Over-the-counter (OTC) Hearing Aids and the Evolution of Hearing Enhancement with Matt Skindzier of Knowles

Welcome to this Week in Hearing, and I have the great pleasure of a conversation with Matt Skindzier from Knowles Corporation. We’re going to talk about over the counter device and the evolution of hearing enhancement. So Matt, welcome. Thank you. Thank you. It’s a pleasure. Excellent. Tell us a little bit about yourself before we dive into these questions. Yeah, sure. So again, Matt Skindzier, I’m the Senior Product marketing director for Knowles medtech and Specialty Audio Business, and I also oversee our balanced armature receiver and receiver assembly business. In my role on all things marketing and business unit related to our receivers business, product definition, product planning, commercial execution for the business are all under my chair. And more recently, as the topic we’re here to discuss today has started to develop, a lot of that has been focused on educating the broader market on hearing health technology, the value of balanced armatures, and why we feel it is still the right technology to fuel the growth in OTC devices. Absolutely. So how has the hearing augmentation evolved over time, over the last 50, 60, 70 years? Yeah, sure. Great question. To me, at its most fundamental level, the evolution in the market has all been about increased performance, increased high fidelity hearing, increased assistance with hearing, particularly things like speech detection and noise, continuing to develop and push the market along that performance boundary while getting smaller and more compact. And the size, that has a lot to do with things like not just discreteness, but patient comfort in wearing an all day device. And when I think about some of the key milestones in the industry, I think first, what Knowles is very proud of and takes very seriously is our heritage in the industry and the fact in 1950s we were the first to introduce both miniature speakers and miniature microphones for the hearing health market. And that really kind of helped enable this evolution. I think key milestones after that in the 1980s, the development of Class D amplifiers and the optimization of those amplifiers for very small discreet devices, and which led in 1990s to the first digital hearing aids coming into the market. And I think that’s when we saw a real step function in performance versus size for the types of products coming into the market. And along the way we continue to evolve our product. Getting continued product technology to continue to develop improved technology while providing smaller and smaller transducers. I think the next evolution to that was in the 2000s when Knowles introduced the first MEMS microphone to the broader audio industry, and eventually bringing that technology in to hearing health space. And so all along the way, that’s not only helped with size and performance, but low power consumption, kind of culminating into where we are today with very high performing, low power consumption, discreet and comfortable devices. And I think especially when you look at the last 25 to 30 years and how a lot of those enablers in the market, both from within and outside of Knowles, has culminated in the receiver and canal form factor that’s now probably 70, 80% of the market. You can see how popular that form factor has been, and I think that really comes down to the discreetness and the comfort of that device. And that transducer technology has gotten so miniaturized and so optimal, that consumers can have that transducer, that speaker in their ear with all the necessary ergonomics, packaging requirements, things like that, where it really is a very comfortable all day wear. Wow, you guys have done a lot over the last 50, 60 years, and you continue to evolve with that next evolution now being OTC devices that are now prevalent in the market space. So what should we know about these OTC devices and who benefits from that? Yeah, sure. So I’d like to tackle the second part of your question first and who benefits? Right. And I think there’s a lot of data out there that we all understand that suggests just within the US alone, there’s probably 30 million people that have some sort of hearing issue or require some sort of hearing assistance, and for various different reasons. It’s not necessarily just what’s in the ear. It could be neurological conditions, things like that. But within that 30 million population, hearing aids have relatively low penetration, right? Somewhere around 15% of the potential populations using hearing aids today. And I think if you look historically, there’s a lot of reasons for that, although I think it’s improved drastically. There’s traditionally been a stigma around hearing aids. Right. It’s an association with aging. The other piece is cost, not just in terms of the device itself, but in the cost and effort of acquisition. Eventually, after a typical patient goes through an audiologist channel, it costs them quite a bit to acquire this device, get the right healthcare provider support to address their needs. And certainly OTC has given its. It’s different business model, the opportunity to address some of those challenges there. But in terms of who benefits, a fair amount of that population, I would say the majority really fall into what we call mild to moderate hearing loss. It’s people that need a relatively modest amount of gain to address some of the hearing issues they have. And because it’s relatively mild, even at the low end of what I call the moderate hearing loss scale, the awareness isn’t