the $14.99/month of Amazon Music HD. While Tidal Hi-Fi remained at $19.99/month, it is helped by an established user base of audiophiles. In addition, with Amazon discounting Amazon Music HD to its Prime members at $12.99/month, Spotify will need to take this into account to remain attractive, especially given the major boost to the number of Amazon Prime members during the pandemic. In addition to this, Amazon Music HD offers millions of songs in Ultra HD (24bit), when Spotify plans to offer exclusively CD quality (16bit). Futuresource' Audio Tech Lifestyles consumer survey found that amongst respondents who expressed interest in having better audio quality on their streaming services, over 50% said that they would be willing to pay between $1 and $3 more per months than a standard $9.99/month subscription for this feature, which would put a $12.99/month pricing in the sweet spot.

Finally, for audio manufacturers, this news is a particularly exciting development. More people having access to high-quality audio is likely to accelerate adoption for premium audio devices as consumers will want to make the most out of their lossless streaming subscription. This opens-up significant opportunities to introduce the mass-market to premium audio and get more people in the high-end audio funnel. Once consumers have tasted high-audio quality, they are more prone to keep upgrading their system to improve their listening experience, which is ultimately expected to drive long-term value for the consumer audio market.

To find out more about our Audio Tech Lifestyles consumer research, please contact Jack Tammaro via?jack.tammaro@futuresource-hq.com for more information.

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