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Listen Up: Apple's AirPods Face Growing List of Challengers

Don Reisinger

Imitation is the sincerest form of flattery. Just ask Apple about AirPods, its wireless earbuds that it introduced two years ago.

Tech news site Thurrott cited sources on Monday who said that Microsoft is working on a rival. The headphones, which could debut later this year, would come with Microsoft’s Cortana virtual personal assistant and noise-cancellation technology to reduce ambient noise from affecting the audio experience.

The news came just days after Bloomberg reported that Amazon is working on its own AirPods alternatives that would integrate with the company’s virtual personal assistant Alexa. With Alexa’s help, the article said, users would be able to control smart home devices, like light bulbs and thermostats, and quickly turn on music with voice commands.

Those devices would join a growing number of what some industry watchers have called “AirPods Killers,” like Samsung’s Galaxy Buds, Jabra’s Elite 65T, and Bose SoundSport Free.

Why the big interest in wireless earbuds? Companies have noticed the growing popularity of AirPods and want in on the action.

This year, Apple is expected to sell 40 million AirPods pairs, 90% more than the 21 million it sold in 2018, according to Neil Cybart, an analyst with Above Avalon. By the end of 2019, 50 million people will own AirPods worldwide, he said.

That makes AirPods the second best-selling Apple product ever during its first two years of availability. Only the iPad sold more during its initial two years starting in 2010, according to Cybart.

Apple does not provide sales information about Airpods, but in an earnings call in January, Apple CEO Tim Cook called AirPods “a runaway hit” and said the earbuds are enjoying “incredible” consumer demand.

Looking to build on its momentum with earbuds, Apple is doubling down on the category. Earlier this month, it said it would introduce a new pair of wireless earbuds, called the Beats Powerbeats Pro.

At the same time, Apple released an updated version of the device, AirPods 2, with a new wireless charging case and improved battery life. They come with the same design as the first-generation, and, like their predecessors, cost $159.

AirPod competitors have nearly identical features. They’re small, connect wirelessly to audio sources, like an iPhone or Android device, and deliver good, but not necessarily outstanding sound, according to industry reviewers. But they’re easy to use, convenient for a long walk or workout, and are cheaper than high-end wireless headphones, like the Beats Studio3 Wireless, that can cost at least $100 more.

In fact, the competition is starting to gain ground. Apple ended 2018 with 60% market share in the global wireless headphones market, research firm Counterpoint Research said. That was down from an 85% market share in 2017, according to the market researcher NPD Group.

Counterpoint analyst Liz Lee said Apple’s market share could slip even further. “As more companies enter the market and roll out new devices equipped with advanced features at a reasonable price, consumers will get a wider choice in the future,” she said. “We expect the competition to intensify.”

But that may not bother Apple. In December, TF International Securities analyst Ming-Chi Kuo predicted that Apple would sell 110 million AirPods pairs in 2021—double what he believes the company will sell this year.

That could mean big business for Apple. If the company keeps its $159 price on AirPods in 2021, those sales that Kuo predicts will translate into $17.5 billion in annual revenue.

By comparison, during Apple’s 2018 fiscal year ending September 29, iPad revenue reached $18.8 billion. Overall, Apple generated $266 billion in revenue during the period.

Not bad for a simple pair of wireless headphones.