always there. People might think they just misheard or some of what they’re experiencing is normal. And a lot of studies have shown as part of that journey to someone that eventually acquires a traditional hearing aid, it’s a seven year journey from the initial signs to a full awareness of what their needs might be. And I think part of that has just been that hearing aid markets has been a relatively, I wouldn’t say nichey, but relatively limited market, relatively specialized. And it has traditionally taken a lot for the typical hearing aid user to get to the point where they really understand how hearing aid technology can benefit them. Yeah, no, absolutely. As you talk about who would benefit in some of these barriers, what are some things that consumers and even providers should think about with these devices? Yeah, sure. So I think in terms of what’s important, in terms of the further development and growth of the OTC market, I think comes back to a lot of reasons. Even when someone might have that awareness of, hey, I could be someone that might want to use a hearing aid, it’s a difficult journey to get there. It’s high cost. Traditionally in the US, unless someone carries supplemental health insurance coverage, they might not get any reimbursement support. Of course, the VA is a different story and about 20% of the market, but for a lot of potential patients, that financial support isn’t there. And then it usually takes multiple meetings, engagements with hearing care professionals to get to the point where someone is comfortable with that hearing aid device. And it’s historically required a lot of systems to get there. And frankly, it’s not that often that someone might get through multiple stages of that journey and still find the technology might not work for. So for the OTC market, I think especially with kind of removing the mandatory requirements for the audiologist. So let me be clear. I think it’s a personal decision how much healthcare or hearing care provider assistance someone might need. And at the end of the day, for a lot of people, that’s a very important service, and it’s highly, highly valued in the industry. And traditionally, a lot of patients have ultimately relied on the service and the recommendations of those hearing care providers to get to the device selection they make. But here’s a real opportunity where for folks who’s hearing loss or hearing, it’s. Needs aren’t necessarily that severe. There’s a lot of technology out there today that could provide a relatively robust amount of upfront configuration and assistance, kind of get through maybe the bulk of 80% to 90% of that configuration and fitting journey to get to a suitable experience for someone to take on an OTC device. And the regulatory structure and the growth of the commercial channels are now in place to facilitate that. And so one year later, we’re already starting to see the signs of that. I think we’re still very much in its infancy, as we would expect. And I think over the next probably three to four years, we’re going to see a lot of rapid development in the channel and how it enables the market. And I don’t think it’ll just be a product definition journey. I think it’s going to be a lot about the channel, various levels of hybrid support for someone that wants to kind of have most of the ownership of that hearing device acquisition journey in their own hands. And so it really is a great opportunity to develop a lot of things that will enable in the industry. And I think what’s also important and what we see is as the awareness grows and there’s a lot of new participants coming into the market, there’s a lot of focus on this channel from the traditional participants. The level of awareness and the amount of marketing and messaging going into that awareness across the industry is increasing very rapidly. And so whether ultimately a new patient ends in an OTC solution or decides the traditional channels and traditional solutions are right for them. The fact is, I think there’s a lot more people that will maybe much more quickly become familiar, feel enabled and empowered by the hearing health industry because of all the work that’s going in to increase awareness and the ease of acquisition in the industry. And I think it’s a lift for the entire industry, whether it’s growth in the OTC channel or more people going through that journey and realizing the hearing care provider support is right for them and increasing penetration of traditional hearing aids as well. At the end of the day, I think there’s a strong consensus building that this trend is positive and a demand creation generator for the entire industry. Yeah, 100%. And I think you made two important points, one of those being that there’s more players coming into the market. You were just at the European Hearing Aid conference out in Germany, and without divulging who was there, did you see an uptick potentially in the number of new participants in this market from other global players? Yeah, absolutely. And all, and again, I want to emphasize nothing I see going on in the industry. Um, is resulting in the negative factors for the traditional players there that, you know, bring to market and bring to bear a long tradition of outstanding technology support, audiologist expertise to the hearing health market. But I think there’s a few areas. Number one, I think the market as for some time had what we typically refer to as hearables or personal sound amplification devices where there maybe wasn’t much of a market catalyst for the functionality or to drive evolution in that space. And