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Analysts on How Apple's Strategy Is Hobbling the HomePod

Analysts on How Apple's Strategy Is Hobbling the HomePod

By Hayley Tsukayama, The Washington Post | Updated: 18 April 2018 12:56 IST

Highlights

HomePod isn't selling well
Apple even cut its internal sales estimates
Apple's commitment to its own services is more of a bug than a feature

Apple's main claim to fame is a proven track record for successful products. But with its latest, the HomePod smart speaker, some analysts say its old formula for success - going for the high end of the market and tightly controlling its ecosystem - has let it down.

Recent analyst reports suggest that the HomePod isn't selling well. Bloomberg reported last week that Apple even cut its internal sales estimates. While Apple hasn't released numbers on HomePod sales, it's expected to give some sense of the HomePod's sales in its next earnings report on May 1.

Apple declined to comment.

HomePod sales are important to the Cupertino, California company. The smart speaker would help Apple carve out a spot in what companies see as the next frontier in consumer technology: The smart home market. Research firm International Data Corporation estimates companies have shipped 433.1 million smart home devices in 2017, and that the number could grow to 939.7 million by 2022.

Apple focused on sound quality as a way to differentiate the HomePod from its competitors, such as the Google Home and Amazon Echo, which have been on the market for years. HomePod sales started out fairly strong, according to data from Slice Intelligence, which uses online purchases to get a snapshot of sales. (Slice Intelligence gathers its reports from receipts sent to the inboxes of a panel of 55 million.) Apple sold 38 percent of all smart speakers in its first week.

But sales quickly dropped off, Slice Intelligence analyst Ken Cassar said. Looking at the whole market since the HomePod's February debut, Apple has sold about 6 percent of smart speakers. That puts it ahead of Sonos, its closest competitor in terms of price and sound quality. Yet it still lags far behind Amazon's Echo family, which pulled 73 percent of the market in the same time period, or even Google's Home devices at 14 percent.

It's one thing, Cassar said, to have a small share of sales during the holiday season when there are many new options on sale. It's more troubling, he said to "swing and miss during a time of the year when competitors were all but asleep."

One issue for the HomePod is its price, analysts said. Apple went for the high-end of the market, with a $350 (roughly Rs. 22,800) price tag that is seven times more expensive than Google's best-selling smart speaker model, the Home Mini. That's grabbed it a healthier share of the dollars being spent on speakers, about 20 percent, but hasn't helped it move into more living rooms. Cassar said the growth in smart speakers right now is driven almost entirely by the low end of the market, meaning the aggressively priced Google Home Mini and Amazon Echo Dot.

Sound quality also isn't the strongest selling point for smart speakers at the moment, analysts said - even if it plays to Apple's historical strengths of high-quality and fits well into its Apple Music ecosystem. Most people are looking for ease of use and a breadth of sophisticated functions over sound quality, analysts said, a shift for which Apple may be partly responsible.

"Apple trained me to listen to the headphones that came with the iPhone," Jitesh Ubrani, analyst at IDC said. "Trying to sell me now on sound quality is a little pointless."

And if the ultimate goal is to get into the broader smart home market, he said, another Apple hallmark may throw a wrench in the works: Its famously closed system for development.

Siri, despite being the first major voice assistant on the market, isn't as versatile as those from companies such as Amazon.com and Google that make it very easy for outside developers to make skills for those assistants. Siri hasn't been working the crowd as well. Unlike with Alexa or Google's Assistant, Siri in the Homepod can't work with Spotify, for example, but rather only with Apple Music. It can't even check your calendar like its competitors.

(Amazon.com chief executive Jeffrey P. Bezos owns The Washington Post.)

"They need to invest heavily in Siri's capabilities," Ubrani said. To do that, he said, Apple will have to work with more companies outside of its walls. If Apple had been first to market with a talking speaker - something Ubrani said its Siri and Beats acquisitions could have allowed it to so - it may have been able to get away with a closed system.

But with other, cheaper speakers now promising to work with whatever music service, weather apps and calendar programs people use, Apple's commitment to its own services is more of a bug than a feature.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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