Analysts and tech reviewers largely agree Apple Inc.'s new HomePod smart speaker offers stellar sound quality, but its price and limited initial features compared to peers could dampen its consumer appeal, some say.
Apple's Siri-powered connected speaker hit stores Feb. 9, nearly two months later than its planned rollout date and after the fourth-quarter holiday buying season. The device, which retails for $349, is Apple's first big leap into a smart-home product line dominated by Amazon.com Inc. and Alphabet Inc.'s Google. Analysts and early consumer reviewers have pointed to more limited features for HomePod than its main competitors, but some suggested that it is too early to dismiss the potential of any device backed by Apple.
The emerging smart speaker market can change rapidly. During the third quarter of 2017, Amazon and Google together made up 92% of the global smart speaker market, according to a December 2017 Strategy Analytics report. However, the share held by market-leading smart assistant Alexa, which powers Amazon's Echo line, fell to 69% of smart speakers in the period, down from over 80% in the first half of 2017. Alexa's losses came as Alphabet's Google Assistant made gains following the launch of Google Home in a number of new locations, Strategy Analytics noted.
The 2nd-Generation Echo and Google Home, which most closely compare to HomePod, are less expensive than the Apple device, retailing for $99.99 and $129, respectively. HomePod supports streaming for Apple Music only, while Echo and Google Home can connect to a range of streaming music services, including Spotify, Pandora, iHeartRadio and TuneIn.
Speaking during an earnings call Feb. 1, Apple CEO Tim Cook stressed that HomePod is not a product meant solely for Apple Music loyalists, noting that it can also perform a variety of home automation requests.
"Some people will use it significantly for music and others may use it significantly ... as a digital assistant," Cook said. "I think the majority of people will likely use all of it."
Gene Munster, a managing partner at venture capital firm LoupVentures — which he co-founded with other former Piper Jaffray analysts — recently tested HomePod against the Echo and Google Home. He said that while HomePod's sound quality is its strong suit, the device must become more adaptable.
In Munster's recent tests, he found that HomePod's personal assistant sounds more "human-like," but it lacks supports for features like checking email and navigation that are available on Echo and Google Home. He also found that HomePod answered 52.3% of queries correctly, compared to Google Home at 81% and Alexa at 64%. Munster said he expected that Apple's device would rapidly improve, however.
"It's about a year overdue for [Apple] to get into the [smart speaker] market," Munster said in an interview. "The number of people who have these globally is still very small; it's still an open-ended market."
He estimates HomePod unit sales will reach 7 million in 2018, capturing 12% of the global smart speaker market.
Daniel Ives, head of technology research at GBH Insights, said Apple faces an uphill battle competing with established products from Amazon and Alphabet, but given Apple's large and loyal following, the HomePod could still do well. Ives expects the device's total sales to be under $500 million in 2018.
"[Apple] could mess up coming out of the gate and still be successful given a massive worldwide installed base as well as just Apple enthusiasts," Ives said. "As long as that logo is on [Apple's] product, they'll buy it."
Mike Paxton, a senior technology analyst with SNL Kagan, a research division of S&P Global Market Intelligence, said Apple's release of its Apple TV and Apple Watch got similar reviews to those of HomePod, adding that Apple's marketing power should never be discounted.
Apple TV was released in 2007 as a way for consumers to stream video from their Mac devices to their TV, Paxton noted, but he said its capabilities at the time were limited and there was much confusion about its purpose. Similarly, after Apple Watch's initial release in 2015, consumers at first balked at its hefty price tag and its need to be connected to an iPhone to work properly. Since then, however, Apple Watch sales have been growing rapidly, he said, while Apple TV sales have been slower but relatively steady.
Paxton called Apple's move into the smart home market a deft way to promote its ecosystem while staying on pace with Amazon and Google. "Apple sees home automation, home intelligence and the internet of things movement as a trend that's going to continue picking up pace in the future," he said.