Despite the High Price, Apple’s AirPods Max are Set to Foster Increased Competition in Wireless Headset Market

In December 2020, Apple introduced a new pair of headphones to its AirPods wireless product line, the AirPods Max. The new high-end device is an over-the-ear wireless Bluetooth headphone with a stylish design and premium-quality materials (stainless steel), costing US$549. There is no doubt that the new headphones are overpriced in comparison with other Apple’s products such as the  AirPod, AirPod Pro, and Beats, as well as other high-quality headphones from competitors like Bose and Sony. AirPods Max support the features of the AirPods Pro, including transparency mode, noise cancellation capabilities, and voice commands through built-in Siri.

The list of tech companies that invest in wireless headsets is expanding, with new players entering the market and existing ones upgrading their products in order to remain competitive. Wireless headset products tend to be more customized in order to meet specific use cases (such as sports/exercise suitability, gaming and entertainment, professional usage, and medical assistance) and different consumer groups (from casual listeners to travelers to professionals). The high level of competition in the headset market raises questions about key features and criteria that will affect consumer adoption and manufactures that will lead in consumer preference.

A number of factors contributed to the launch of the AirPods Max: the success of Apple’s first true wireless AirPods/AirPods Pro, in terms of good functionality and positive user experience; Apple trading on its experience from Beats products; better educated consumers and richer audio content; and increased demand for wireless headsets. Apple’s new device is equipped with advanced software and sensors that enable noise cancellation, spatial/3D audio (that tracks both a user’s head and device position to transfer sound accordingly), an Adaptive EQ feature that adjusts low and mid frequencies in real time, and extended battery. These features support high-quality acoustic experiences. AirPods Max do not only target users seeking a premium sound experience, but they also unlock opportunities for enhancing productivity and supporting professionals. The ongoing effects of the COVID-19 pandemic have established remote work/education, long hour (video) calls, and limited access to professional/studio equipment, which has driven the need for over-the-ear wireless headsets that are ergonomic, allow movement flexibility, and deliver high-quality sound. At the same time, AirPods Max is designed to better support Apple’s subscription services, providing more immersive and realistic experiences in Apple Music, Apple TV, and Apple Arcade. Also, high-quality audio experience has the potential to encourage AirPods Max owners to subscribe to new Apple services and leverage the full potential of the device. Furthermore, high-quality hardware prepares the ground for the release of new immersive audio content in Apple TV, Apple Arcade, and Apple Music. For instance, the relative comfortable design of AirPods Max and their spatial audio capabilities means that AR gaming will become more immersive and realistic, as users will be able to perceive sounds from different angles and depths in space.

Over the past few years, Apple has diversified its accessories product portfolio, offering both affordable and high-end options in order to expand its customer base and incremental revenue streams, while also meeting the needs of different consumers and professionals. Apple offers a range of hearable options to its customers, from affordable Beats earphones to the premium AirPods Max. It is expected that Apple will continue leading and investing in hearable products by improving user interface through voice/touch control, optimizing sound quality, decreasing latency, extending battery life, and enhancing design and comfort. Also, Apple’s noise detection/cancellation algorithms will be more accurate thanks to the data collected by the Noise app on Apple Watch, which measures ambient sound level and duration of sound using microphone. Finally, Apple’s latest approach to provide EarPods as a separate product will be another key factor that will drive Apple’s wireless headset revenues, encouraging consumers to purchase wireless headsets instead of traditional wired EarPods.

According to ABI Research’s latest database, total after-market wireless headset shipments for smartphones will reach approximately 689 million units in 2025. The demand for wireless headsets has increased significantly over the past couple of years, not only due to the wider range of stylish and technically capable devices that exist in the market, but also to the changes in consumer behavior and lifestyle, especially during the COVID-19 pandemic. More specifically, the growth of streaming services and video call conferencing platforms, in combination with being at home as the new norm (including work, fitness, and entertainment at home), has driven the need for personalized audio experiences that minimize external distractions and achieve high-quality sound experiences.  At the same time, consumers tend to be more conscious of health and mental wellness, driving demand for high-quality sound and smart headsets. For instance, music therapy (which can treat anxiety or sleeping disorders) is a promising area that becomes more efficient with advancements in spatial sound, noise cancellation, and integration of digital assistants. Moreover, the integration of virtual assistants in headsets can augment reminders/notifications and reduce dependency on smartphones.

While the lack of audio content and use cases are not major challenges for driving adoption in the wireless headset market, technical capabilities and functionality in combination with design and pricing are critical criteria that can define purchase decisions. Currently, consumers are looking for stylish and comfortable devices that enable freedom of movement and minimize the need to rely on smartphones/tablets. In addition, other important criteria that will define leading hearables are the effortless user interfaces and seamless pairing with other devices (smartwatches/smartphones/smart TVs), swift and accurate execution of voice/touch commands in combination with sound/haptic feedback, head tracking and spatial sound capabilities, and selective sound cancellation. Last but not least, long battery life and Bluetooth reliability with minimum latency are critical factors for user experience, especially for applications such as gaming and video that require ultra-low latency and audio synchronization.

Finally, the exposure of the hearables market will unlock new opportunities for sports, media, and entertainment industries to partner with hearable manufacturers, launching new audio content and delivering more immersive experiences. For instance, with the assistance of spatial audio, advertising/marketing campaigns can be transferred as a more engaging experience and be less disruptive, while sports and movies will resemble stadium/cinema experiences. Wireless headsets are a very promising market with a plethora of monetization opportunities for manufacturers and services providers, and real value for consumers.