At ITEXPO A month ago, we asked a room full of about 500 techies how many wanted the HomePod from Apple. One hand went up. Dozens had Amazon Echos and Google Home devices however.
The bad news at the show later translated into lackluster sales as reported by analysts.
The problem for Apple in the smart speaker market is the low end is sewn up. Amazon is selling their Echo devices for a few dozen dollars. You can’t undercut them and make a profit.
Moreover, Apple has traditionally used the service to sell the device. The huge premium on iPods and and iPhones – back in the day anyway, were offset by low if any margins on $0.99 music.
So naturally the HomePod had to be a high-end device. The challenge is audio enthusiasts weren’t too impressed once they got these things into their homes.
But Apple needs to differentiate and the high-end is where they have to go – they must own this space. Sure, they can move downmarket but they need to have a halo product.
Millennials who grew up on MP3s and the crap headphones that came with the phone may not notice the difference between a HomePod and a superior system but audiophiles do.
You are paying for great engineering and design.
What Apple should have done is to purchase the company instead of building its own product.
They didn’t but it isn’t too late to purchase and rebrand the speaker as HomePod Plus. The price would have to be in the $499 range but it would be worth it for consumers and probably still be profitable for Apple. As a reference, the HomePod lists for $349.
One other point worth making is Apple has the ability to lower component prices like no other company. This is a core competency. They can produce this speaker far less expensively that Devialet can ever dream.
If they do it, Cupertino immediately gets a sound quality halo and consumers get a lower priced speaker that sounds amazing.
The Beats deal wasn’t about high-end audio so if the company is serious about audiophiles they have a few companies to choose from in an M&A deal.
From there – they have to go down-market and work on broadening their ecosystem. They need a $99 speaker and possibly even one at (dare I say) $49.
The goal is to have a product throughout a home and you can’t do that if the price point is above $100.
In conclusion, Apple has to own the high end of the audio market and they tried and failed. They can change this very quickly. Even though Devialet just hired a new CEO and is growing rapidly, the time for Apple to move is now.