Why headphones are not going to save Hi-Fi

by Scot Hull

You've probably heard the news by now. Hi-Fi is dead. Rumor is, it was murdered. Poison! And it has 36 hours to learn who killed it. [Insert ominous music here] If this idea is even remotely new to anyone out there (other than fans of that dreadful flick with Dennis Quaid and Meg Ryan), well, I fear for you. It's practically a Facebook meme at this point -- it's taken as (figuratively) true by just about anyone In The Know. Yes! Just take a look at the number of hi-fi shops that have closed their doors in the last decade alone! Clearly and unequivocally, this is a Sign Of The Apocalypse, and the gasping demise of audio's high-end. In short order, Music by Beats or Spotify or some other streaming music portal will destroy Apple's iTunes and with it, the last remnants of the Old Republic will be swept away. Just so you know, these are probably the same people that said that the CD was obsolete. And before that, that the vinyl disc was obsolete. And before that, that the vacuum tube was obsolete. Ah, me. Clearly, we'd be rattling around like a bean in a can in our house of hyperbolic tomfoolery if we didn't already have it jammed full of overblown predictions. Sometimes, padded walls are good. Look at me! I'm crazy.

Look. The fact of the matter is that CD sales are down. Vinyl sales, while recently up, are still way down from historic highs. And yes, proportionally speaking, the vast majority of audio components sold today have absolutely no vacuum tubes anywhere. But there are still CDs, vinyl records, and vacuum tubes being sold and a lot of money still being made. And yes, there are still audio dealers peddling these (and other) wares. So while the market has certainly evolved (thanks, Apple and Amazon et al), it’s worth sticking pins in the ballooning nonsense coming from the Negative Nancy Brigade. The world is not ending. And every once in a while, something new comes along (still!) that sets the world on fire.

Take Beats, for example. Originally created by a team of clever folks including Dr Dre, Jimmy Iovine, and Monster Cable team, this headphone brand took the world by storm back in 2008. And by storm, we’re talking about them overtopping $500M in sales this year. If you’re an audio manufacturer in any vertical, that number really ought to wipe the tear-stained snot clean off your face. “Headphone Audio” is now a $2B market! But here’s the fun bit — the total market for hi-fi? About $200M or so, which happens to be down about 50% in the 10 years leading up to about to, well, about now. Said another way, the headphone audio market, which is growing, is about 10 times the size of the hi-fi market, which is shrinking. Said yet another way, Beats — by itself — is outselling the entire hi-fi industry combined, by a factor of two. Ahem.

Say what you like about Beats. In fact, you can say anything you like about Beats:

“In terms of sound performance, they are among the worst you can buy,” says Tyll Hertsens, editor in chief of InnerFidelity.com, a site for audiophiles. “They are absolutely, extraordinarily bad.”

It doesn’t matter. Because Beats are cool and everyone is buying them. Ka-ching!

So, if you were a wise businessman and invested in audio, which market would you think was the one to dip your toes into? Lemme give you a hand — if you’re a manufacturer making high-end audio bits and you’re not looking at headphone audio with a greedy stare while jets of saliva arc out of your lower jaw like some sort of underfed cobra, you’re a blithering idiot.

For hi-fi, headphone audio is an obvious market adjacency and quite frankly, there’s a lot of room for the average hi-fi manufacturer in the headphone audio space. Yes, headphones have been around for a long time, but quite frankly, the sound quality “over there” trails the hi-fi space by a wide margin. Take Beats, for example. Ahem. Yes, there are quite a few tremendous sounding offerings in the headphone audio space — but take all the world-class headphones and stack them up. Not just good headphones — I mean the best of the best. Right now, that’s a short list. You’ve got:

Audeze LCD series

Beyerdynamic T1, T5p

Grado HP1000, GS1000i

HiFiMAN HE-6, HE500 and more

JPS Labs Abyss AB-1266

Sennheiser HD800, HD700 and HD650

Stax SR-009, SR-007

I’m sure that there are a few others that deserve to be on that list, but the point is that the list is short.

Compare that to the list of world-class loudspeakers that Stereophile has listed for loudspeakers in their 2013 Recommended Components. Yeah, it’s big — and that’s just the stuff they’ve reviewed recently. There’s also a dozen more “highly reputable” websites that have similar lists.

I think there’s a few things that all this should tell you. One, there’s a lot of talent playing in hi-fi — even now, in this, the Declining Years. Two, that there isn’t a lot of variety (by contrast) in headphone audio. Yes, there’s some — but if the recent participation in CanJam at RMAF was any indication, with something close to 100 times the number of hi-fi vendors willing to travel and demo than there were headphone audio vendors willing to do the same, the scales are clearly unbalanced. Third, there is a level of insanity quality-chasing in hi-fi that just isn’t present in headphone audio. Sounds like opportunity to me! Check out what’s what with JPS Labs’ new $5,500 Abyss headphone — that thing is incredible sounding, and even at that eye-popping price (at least in the headphone world), it’s still getting a lot of positive reaction. There’s clearly a hunger in the headphone “personal audio” world for mo’ betta’ gear — and hi-fi manufacturers are a natural supplier for such “innovation”. I’ve already opined that headphone audio is going to be inundated with hi-fi sourced uber-product in the next decade (the deluge is only just now starting — check out the $1,000,000 Indiegogo campaign for a desktop headphone amp/DAC combo from LH Labs), and that it’s going to be nuts. It’s also going to be awesome and that’s all to the good for guys like me. But there’s going to be a backlash … but put that aside for now.

