The 3.5-millimeter headphone jack has been around for a long time in one form or another, but has been a part of most phones for less than a decade. Still, that was long enough for it to become mainstream, causing quite a stir when it began to die off. Starting with a failed experiment to leave the port off the HTC Dream, the first commercially available Android, then the uber-thin Oppo R5 and its R5S successor, bigger manufacturers are now beginning to take to the trend and commit more to it. Rumors are flying that Apple's flagship iPhone 7 will not feature the iconic port, opting instead for headphones that can plug into the phone's Lightning port. Out of the land of rumors and firmly into reality, LeEco recently announced three flagships without the port, and that they will get rid of it going forward in the name of a better audio experience. Likewise, the new Moto Z family of flagship phones lacks a 3.5mm headphone jack, forcing users to use USB Type-C headphones, Bluetooth headphones, or an adapter. For all intents and purposes, the 3.5mm jack is on the way out.
A great many people still own 3.5mm headphones and will want to continue using them, meaning the market for USB Type-C adapters, and possibly Lightning adapters, is about to boom. To explain the technology behind the adapter in brief, a few components take the digital signal that is the sound in a file and convert it to an analog signal, compatible with sound equipment. This kit is usually inside the phone, or inside a pair of high-end headphones. In order for somebody to use their Galaxy S7 pack-in headphones or vintage Sony Walkman headphones with the Moto Z, they will need an adapter that houses this tech. While it's still inside the phone for the speakers, it's been taken out in favor of the USB Type-C port because the second set of kit can be left up to the headphones or adapter, rather than having to be inside the phone. This reduces power use and device cost, and leaves the audio quality in the hands of third parties, rather than having the base quality determined by the handset. In those ways, this is a good thing. There are some, however, who will find reasons to dislike this change.
The budget headphone market and its buyers are set to suffer the most. Sure, there are cheap adapters out there that take a month or so to reach your door and cost less than the headphones you're plugging into them, but most of those, if not all of them, are going to sound utterly terrible. Hissing, popping, tinniness and noise that could give a non-audiophile a headache plague many current cheap adapters out there, and that trend is unlikely to vanish. Likewise, cheap USB Type-C headphones, which have to internalize their own DAC and amplifier kit, will sound like garbage. Essentially, a USB Type-C setup will always sound worse than a comparably priced analog counterpart because the manufacturer is unlikely to give up profit margin just to give users a free DAC and amp kit inside the headphones.
Audiophiles will take a bit of a hit as well, but only in price; those who are already willing to carry around external dongles and pay thousands for a top-tier pair of headphones will see that they'll be paying a bit more. While many audiophile headphones already include their own DAC and amplifier, these will now end up more expensive due to the upward shift in the market, as well as manufacturers having to retool their current kit for digital input through USB Type-C. There will, however, be a bit more choice in the market, most likely; manufacturers who have never had to internalize such tech before for the mainstream market will be more likely to go ahead and try their hand at the high-end market, since it would require minimal switching of parts or re-engineering in this case. Meanwhile, entry-level audiophile headphones will likely see a huge jump in price. A decent set of Audio-Technica headphones at the entry level of the spectrum will run about $80 these days. Throw in the cost of a decent quality DAC and amp kit, at about $30, and suddenly, these budget headphones are over that magic $100 mark. Essentially, the low-end audiophile market will be moved up and replaced by the high-end normal headphone market, currently represented by the likes of Dr. Dre's Beats lineup and some of the more expensive Sony kits.
Most smartphone buyers who aren't terribly picky about audio quality will find that this change barely affects them, however; pack-in headphones will inevitably shift to the new standard, giving new smartphone buyers the same plug and play capability they enjoy now. Some manufacturers, instead of packing in headphones, will pack in an adapter, as Lenovo has done with the Moto Z. The adapters packed in will likely be above the super-budget standard, but not great, matching up nicely to the quality of most pack-in headphones out these days. For users that love the earbuds that came with their phones, this change won't be a big deal. It's worth noting that those who have embraced Bluetooth headphones won't notice the change much at all. Bluetooth headphones already include the requisite conversion kit, meaning no adapter or special software will be needed. This means that price and quality should stay about the same on that front. Besides these two segments of people that use their smartphones for music, however, everybody will be seeing a big shift.