Boom in Audio Content and Podcast Services in 2021 Driven by Advancements in Smart Speakers and True Wireless Headsets

Apple has released its Q2 2021 financial results, with earnings from services remaining the second strongest revenue driver after iPhone sales, reaching US$16.901 billion, 26% higher than revenues generated in the same period in 2020 (US$13.348 billion). There is no doubt that in the past two years, Apple has shifted to a cloud service business model as it expects revenues from its hardware to decline due to overall smartphone and tablet maturity and extended device replacement cycle, especially after consumers upgrade to 5G devices. At the same time, at the company’s latest spring event, Apple expanded its service portfolio by introducing Apple Podcasts Subscriptions (within the Apple Podcasts app), that provides ad-free content and allows listeners early access to podcasts. Audio content and podcasting are showing high demand from consumers and have generally gained interest from other tech giants like Facebook, which is building its own in-app podcast player. Facebook says more than 170 million people connect to podcast pages, and more than 35 million people are members of fan groups around podcasts shows.

Over the past two years, Apple has introduced numerous cloud services, including Apple TV+, Apple News, Apple Fitness+, and Apple Arcade, that not only assists the company in diversifying its revenue streams and minimizing risk as iPhone and iPad addressable markets mature, but also increases engagement with customers and adds extra value to Apple’s hardware ecosystem. For example, Apple Fitness+ leverages healthcare data taken from Apple Watch, such as heart rate, distance covered, calories burned etc., and displays them on a user’s companion screen, such as an iPhone, to encourage users to meet their training goals and monitor performance. At the same time, Fitness+ is an ‘intelligent’ service that provides personalized work-out recommendations based on Apple Watch’s collected data and the user’s performance. It has been proved that the seamless integration of Apple’s services within its own hardware is the primary competitive advantage. Apple’s devices and services are able to communicate and exchange data to create harmonized, personalized experiences and provide value to customers.

While Apple’s growth in services is impressive, the company faces strong competition to its streaming services like Apple Music, Apple TV+, and Fitness+, from players such as Amazon, Netflix, and Peloton that are more established in the market and offer richer content libraries. For example, although that Apple TV+ fee is low, it is lacking in terms of original content able to capture public attention, compared with the competition. Also, although Apple Fitness+ is connected to the Apple Watch, it is not connected with exercise equipment like Peloton’s spin bike. Apple has the potential to increase market share and subscription prices by offering richer original content and expanding partnerships and collaborations.

Given the maturity in tablet/smartphone market, the potential launch of new hardware like AR/VR headset and demand for ‘smart services’, Apple will continue optimizing and unveiling new subscription services tied with its hardware.

The launch of Apple Podcasts Subscriptions indicates that audio content—beyond music—is flourishing, especially during the pandemic, with leading companies like Spotify, Amazon, Apple, Sony Music, and Facebook investing heavily in audio tools and platforms to gain market dominance. According to a Spotify survey, 50% of responders prefer to listen to at least one podcast episode per week, while users in the 18-24 age group just listened to podcasts for the first time in 2020, which indicates that the market has not yet reached its peak. Podcasts can cover a range of topics, from educational content to news and personality interviews, and they are also considered easy to consume any time of the day, allowing users to multitask, which is not as easy with video and text-based content. At the same time, podcasts are affordable solutions both for consumers and creators. More specifically, some podcasts are free while general podcast subscription service price varies between US$2.99 to US$7.99 per month. Creators form their own side; they do not need expensive studio equipment to record a podcast episode.

There are no doubts that new and rich content plays an important role in acquiring and maintaining customers; therefore, providers that support creators and broadcasters can gain a competitive advantage by attracting talent and offering original content. For instance, Spotify acquired Anchor, which is a platform that allows podcasters/creators to mark episodes as subscriber-only and distribute them on Spotify and other platforms. At the same time, Spotify does not take subscription revenues from creators in the first two years. Apple is taking 30% in the first and 15% the subsequent years. While Apple’s charges are higher in comparison with other vendors like Spotify, it has a large and growing user base (thanks to its hardware) which attracts podcasters/creators.

The growth in audio content has also been encouraged by advancements in smart speakers and true wireless (TWS) headsets along with Bluetooth LE audio capabilities that allow users to share audio in real time. At the same time, the adoption of voice assistants will play an important role to the continued success of audio content as more and more devices (including TWS) and services (like Spotify) have integrated voice commands that allow user to seamlessly control audio content.

The popularity and high demand for audio content, including podcasting, unlocks opportunities for advertising and consumer engagement. Brands can leverage the growth of audio content consumption to build immersive ads or distribute branded educational/entertainment content that increases engagement and brand awareness. It is expected technological advancements in analyzing sound content will improve audio searches and personalized recommendations, allowing more targeted ads and content.