we’re seeing more brands from that segment of the market. Think about kind of, I’ll say, graduating their product offering and service offering from that category to more OTC devices that bring greater functionality. They start to get into configuration that was very limited on these devices in the past. So we see growth from there and new participation there. And then the other piece is kind of more traditional consumer focused brands that might have really strong expertise in audio, really from kind of more of a music or personal product perspective now understanding that, hey, there’s opportunities for them to service this space as well. And so with that, we’re seeing a lot of new names and a lot of new participants and interests pop up from new market adjacencies that weren’t necessarily really focused on this space maybe three or four years ago. So we’re seeing that come to market or come to bear. And with that, they find partners like Knowles that have the legacy transducer technology, the expertise they need to be successful in the space. They are engaging us, and they are learning very quickly. We saw a lot of evidence of that at. You know, one of the things that I think is a real positive about the OTC market, developing the kind of products that are coming to market, regardless of what former end markets they may come from, is, at the end of the day, especially when it comes to transducers and the kind of technologies that Knowles supports in the markets, they’re using a lot of the same core technology that has been used in hearing health for years. And the reason that’s important is what I think would be unfavorable to everyone in the market, whether it’s the hearing aid OEMs, the hearing care providers, or the potential users, is if the technology and the performance is not there, a lot of new potential users will have an unfavorable experience. Right. And that means that they might ultimately, as a result of that unfavorable experience, not end up getting the assistance and the care they need. But when the market is using all that core technology that’s been proven and optimized for this industry. It means all the new products coming in the market will have that foundational performance and capability that even customers that otherwise wouldn’t have gotten into this space and are now acquiring. Products to the OTC channel really need to make sure they’re getting the care that they deserve. Yeah, and I think that’s another important point that you just made, and that is that the quality of these products, both prescriptive and know there’s not one that’s a lot lower than the other one. They’re both, I don’t say they’re equal, but they’re really. Absolutely. And you know, I think the reality know, as segmentation develop between OTC and the traditional hearing aid channel, you’ll see variations in feature sets and performance, as you would expect. But it’s very clear that the foundational level of performance and the kind of table stakes, if you will, if you want to provide someone with true hearing assistance that they need, are there. And that’s a very positive development, again, for the entire market. Absolutely. The other thing I want to bring up real quick, and I think this is important to the market as a whole, and that is the fact that we are now having the opportunity to better engage and educate the consumer, given that there’s broader strokes. Any comments on that? Yeah, I think we are just starting to scratch the surface of the way the OTC market again is increasing awareness and service to these customers. And I think one thing that’s also positive is a lot of players that even if they’re relatively new to the space and just serving through commercial channels, that even if it’s not mandatory to go through an audiologist or a hearing care provider, I think what the market has noticed is still a need for support. And a lot of these players are bringing to market kind of hybrid support models where, hey, they might not need the full audiologist support, but they need someone to walk them through setup or configuration or maybe after going through it on their own, they could still use some help. And so now it’s very easy, especially today’s technology, to get that care quickly, to get it remotely, sometimes as simple as hopping on a FaceTime call. And I think that’s a huge positive, and that’s market demand and the tailwinds that this new legislation has created, really driving growth and creation of all the services these customers need. And so I think between the increased marketing around awareness and the messaging, those things, and also, frankly, some commercialization both in OTC and traditional hearing aids, where the customer experience an expectation, especially as new, younger demographics are coming into the space and kind of have expectations of what they’d experienced through kind of maybe high end TWS systems that they’re used to listening to music on. And as the Tyrion players start to adopt some of those key features. It’s a very positive experience there. And then you’ve got the development of the hybrid channel that is aiding all that. See, got three really, I think, strong tailwinds driving this industry and helping these. Customers make that acquisition journey easier, 100%. And I think that’s a really important point, is that if I was a provider today, people are coming at me in different ways. Right. It’s like just traditional walking in the door. And as a provider, I have to be cognizant of what those things are in order to be able to better service those individuals, because there’s