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HomePod is an Interesting Test for Apple

Jun 12, 2017
Ben Arnold, Executive Director, Industry Analyst ;
Consumer Electronics , Technology

This time last year, when interest in the Amazon Echo and Google Home were at a fever pitch, many observers wondered why Apple hadn’t yet made a voice-activated speaker. After all, Apple has the pieces necessary to make a great Echo-like device: a robust content and app marketplace, smart home platform, and a market-leading audio brand in Beats. Additionally, Siri is installed on 375 million Apple devices. Smart speakers can tie disparate pieces of an ecosystem together and last year Apple seemed perfectly suited to make such a product... 

At last week’s WWDC, Apple finally announced HomePod, its voice-controlled speaker powered by Siri with all the requisite features we’ve come to expect from the growing crop of ‘smart’ speakers:  Apple Music integration, the ability to set timers, news and weather reports, and control over other connected devices in the home. HomePod is similar to Echo and Google Home in many ways, even down to its vaguely similar form factor. Given these similarities, and Apple’s late entrance to the market, it’s vital that HomePod provide a differentiated experience from what is sure to be a wider field of competing devices.

A more robust Siri is one differentiator Apple is counting on. An announced upgrade to ‘Siri Intelligence’ will allow the application to analyze multiple streams of user data – taking into account past app and device usage, as well as context, in order to help Siri make better informed recommendations. Apple has also expanded the list of third party apps and capabilities Siri has via SiriKit. Tasks like dictating notes in Evernote or initiating VOIP calls can be done using the digital assistant, a sign Apple is looking for ways to make more applications navigable through Siri. Further, an improved Siri more tightly integrated into iOS and HomePod is likely to get iPhone and iPad devotees interested.

Challenges await Apple too. At $349, HomePod is twice the price of Google Home and Echo, making it unlikely consumers will buy multiples to position throughout the house… at least at that price. Simulating a Sonos-like multi-room audio experience throughout the home would be equally cost prohibitive. And while early reports suggest HomePod delivers on sound quality, Apple isn’t a pedigreed audio brand. Wireless speakers priced above $300 make up a small market, accounting for just 12 percent of total revenue, which has actually declined three percent year-to-date. Lastly, with new products like Amazon’s Echo Show and Echo Look on the horizon, the market is already looking beyond the tabletop speaker.

But if any company has a track record of creating markets where they don’t exist, it’s Apple. Apple’s other voice activated audio product, AirPods, launched in December to intense demand, making Apple the third leading Bluetooth headphone brand on the market thus far in 2017. The pricing strategy was different (AirPods actually hit the market slightly below the price of its competitors), but limited supply of the product and rave reviews from users represent a first successful step into this market. HomePod won’t release until December, but the buzz around the product will surely challenge demand for competing voice-enabled speakers, and premium non-voice speakers as well, for the rest of the year.  You can expect Apple fans will once again line up outside stores to buy HomePod on launch day – but interest among more casual users will determine how well Apple can compete in this rapidly changing market.

 

Source: The NPD Group, Inc. / Retail Tracking Service, U.S.

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