Apple Needs to Reconsider Its HomePod Strategy

Sales are lagging on Apple’s smart speaker. Here’s what it can do to increase interest and challenge Amazon and Google.

Photo illustration: HomePod with sales down graph arrow.
Photo illustration by Slate. Photo by Apple.

Apple finally joined the smart speaker competition in February with the launch of its $349 HomePod. The device was anxiously anticipated. Reports that Apple had been working on a “Siri speaker” had circulated for more than a year, but the device missed its targeted December 2017 debut. Now, the HomePod seems to be missing the mark with consumers. According to recent reports, HomePod sales haven’t hit Apple’s expectations, and the company is considering options including a lower priced model.

Early sales forecasts suggested that Apple could sell up to 10 million HomePod units this year, but recent supply-chain analysis has drastically lowered those estimates. KGI Securities analyst Ming-Chi Kuo, for example, said that Apple may sell only 2 million–2.5 million HomePods over the course of 2018. And Bloomberg reported that despite strong preorder sales, in the weeks since its launch, some Apple Stores have only been selling 10 HomePod speakers a day. For comparison, Apple had sold roughly 2.5 million Apple Watches during its first month of sale alone. In 2017, the first year that AirPods were available, Apple sold around 12.5 million.

Apple is lagging behind in the smart speaker race. In a survey by researchers with Loup Ventures, Amazon leads the smart speaker space 55 percent market share, and Google Home comes in second with 23 percent market share. Apple’s HomePod has nabbed about 3 percent of the market. To eat into Amazon’s dominance in the space, Apple may be considering a cheaper version of its smart speaker. At $349, the HomePod is currently one of the most expensive smart speakers on the market. (The larger $399 Google Home Max is one of the few that is more expensive.) Dropping the price closer to $200 might incentivize consumers to choose it over similarly priced competitors. How low of a price Apple might be considering is pure speculation at this point—as is when and if such a device might land.

But price is only one factor in the HomePod’s story. As early reviews suggested, there are several reasons why consumers might prefer Amazon or Google smart speakers—or no speaker at all. Siri’s limited functionality as a virtual assistant is one large turn-off. Thanks to Amazon’s vast library of third-party Alexa skills, its digital assistant can be used to check your calendar for the day, order a pizza or an Uber, and place orders for household items through Amazon. Both devices can work in conjunction with other smart home products, but Siri’s options are more limited. The HomePod is also heavily reliant on iPhone integration for full functionality, while Google and Amazon’s speakers largely stand on their own. However, given music is the central focus of Apple’s smart speaker, it would seem that Apple’s walled garden approach to music streaming may be the thing most deeply in need of reconsideration.

The HomePod is designed specifically to work with Apple’s own streaming service, Apple Music. If you don’t subscribe to Apple Music, you can use the speaker to stream audio purchased through iTunes or play Beats 1 or other Apple radio stations. The device can’t natively stream content from Spotify, Pandora, or another service, although you can work around that fact by playing music on your iPhone and then using AirPlay to broadcast it over the HomePod. While it’s a solution, for a gadget that costs nearly $350 it’s a pretty weak one.

Apple has its reasons. It wants its smart speaker to be “the ultimate music authority,” a personalized musicologist that learns from the songs you like and adds to playlists to better curate your experience. The problem is that many people are already invested in other streaming services. Apple Music’s biggest competitor, Spotify, has roughly 71 million users—nearly twice as many as Apple’s platform. On the streaming radio side, Pandora has a similar number of active listeners. Apple likely hoped to sway streaming music subscribers onto its service through its HomePod, but that doesn’t seem to be what’s happening. If Apple wants its HomePod to be a mass-market success, it’s going to need to embrace music and services from third-party sources. It was the App Store and third-party apps that originally transformed the iPhone and brought it massive success—success that has far eclipsed its predecessor, the iPod, which was locked tightly into the iTunes music ecosystem.

What happens next is up to Apple. It can open up HomePod to integration with third-party streaming music players—and improve Siri integration with those services—or it can keep the HomePod tightly locked into the iTunes and Apple Music ecosystem. While the iPod saw tremendous popularity in its heyday, it was a different time with far fewer players in the digital music space. Apple can’t ignore apps like Spotify and hope that its speaker will see the same level of success as its cheaper priced, more fully featured competitors. The HomePod needs to embrace today’s leading audio services rather than shut them out, or it’ll never grow beyond a niche product.