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Plugged In: Did The Music Industry Squander Hi-Fi’s Potential?

Music and tech executives weigh in on the rollout and price cuts around high-fidelity music.

Welcome to Plugged In, a newsletter that features the unfiltered thoughts of the CEOs, decision makers and power players at the intersection of technology and music. I’m Micah Singleton, Billboard’s director of technology coverage, leading our reporting on the streaming music ecosystem and the startups that bridge the gap between two of America’s most important exports.

This week: High-fidelity music was billed as the next major revenue driver for the music industry, but when it arrived on Amazon and Apple Music, it landed with a thud – and without a price increase for consumers. Did the industry miss the opportunity to capitalize on high-fidelity sound?


The Promise of High-Fidelity Music

For many years, high-fidelity music (commonly referred to as Hi-Fi, Lossless or HD Audio) has been touted as a potential revenue driver for the music business. With music streaming stuck at $10 a month since Spotify hit the U.S. market in 2011, music executives have been eyeing improved audio quality as the easiest way to finally raise prices and increase profits — both for rights-holders and for thin-margined streaming companies like Spotify that don’t sell other products.

High-fidelity started out as a premium product in the mid-2010s as smaller players like Tidal, Deezer and French streaming service Qobuz sold access to high-fidelity music to significant portions of their users for $20 a month. But last May that changed, when Amazon Music cut the price of its HD offering and began offering it to all subscribers at its standard $10 a month price, and Apple Music quickly followed, launching its own Lossless service at no additional cost, quickly crushing hopes that higher-quality audio could compel streaming subscribers to pay any more. Spotify, which promised its own Hi-Fi service in 2021 before the price cut from Amazon and Apple, has still not rolled out its service.

Now, nearly a year later, there’s a much wider audience that has access to high-fidelity streaming music. But did the industry squander an opportunity with high-fidelity music? Or could streaming giants still raise Hi-Fi prices yet, once they’ve given their customers a taste?

“It’s extremely disappointing to see this next kind of phase in the development of the model, but there to be no opportunity for increased revenue,” one CEO says. “You watch other services like Netflix continually increase prices as it has shown that consumers are willing to pay more, and that’s basically for the same product. I’m hopeful that at some point prices will go up so that there will be a larger revenue pool.”

“In the early days when the first iteration of the iPod was coming out and there were so many conversations with leadership at the labels talking about how terrible sound was going to be because it was going to be compressed and nobody’s going to want to listen to the music,” one senior executive says. “There were such concerns around the transition from CDs to these devices because of that compression. And as we all know, none of that ever happened. And it just reminds me that a huge, huge portion of consumers don’t know what high fidelity sounds like. And they’re so much more focused on the speed at which they can consume the music that they want to consume than high fidelity. It isn’t a priority.”

“Ninety plus percent of people are not really even interested because they don’t really have the equipment and they don’t even notice the difference,” another senior executive says. “People were on the completely wrong path. They thought that 100% of the people will eventually go and listen in Hi-Fi and didn’t really understand that technically that’s impossible. We didn’t think there was any chance a significant amount of subscribers would ever actually sign up for it.”

“As a consumer, I think it’s exciting and a wonderful development,” one president says. “But I question how many consumers value that. One of the things that we know to be true is that a lot of listeners do not put much of an importance on the quality of their audio, which is why you have so many people listening to audio through phone speakers or poor headphone speakers and things like that. But for those who value it, it’s obviously a wonderful development, and I’m hopeful to see it become more widespread.”

“We’re still in the education phase to some extent,” a senior executive says. “When it launched, we saw a lot of pent-up demand for it. I think there’s another big segment of the music-listening population that doesn’t understand the benefit of it. And may not even understand what it means because they grew up in a generation where they never had CD quality. They grew up only on their phones. So, I think that there’s still some education to go down that path that we see this trend towards nicer headphones among younger adult segments. I think it’s great that it’s no longer something you have to pay extra for though. I think that’s awesome.”