As world goes wireless, home audio systems see big shift

Bose SoundTouch 10
Javier David | CNBC
Bose SoundTouch 10

Whatever happened to the pricey home entertainment system and its big, bold speakers?

In ways both large and small, digital music and streaming media have transformed how consumers listen to music and watch movies and television. The rise of platforms such as Apple iTunes, Pandora and Spotify — fueled largely by the ubiquity of tablets and smartphones that serve as portable radio stations and movie theaters — is feeding a burgeoning appetite for Bluetooth and wireless speakers, according to research firm Euromonitor.

Simultaneously, the shift to streaming media has led to another quiet revolution. The home audio system concept — featuring bulky high fidelity (hi-fi) speakers and other assorted equipment that could easily costs thousands of dollars — has been reshaped into something more compact and less expensive. Euromonitor data showed that hi-fi retail volume sales tumbled by 21 percent last year, to 714,000 units.

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While there's still a market for traditional sound systems, the landscape is increasingly dominated by wireless technology that powers smaller, portable and cheaper components that give audiophiles more bang for their buck. So how did we get from there to here?

"Technology is really catching up," Santiago Carvajal, director of Bose's SoundTouch division, told CNBC in a recent interview. "Customers can have beautiful speakers without complicated racks and components, and delivers what you always wanted, which is great sounding music."

Bose, which competes with the likes of Sony, Sonos and Beats by Dre, recently rolled out the SoundTouch 10, a wireless speaker that has a retail price of $200 that can be operated from a tablet or smartphone. Although the device is approximately the size of a small book, the SoundTouch's playback abilities can easily fill a room.

Underscoring the growing power of streaming media, the SoundTouch can be operated with a mobile app, and the device itself directly accesses platforms like Spotify, Pandora, SiriusXM and iHeart Radio, among others.

"For this market to really take off it needs to be simple. If there's any complexity involved, the mass consumer will not adopt it," Carvajal said.

Much like the iPod, which endeared itself to the masses with its sleek style and easy functionality, "…technologies have to evolve to develop a new level of simplicity," he added.

'Feeling the movie', only with smaller speakers

The wireless explosion has transformed the market for audio speakers into a $10 billion juggernaut, according to a recent report by Strategy Analytics. With home audio becoming "a focal point" of consumer electronics, the firm noted that an estimated 80 million audio speaker units will ship globally in 2015, with half of them being Wi-Fi enabled.

Bose's Carvajal doesn't believe traditional home audio systems are completely obsolete. He pointed out there are still high-end speakers that appeal to certain consumers — particularly as vinyl records attempt a comeback among more nostalgic music lovers.

"You can spend more than $1,000 on a home speaker system and people are completely thrilled with what they're buying. They like 'feel the movie' kind of sound," he said. "Sound people like to take their music and crank it up [and] ... those systems at the high end of the market serve those consumers very well."

A home theater system featuring wireless speakers
Source: Javier E. David
A home theater system featuring wireless speakers

Yet recent trends leave little doubt about where the market is headed — and that appears to be in the direction of small, cheap and without wires.

In response to an inquiry from CNBC, a spokesperson for Best Buy said that high-definition television sets were one of the retailer's most popular items, "and we saw many of those customers also then upgrade his or her home theater audio" with wireless or connected speakers.

"And in the last two years, the number of wireless networked soundbars offered to customers has doubled," the spokesperson added. Soundbars are thin, add-on systems designed to pump high-quality audio for a home theater.

Euromonitor's report said that "as increasing numbers of millennials reach the age where they are outfitting their own homes with audio upgrades beyond the speakers on their television, soundbars are expected to be the primary beneficiary.

Given the fact that younger buyers have smaller apartments, "expensive audio receivers and cumbersome home-theater-in-a-box systems are expected to continue to decline in favor of the ease of set-up for smaller sound bars, and the portability of Bluetooth speaker systems," the firm added.

"For many years, people expected [the wireless market] to take off and it hasn't, but we're beginning to see the hockey-stick kind of effect and it's starting to turn up," noted Bose's Carvajal. "Consumers are beginning to understand the benefits of technology and … companies making them more affordable."