This article was first published on Forbes
The long-awaited FDA guidelines for the Over-the-Counter (OTC) Hearing Aid Law were finally released last week. The move by the FDA will break a 50-year stronghold that a handful of players have had on the hearing aid market and on the pocketbooks of the millions of Americans who need relief from hearing loss but have not been able to afford their exorbitant prices.
Proponents of the new law — including the administrations of Presidents Obama, Trump, and Biden — claim the bill will help democratize competition and incentivize a wider range of innovative solutions for the 48 million Americans suffering from mild-to-moderate hearing loss. In addition, the OTC ruling includes guidelines for Personal Sound Amplification Devices (PSAP’s), which are non-medical and open to a broad interpretation with far-reaching commercial applications.
Considered to be the third most common physical condition after arthritis and heart disease, untreated hearing loss has been linked to anxiety, depression, social isolation, reduced mobility, falls, dementia, and lower quality of life and relationships. It is also an issue facing more than just the elderly populations. Hearing loss also affects millions of people under the age of 35, as well as kids who go untested and consequently struggle with learning.
The Real Game-Changer
The real game-changer, however, will be at the intersection of wellness, fitness, and consumer audio products. The regulatory shift, when combined with exponential advancements in sound and wellness tech, will help fuel the Hearables Revolution and what is estimated to become a 93 billion dollar Hearables (in-ear audio devices) market by 2026. The long-term impact will be on the Amplified Future: the full integration of audio as a key component of personalized and precision medicine.
Sound Health: Hearing Aids vs Hearables
Until now, the hearing aid industry has set the medical standards shaping consumer concerns around hearing loss. Hearing aids also represent a growing high-ticket reimbursable market that’s worth $1.6B in the US, and slightly more in China.
The Big 5 hearing aid companies, however, only serve 14% of people suffering from hearing loss in the US. They have done little to address the social stigma, help younger and uninsured populations, or keep costs down. That leaves the majority of the population unserved: those dealing with mild to moderate hearing loss who don’t require medical-grade hearing aids or implants.
Both OTC Hearing Aids and Hearables have an opportunity to fill a large part of that market gap while providing products that deliver infinitely more features than traditional hearing aids at a fraction of the cost. Smart-audio and wearable product manufacturers are already lining up to serve that population, expand their brand footprint, and get their slice of the Hearables pie.
Merging Audio and Wellness Expertise
In 1964, engineer and MIT professor Amar Bose founded his audio brand so he could dramatically improve the fidelity and transform the listener experience for recorded music. (He personally loved listening to classical music). Over 50 years later, the company in been making moves into both medical hearing aids and wellness-based consumer Hearables. They have already introduced their first FDA-cleared direct-to-consumer self-fitting hearing aid for less than 1/3 of the price of traditional hearing aids and are continuing development of their in-ear sleep aid technology, SleepBuds.
The new FDA ruling gives Bose an opportunity to create more solid revenue streams for their new healthcare division as they seek to establish themselves as a credible and trusted wellness brand.
According to Steve Romine, VP of Bose Hear, “We’re thrilled the FDA has announced the issuing of its draft OTC hearing aid regulations. This marks a great moment for the millions of Americans experiencing hearing loss today...For now, there’s renewed optimism for hearing loss sufferers who have put their hearing health on the back-burner due to the numerous barriers to getting the help they need to hearing better again.”
In another marriage of consumer audio tech and hearing health, Sennheiser sold its consumer product division to Swiss hearing aid company Sonova last year for $240 million. In addition to giving Sennheiser immediate credibility and positioning in healthcare, the move will allow Sonova to bridge into non-medical consumer audio products.
Apple’s Slow But Steady Advances Into the Future of Health
The most valuable tech company in the world (currently valued at over $2 trillion) — Apple — is steadily building out its ecosystem and product lines for in-ear audio, fitness, and health. Apple recently announced their “conversation boost” feature for more precise listening through their AirPods, and the company is exploring other hearing enhancement features that will go beyond the benefits of noise reduction and — their latest announcement — spatial audio. There is also talk in the air about temperature and posture monitoring with their new AirPods Pro, as well as using iPhones to help diagnose depression and cognitive decline.
Apple has already staked a majority claimed for what will become the most coveted and connected real estate on the human body - the human ear. Last year, AirPods enabled Apple to capture over one-third of the high-end consumer earbud market. Various sources are saying that if Apple spun off their AirPods division into to a separate company, 2020 revenues for the spinoff would have surpassed those of Uber, Adobe, Nvidia, and Spotify.
Apple continues to add value to their AppleFit programs with health and wellness monitoring features via their primary wearable, the Apple Watch, in sync with iCloud the the iPhone. In 2020, however, AirPods unit sales had more than doubled those of the Watch, giving another clear indicator of the continued migration from wearables to hearables. While I doubt Apple will move fully into the OTC hearing aid market, as suggested by the recent The Wall Street Journal article, the fashionable tech giant is well-positioned in both the consumer marketplace and the human ear to make a big play in the Amplified Future, focusing on the most scalable health, audio, and wellness features.
New Players In The Game
Companies like CES 2020 Honoree & Consumer Technology Association (CTA) Innovation Award winner Nuheara, started developing their Hearable devices - IQbuds - after a successful 2016 Indiegogo campaign and 2017 CES launch.