Let’s take a step to the left and note that I’ve spent a thousand words talking about an exodus from hi-fi into headphone audio. Hopefully, I’ve been quite clear about this because that’s my point — while there’s clearly money being spent on one of the two market segments, headphones, et al, are most assuredly not going to “save” hi-fi.

There’s been a lot of ink spilled about how the joys of headphones is the “gateway drug” into the gloriously wonderful world of hi-fi generally. Let’s just say that I think this is hopelessly optimistic and here’s why — by and large, most headphone junkies just don’t give a shit about hi-fi. Never have. Probably never will. Why that is has to do with their age, their demographic and economic status, and their generational experiences, but the point I want to emphatically underline is this — if you’re thinking that the success of Beats is a “good thing” for loudspeaker makers, I’m really sorry to have to disabuse you of this. Think of Tower Records — and how wonderful iTunes was for Tower Records’ business model. Remember Tower Records? Yeah.

Look, it’s just not about growing hi-fi market share — I’m talking about it, best-case, as market shift — not growth. Personal audio is eating hi-fi. And the current fixation that hi-fi has with spiraling costs will ensure that most can heads skip the train entirely — the fact that $9 out of $10 dollars spent in audio are spent in personal audio should be speaking volumes. Not rooftop-with-megaphones, but like rock-concert-PA-systems-on-rooftops. Personal audio and hi-fi are market adjacencies; they share certain features, but they’re not the same — think “sports car” and “motorcycle”, for wont of a better analogy. A true motorcycle fiend will never give up the bike, even after they can afford the sports car. And with the bike, there’s an open question as to whether the sports car will ever be “worth it”. These segments are separate. Sure, there’s overlap — that’s why the term ‘adjacency’ fits. But participation in one does not entail any participation, now or in the future, with the other. Assuming otherwise is a great way to miss the boat. And waste money — and opportunity.

And I do mean miss. Right now, there’s an old-guard in the headphone space. Certain vendors with long-standing product lines and valued reputations. They’re (still!) making great product and introducing new bits against measured plans. That’s a recipe that’s perfect for a new vendor with a disruptive product — like Beats, say. Given the wild success of Beats, and how utterly pedestrian the reviews of that product line tend to be, clearly there’s room in the segment. On the other hand, first-mover dominance is insanely hard to shake off and Beats isn’t sitting still. Anyone moving into the headphone space, specifically, has their work cut out for them. Daunting, yes, but doable — but best of all, there’s now room to elbow into. I’ll leave off suggesting viable business models, target price points and the potential for crossover products for another day.

The long and short of it is this — audio’s high-end is not dead. It’s not even on the table. It is aging and starting to show it, but predictions of its impending death are laughable. Still laughable — we’ve been talking about hi-fi’s demise for decades now. But like Keith Richards [or insert your favorite 1960s/1970s musician or band], it’s still making music and making that music sound good. Even if it looks a bit rickety, no one’s really sure why and how they’re still alive after all that abuse, and any fall is likely break a hip.

Hi-fi is, however, evolving. Whether it’ll be able to merge with a related adjacency or be swallowed by it is an open question, but it can most certainly take advantage of it. And it should. And it is, which is the most exciting news I pulled out of this year.

We’ll see where it goes. I, for one, am not dumping my hi-fi just yet. But just to be open with ya’ll, I have been buying a lot of headphone audio bits lately.

Counterpoint

by John Grandberg

When Scot asked me to to contribute some thoughts on this op-ed, I was a bit unsure. Was he going to rehash the same tired talking points we’ve all read numerous times before? Maybe. Probably? It sure would be the easy way to go. But hey, it’s Scot, so I figured I should give it a read before I outright turned him down. Once I actually sat down to digest his piece, I realized I had misjudged the guy. He actually had a lot of interesting points to make. Most of which I completely support, but a few that I see in a slightly different light.

First off, let’s come right out and say it – the industry is having some difficulties. No denying that. But guess what? So are a lot of other industries! This is a hobby after all, with all the trappings that come along with the word. It demands disposable income and extra time and physical space in your house and…. you see where I’m going with this right? How many people are unemployed right now? How many are working multiple jobs to make ends meet? How many are commuting an extra hour or three each day? For a lot of folks, there just isn’t any extra budget for luxury goods. And even when there is a bit of padding there, enabling a person to buy a respectable sound system, do they even have the free time to sit around and enjoy it?

