Smart speakers will fuel the next wave of music consumption and market growth, says new BPI & ERA joint report

A new report produced jointly for record labels body, the BPI, and ERA – the Entertainment Retailers Association – examines the exciting potential of voice-controlled smart speakers to transform how fans engage with music. 

“Everybody’s Talkin’ – Smart Speakers and their impact on music consumption” considers how this new AI-driven technology is sparking the next wave of music consumption, fuelling further growth in streaming and subscriptions whilst also establishing a new e-commerce platform for sales of physical product.

The report, authored by Music Ally’s Stuart Dredge, was presented to music industry executives at the BPI & ERA’s latest joint Insight Session on 20^th March.  The event, chaired by Music Ally CEO Paul Brindley, also saw presentations by David Sidebottom of Futuresource Consulting and Paul Firth, Head of Amazon Music UK, as well as a panel discussion featuring Pete Downton (Deputy CEO 7digital), Scott Cohen (Founder & VP International, The Orchard), Aaron Bogucki (VP Digital Marketing, Kobalt Music), and Kara Mukerjee (Head of Digital at RCA Label Group UK – part of Sony Music).

Kim Bayley, Chief Executive ERA, said: “Music began with the human voice, so how appropriate that the voice is fast emerging as the future of entertainment technology. It promises music fans a more fluid and personal relationship with the music they love. Over the past decade ERA’s members have reshaped the entertainment industry, benefitting both consumers and content owners. Thanks to new digital services, an industry in rapid decline is now back to growth. If ever it was in doubt, it is clear that innovative new services drive music listening and music revenues.”

Geoff Taylor, Chief Executive BPI & BRIT Awards, said: "Smart speakers are poised to kick-start the next stage of the music streaming revolution, attracting more casual listeners into subscription services drawn by music as the “killer app” for these devices.  This exciting new technology will not only transform how we engage with music, encouraging more shared listening, but also how we discover it. The challenge and opportunity for labels and artists will be to ensure their music is as easily available and as effectively marketed via AI voice assistants as it has been through the screen interface.”   

Providing a wider perspective, Simon Bryant, Director of Research at Futuresource Consulting, said in January 2018: “Smart speakers could become home retail terminals, linking consumers to a supply chain that opens the door to a range of services.  The winner of today’s smart speaker land grab could be the owner of tomorrow’s consumer.”

Summary of key findings

Smart Speaker history & guide to devices:

• Amazon’s Echo with its Alexa assistant was the first to launch in late 2014, but it has since been joined by Google Home (with Google Assistant) and Apple’s HomePod (with Siri).
• Sonos, and others have also launched smart speakers, while consumer-electronics firms like Sony, LG and Panasonic have used Google Assistant as their devices’ brains.
• Spotify and Facebook are both rumoured to be exploring this area.

Market data & forecasts

• Analysts’ estimates suggest 24m – 27m smart speakers were sold globally in 2017.
• The US & UK accounted for up to 95% of those sales, with the US taking the lion’s share.
• Futuresource estimates that 7% of UK households now own at least one smart speaker – with 2.8m devices shipped in 2017 (three-quarters of which were Amazon Echos)
• Between 39m – 47m Americans now have a smart speaker in their home, with Amazon’s Echo range thought to have around two thirds of those devices.
• Analyst global predictions for 2018 are bullish – forecasting up to 58m unit sales.
• 55% of US households will own a smart speaker by 2022 (175m units in 70m homes).

Impact on music

• Music is the most popular use for smart speakers, with users listening to more audio than they did before purchasing one of these devices.
• One study found that 34% of Echo and Home owners spend more than four hours a day listening to music, compared to 24% of the general population.
• 48% of smart speaker owners have a premium subscription to a music-streaming service.
• 39% of smart speaker owners say time listening to the device is replacing time spent listening to AM/FM stations – encouraging a shift away from traditional radio.
• Smart speakers may fuel more casual interaction with music – with generic requests to play music creating greater dependence on the personalisation algorithms of speakers’ assistants.
• Labels must now create metadata around genre, mood and user activities.
• Smartphones have apps, and smart speakers have ‘skills’ or ‘actions’ – applications created for use by listeners. There’s an opportunity here for labels to launch skills for their artists.
• Platforms such as Spotify want smart speakers to be gateways to listeners, not gatekeepers.
• Smart speakers are taking music streaming into a new world of shared listening, away from individual consumption, with multiple-user interaction.

What’s next for smart speakers

• Smart speakers will drive subscriptions growth as household penetration increases and consumers find it increasingly easy and convenient to sign up.
• Recent research finds that 28% of smart speaker owners say the device has caused them to pay for a music subscription service.
• Smart speakers can make music ubiquitous – making music even more accessible and central to people’s lives as the devices proliferate in the home and in cars.
• The emergence of programmed playlists on streaming services is making ‘context’ a hot topic – such as music to work-out to, cook to, etc.
• This is creating the opportunity to convert radio listeners into paying music subscribers.
• Price remains a factor, and there are likely to be more experiments around how subscriptions are marketed to and priced for smart speaker owners.
• Pureplay streaming services fear that smart speaker operators may become gatekeepers rather than gateways to music consumers.
• Smart speakers could help drive sales of physical music – where a fan likes music they hear, then can just as easily use devices to order a physical copy of a recording, particularly on LP.
• Smart speakers can also enable increased purchasing of concert and festival tickets – to potentially support growth in live music alongside the recorded sector.
• As smart speakers learn the tastes and behaviours of their users, they may be able to suggest and recommend products and services for purchase.
• Smart speakers pose metadata and marketing challenges – if you make a generalised request, where will the algorithm that powers the search take you? If you ask for a concerto, which recording out of the dozens or more that may exist will it transport you to?