visuals coming in, although we do have a shortage of providers, but the opportunities exist. And I think that’s a really, I think what’s evidence of that is we’re starting to see data that suggests, with some of the OTC offerings, interest in the market in the last year, that return rates, high return rates has always been a fundamental dynamic in the hearing aid industry. And a lot of that just has to do with finding the right fit to the right solution for that customer. If someone hasn’t been wearing a hearing aid their whole life and now they’re wearing one, especially when it’s adding gain and we’re sound back at high frequencies that maybe that user hasn’t heard for years, sometimes it can be uncomfortable, sometimes they feel just re acclimation to that doesn’t feel righted, and it might turn off users. Well, now we’re seeing OTC rates quickly for some products drop into the 10% range, and that’s a very low return rate for this industry. And so I think that’s evidence of all the different ways the market is being enabled, really gaining traction and being effective. Yeah. So what are some major opportunities as we continue to talk about growing this space? Yeah, great question. I think one of the things that will enable this industry more, it goes a little bit back to what I said about the commercialization and more influence from the consumer markets into these devices. And one thing I would say is very quickly and one thing about Knowles is we’re not just providing high performance transducers to the hearing health market. A number of years ago, the high end audio, the professional audio businesses, and now even a lot of higher end TWS systems have started to adopt balanced armature technology and traditional annual transducers for a number of different use cases. So we have a pretty wide lens into what’s going in the market in all different areas. And one thing that I think will really enable this industry is while things like connectivity, streaming, some of the newer technologies that might take longer to adopt in traditional hearing aid segment, I think will be adopted a lot faster in OTC, and I think that will be a big driver and a big enabler for the market. If you look recently, what’s come out with low energy Bluetooth, Auracast, those kind of things, that will drive a lot easier. Wide adoption or really wide connectivity of that hearing device in a lot of different environments, I think is a really key enabler. Hearing aids had traditionally used telecoils, although they’re not as common today as they might have been 10-20 years ago. Know, if you think about how those work with hearing loops, and there are certain pockets out there where hearing loops are widely available, but not everywhere. Right. And sometimes what that means is in a lot of public environments, auditoriums, churches, a lot of those kind of areas, hearing aids aren’t still necessarily an optimal experience. Well, when these devices start to adopt things like low energy Bluetooth and auricast, and that becomes more prevalent and somewhat standard in the industry, connectivity is going to increase rapidly. And that’s really going to help the efficacy of someone that adopts an OTC device. And of course, eventually, in the traditional hearing aid side. But I think that consumerization, the shorter design cycles, quicker speed to market, and product evolution on the OTC side will mean those factors will become much more relevant faster. And I think that’s going to enable the market pretty quick. So I think the key things are making sure you maintain that foundational hearing health performance that you really need to give patients the care they need. You’ve got increased connectivity that will vastly improve the user experience and accessibility when it comes to hearing assistance. And then what we’re also seeing is the ecosystem develop very quickly around this. Traditionally, a lot of the hearing health market has done a lot of their own digital system processing development. There was a relatively limited supply base outside of the major hearing aid manufacturers. We’re starting to see that increase rapidly with a lot of traditional names in the commercial chipset space now start to get into things like OTC. And I think that’s just going to very rapidly improve the technology coming to market and both the prevalence and cost of access by manufacturers and new participants in the space to that technology. And so I think those are a lot of really key enablers into the space that we’re going to see develop very quickly. Yeah. And I love it because for years we’ve had the average age of somebody that adopts amplification has been the high 60s, early 70s. Right. And with the new generation. Right, you got the baby boomers, and then, of course, you got the Gen X’s that are coming in behind them. That’s about 80 million folks. You take roughly a third of those individuals, add those to the market space. As it continues to grow and as they continue to age, we want that downward push. And the technology, we’re meeting their needs, so we’re meeting the consumer where they are. And now we just have to couple that with the right services, I think is what you’re trying to say. Exactly. And I’ll tell you an interesting data point on that is already, say, two to three years ago, where the direct consumer channel within the traditional hearing aid space was already starting to grow. And it grew very rapidly. I mean, within a couple of years, all of a sudden, the estimates were somewhere around five to 10% of the US market was going to the distribution, or, I’m sorry, the