Earlier this month, Nuheara announced that it has commenced its clinical trial with the National Acoustics Laboratories (NAL), to support its planned expansion into clinically tested and regulatory-approved hearing aids.
Japanese manufacturer Olive Union has been targeting the younger populations and the 86% of the 48 million Americans who suffer from mild to moderate hearing loss and don’t require medical-grade hearing aids. In the process of trying to de-stigmatize hearing aids, however, they are coming up with some very stylish hearable offerings, like their Olive Pros and SmartEar Plus that combine hi-end personalized audio features to provide style (they have a similar form to AirPods), hi-fidelity music listening (via the ability to choose between Music Mode and Hearing Mode), noise reduction, and customizable hearing enhancement features via their phone app.
Olive Union closed a $7 million B round in April 2021, bringing their total funding raised to date $20 million for their next-generation smart hearing technology.
Kokoon sleep phones have integrated EEG sensors and other sleep-specific features to capitalize on the burgeoning sleep market. Although they offer a more traditional headphone (over-the-ear) design, their software interface provides more content options than Bose in-ear SleepBuds including streaming third-party music sources via Bluetooth from your mobile device. Because the global epidemic of sleep problems and the consumer demand for better non-pharmaceutical solutions are not going away anytime soon, you can expect a new wave of innovations in hearables for sleep in the near future.
Why Consumer Audio Companies are Racing Into Health & Wellness
Why are investment funds, new ventures, and audio heavyweights jumping headfirst into the health tech pool?
The global market for earbuds and headphones is growing steadily as wireless becomes the norm and new features continue to improve performance and usefulness. A report from Grand View Research, set the value at $25 billion in 2019 (before witnessing the record-breaking 2020 AirPods sales), with a projected compound annual growth rate (CAGR) of over 20% from 2020 to 2027. The total wearables market was worth nearly $70B in 2019, with the hearables sector (including headphones), making up $28B of that.
Even digital music and content companies are looking at wellness as a way to differentiate, create new revenue streams, and attract customers away from their competitors. The evolution of higher fidelity and feature-rich hearables will only help their cause.
The audio products market, however, is crowded and highly competitive. That means market caps and lower profit margins for traditional and limited-use audio products. For consumer audio product manufacturers to compete and create exponential growth in the future, they may have to cut their slice from a bigger pie.
According to a report from Precedence Research, the broader Digital Health Market was $181 billion in 2020 and is expected to grow to over $550 billion by 2027. It is predicted that the much broader and exponentially larger global healthcare market will reach $10 trillion by 2022. The largest US healthcare company, McKessonMCK -1.1%, already has an annual revenue of over $208 billion. While these numbers are inclusive of a number of sectors that make up the massive global health and wellness markets, those are some pretty attractive figures for forward-thinking digital audio product manufacturers to consider.
Even without including digital health and personalized medicine, 2020 wellness expenditures ($4.2 trillion, per the Global Wellness Institute) surpassed over half of total global health expenditures ($7.3 trillion, based on WHO data). That wellness industry represents 5.3 percent of global economic output.
When it comes to the ever-increasing number of startups entering the digital health and wellness space, there seems to be no sign of slowing, especially if you measure future growth by current investments. Global VC funding for Q1 of this year marked a record-setting quarter for investments into Digital Health companies, hitting $7.2 billion - twice that invested during the same quarter in 2020.
As of the close of Q3 2021 — according to CB Insights’ State of Healthcare market report — digital health startups have raised $39.6B in funding YTD, already 27% more than 2020 funding totals. Q3 also saw the birth of ten new healthcare unicorns, bringing the industry’s total to 91 - the 3rd highest ever.
As audio becomes an increasingly more important health and wellness pipeline for data tracking and content delivery, and wearables continue their migration to high-feature multi-purpose hearables, the overlap of these markets will merge to create a bigger pie.
Listen Up: Voice Bring More Value to the Future of Hearables
And let’s not forget the exploding Voice Economy which has already established household names by the likes of Alexa, Siri, and Google Assistant. The possibilities at the intersection of voice analytics and personalized health monitoring continue to expand. Anyone who uses their earbuds to make phone calls or voice commands, can likely envision how the human ear will become the #1 place to seamlessly capture biometric health and wellness data from your voice.
Beyond the FDA and Into the Future
There is no doubt that the FDA guidelines released last week will play an important role. One way to look at the FDA ruling is through the disruptive lens of the hearing aid market, but that only provides a narrow view of a complex matrix of forces that are creating, transforming, and connecting a number of much larger markets.
We are entering the Amplified Future—one that will feature ongoing real-time and multivariable predictive analysis by sensor-rich hearables and wearables. In addition to improving how we hear the world, these devices will monitor our vitals on the go and offer real-time recommendations for enhancing our physical and emotional well-being. These same technologies will provide early detection data to help us avoid life-threatening diseases, all as we go about our daily routines, all captured seamlessly through closed-loop systems between our ears, the cloud, our phones and other smart devices.
The companies that build the best UX and ecosystem to successfully bridge more traditional uses of this 2-way audio highway (voice and music), with highly effective, personalized, and convenient health and wellness features will have the best arsenal to win in the Hearables Revolution. Along with the competition, they will also help democratize and de-stigmatize hearing enhancement solutions for the new majority.