I hear some of you saying “But John, what about those well-to-do folks, for whom time and money are not limiting factors? Surely they are out spending money in the local shops, right?” Which of course is a good point – someone is still buying this stuff, or the companies and magazines (and websites….) would completely cease to exist. Yet I see something of a generational gap at play here, and with it a whole new outlook. No longer is the HiFi something most people aspire to own. For a kid who grew up with tube-driven amplifiers driving big Altec speakers, who handled vinyl on a regular basis and routinely tuned in the local radio station for news and entertainment – it makes sense that this kid would grow up wanting to have a spectacular system of their own. There’s an element of recaptured youth to the whole affair. But that kid is long gone. Someone who grew up with hundreds of television channels at their disposal, or thousands of MP3 tracks in their pocket, or the internet…. those folks have no fond audio memories to rekindle. Even if they somehow catch the bug and become an audiophile, it will be a new thing for them. They won’t have that same emotional attachment. Furthermore, as we became a more fast paced society, we kind of left behind “simple” things like sitting down and enjoying music – without multitasking. Think about that. There’s a whole generation (several actually) who really aren’t used to doing just one single thing at a time.

One more bit that seriously contributes to the decline of the industry – overpopulation. Seriously, how many companies are there trying to make speakers? Or preamps? Or DACs? Head over to Audiogon and pick a category. You’ll find dozens or often hundreds of currently active brands represented. And that’s just the current brands in any one category. A lot of them don’t even overlap. Can you imagine other industries being like this? What if there were this many brands out there trying to sell refrigerators? Mind you, a fridge is something that pretty much everyone requires. Every house or apartment or office pretty much has one, maybe two. Yet surely there aren’t a hundred brands out there currently vying for your business. It’s absurd. The analogy works just as well if we use tires, tissue paper, or trampolines. As for just why so many brands exist in the audio kingdom, well…. that’s a topic for a whole other article. Suffice it to say there are just too many players trying to grab a piece of the ever-shrinking pie. Some will disappear, and (with a little luck) the cream will rise to the top.

Where am I going with all this, besides making myself sound like a grumpy old codger? Ah yes, HeadFi versus HiFi. I think Scot hits on a lot of truths here. The 15 year old who wants Beats around his neck as a way to fit in? Yeah, that guy is not being “reached”. He likely won’t ever become an audiophile, and if by chance he does…. it won’t have anything to do with those headphones. There’s really no overlap at all. In that respect I completely agree with Scot.

Having said all that….. I do see some parallels for certain situations. Example: as a younger guy, maybe living with the parents or in a college dorm, there’s little chance to assemble a nice 2-channel rig. There probably isn’t space, or money, and parents/roommates won’t appreciate it anyway. But if he grabs some nice in-ear monitors (Westone, Ultimate Ears, HiFiMAN, etc) for maybe a few hundred dollars, runs them from his iPhone, then he’s got himself some pretty good sound. As he (or she!) gets more involved in musical enjoyment, incremental upgrades take place – a dedicated DAC, headphone amp, maybe some full size headphones or high-end custom in-ear monitors. Before you know it, this kid qualifies as a full on audiophile, complete with a very respectable (yet headphone based) system – which they would never have been able to achieve using speakers. As this person grows up and enters the “real world”, they find themselves having a place of their own along with more disposable income. What are the chances they decide to get a speaker rig at that point? Pretty good I’d say. Anecdotal, of course, but I’ve seen this happen to lots of people over at HeadFi.org. That younger generation, no longer raised in a home where Dexter Gordon and Charlie Parker were in regular rotation, now develops their own musical tradition based around groups like Muse, The Strokes, Radiohead, et al. This sequence, or one very similar, is playing out as we speak, all over the globe. As long as there is teen angst, there’s a potential new pool of music lovers out there. And once they experience good sound, chances are they’ll keep wanting more.

The only other thing I’d add to this is that we need to keep a fresh perspective about what exactly constitutes “HiFi”. If we’re looking at speakers, turntables and preamps as the chief criteria, then yeah, there’s only so much potential for innovation. But look at the DAC market – major improvements in the past few years. What about music streamers? Dedicated audiophile playback software for PC and Mac? Active room correction? High-res PCM and DSD downloads? Ever-maturing Class D amplification? There’s actually a lot going on if you think about it. If we can free ourselves from the anachronistic notion that a “real” system must involve vinyl or giant monoliths for speakers, we’ll see a whole new world of great sounding gear to play with. At the same time, if you like your VTL and your Wilsons, those will still be around. It’s win-win in my book. The industry may or may grow bigger as the economy (hopefully) improves, but make no mistake – good things are definitely happening.

Counter-Counter Point

The team at Audio360.org have offered up some more thoughts on this (I even chimed in again, because I can’t seem to help myself) and you can find those. They also link a couple of others that had different … takes. Check it out. [Editor’s Note: Audio360 is no longer live]

Got something to add? Feel free to chime in in the comments section!