direct to consumer channel and online sales and things like that. We already saw within that group the average age of acquisition already coming down into the late 50s. Right. And that was. Just with some ways to more easily access these devices. Still with a lot of support from traditional, although again it was hybrid and remote, the audiologist channel. And so now, as things like product functionality, with influence in the consumer space and infrastructure evolving to improve connectivity, I have to expect that that shift in the first age of acquisition is going to accelerate. Now, obviously it’s great for the population, the people that benefit from OTC, and obviously it’s highly beneficial to the hearing health industry as well. Absolutely. Last question I have for you, and hopefully I’m not stepping on any toes here. What’s coming next? Is there anything that you can share that we can start thinking about as this community, this ecosystem, continues to evolve? Yeah, sure. So I think what’s key is I kind of mentioned some of the technology trends as the ecosystem grows in terms of chipset providers, the hybrid chain and support development. Even on the TWS side, there’s a lot of hearing personalization technology for a pure consumer device that’s evolving rapidly and creating a lot of value there. Obviously, the technology evolution there is going to migrate into the OTC and the traditional hearing L channels and drive all those benefits. And then the key thing, what Knowles is certainly focused on is what is the next generation of high performance transducer technologies enable that as well. If I really think about things like kind of these foundational trends with things like high res, lossless audio, hearing personalization, all those things coming to market, it puts a lot more emphasis on high frequency performance. And so our focus is continuing to enhance the high frequency response of our transducers while combining that with even smaller size, more robustness. Right. So a lot of the robustness standards for a typical consumer device are influencing the hearing aid industry more and more. And so that means our products have to be more sturdy, more reliable, higher performing, and smaller. And all of that is occurring. And year after year, we’re launching more and more innovations into the market to enable that. And so I think devices will continue to become more discreet, more comfortable, more elegant in design. The stigma is waning, and very soon, I think what we’re going to see is some really Exciting products that will still have their foundational roots in the traditional hearing aid form factors. Receiver in canal form factors are very common. We’re starting to see more things that look like TWS or traditional earbuds, what hearing health industry might call it designs. All those things are coming. And I think with the increased demand, increased participation in the industry, product evolution cycles will get shorter, and they’re going to get more and more exciting. And so I think technology will accelerate. It tells you proven to accelerate and more and more exciting products. Don’t just provide the hearing wellness people or assistance people need, but have greater music performance, greater connectivity. Things that kind of straddle that boundary between a hearing assistance device and an all day wear connectivity device I think will accelerate very rapidly. And I see a lot of that happening with an OTC. So I think that’s what’s to come here. And I think over the next couple of years, we’ll see the evolution there increase rapidly. Incredible. Incredible. So, Matt, anything else you want to add before we kind of close this out? Is there anything that’s missing, anything that you think would be relevant? Did I miss anything? No, I think this was great discussion. Very comprehensive. Again, I just want to emphasize that there’s a lot of exciting high performance technology out there that can really help people with hearing wellness in the areas where that needs to be addressed on the high frequency side, while also providing a lot of great sound performance, configurability, and comfort across the full. Again, I think it’s real important as consumers journey into that OTC market, knowing that upfront, they may not have as much guidance from audiologists, and they have to kind of educate themselves, make sure they’re selecting products that really do leverage that foundational hearing health technology, the right transducers, the right performance from a signal processing streaming standpoint. Just understand that products that are really going to meet your needs are going to look very much like the traditional hearing space with a lot of exciting incremental functionality. So again, I just think continued customer education and giving them ways that they can be self directed in that is absolutely critical to the industry. Yeah, that’s great advice, and I’m really looking forward to seeing what’s coming new. Matt, I really want to thank you, and I appreciate you taking the time today to educate us on what’s going on. And hopefully a few months or even a year down the road, we can have another conversation and you can say, hey, guess what? We were here, and now look what’s coming. Yeah. Well, thank you for the opportunity. It would be my pleasure to reconnect again in the future because, again, I think we’ll see a lot of developments in a short period of time. Love to help educate the industry and the consumer market on what those opportunities are. Sounds wonderful. Thank you very much, Matt. Thank you. Amyn.