Apple (NASDAQ: AAPL) is known for its steep prices and the $349 HomePod that launched in January is no different. That could be why early reports indicate sales are falling short of expectations so far.
The tech giant has been forced to cut its sales forecasts and scale back some orders with one of its HomePod manufacturers, according to an April 11 report from Bloomberg. In fact, some Apple stores are only selling 10 HomePods per day, sources told the publication. A few days after the report came out, Apple sent out a memo to employees imploring them to stop leaking information, which seems to give further legitimacy to it. Of course, this memo was also leaked.
Apple has been known to show up years late to a category with its own, more expensive version and the HomePod is no different. The $99.99 Amazon (NASDAQ: AMZN) Echo came out more than three years before the HomePod while Alphabet's (NASDAQ: GOOGL) Google launched its $129 Google Home over a year ago.
When a product comes out at a much later date than its competitors, then it better be of superior quality to take market share from the more established players. Unfortunately, HomePod users already have some big gripes with the device.
The Apple HomePod is by far the most expensive home speaker on the market. Image source: Apple.
Where does the HomePod rank in the market so far?
The HomePod claims just 4% of the home speaker market, down from a high of 10% right after it launched in January, according to data from Slice Intelligence.
A bleak outlook says Apple will only sell between 2 million and 2.5 million HomePods in 2018, according to estimates from KGI analyst Ming-Chi Kuo. Even more discouraging, he believes 1 million of those were already sold in the first month.
Other estimates are more hopeful. Loup Ventures co-founder Gene Munster predicts HomePod sales will mushroom from 7 million sales in 2018 to 10.9 million sales in 2019. He believes HomePod sales will grow between 40% and 45% annually over the next three years.
However, even Munster doesn't see the HomePod leaping over Amazon's Alexa devices or the Google Home anytime soon. For 2018, Munster sees the HomePod capturing just 12% of the smart speaker market, while Amazon's Alexa will take 52% of the market and Google Home will take 32% of the market. In 2022, Munster predicts the HomePod will still claim just 12% of the growing market, while Google Home will leap ahead to claim 48% of the market thanks to its superior voice assistant capabilities, and Alexa will be in second place with 37% market share.
Selling 7 million units isn't terrible when you consider the HomePod came out late and is $229 more than Google Home and about $249 more than the Amazon Echo. But based on current estimates, no one is expecting the HomePod to take over the smart speaker market in the near-term in the same way the iPhone has taken over the smartphone market.
Why isn't the HomePod making bigger waves?
There's no denying that Apple is late to the smart speaker market. To make matters worse, Apple wasn't able to get the HomePod out for its original release date in early December so it missed the bulk holiday orders.
If Apple wants to make a meaningful dent in the smart speaker market in 2018, it needs to present customers with a significantly better experience. Apple attempted to do this by marketing the HomePod as a smart speaker with superior sound quality. But sound quality doesn't seem to be as high a priority for customers.
Despite taking three years longer than Amazon, the HomePod has a list of gripes against it, including the price, its limited support for third-party apps like Spotify, Siri's limited skills, its incompatibility with Android phones, and its lack of multi-room audio support.
In other words, people see the HomePod as asking for a significantly higher price for a worse product. There doesn't seem to be an upside to buying the HomePod unless you're someone that prioritizes sound quality above all the other features on a home speaker. But that's such a small percentage of people that Apple will have to make some adjustments to the HomePod this year if it wants to sell more units.
Is Apple working on solutions?
The good news is that the HomePod should look better at the end of 2018 than it does now.
First, a software update later this year will give HomePod users the ability to use two HomePods to create stereo sound in a room. Second, Apple has said that AirPlay 2 will be compatible with the HomePod later in 2018. This will allow HomePod users to use their Apple devices to control the music and volume on multiple HomePods located in different rooms of the house.
Stereo sound and AirPlay 2 were features that Apple marketed heavily ahead of the HomePod launch so it was disappointing that they weren't ready for the initial offering.
A big pain that is sure to cause continued grumbles from the community is the HomePod's incompatibility with third-party apps and with Android devices. If you have an Android phone, you automatically will have to choose between Alexa devices or the Google Home. If you're a loyal member of a third-party app like Spotify, you're better off with an Amazon or Google home speaker.
Currently, HomePod users can use the current version of AirPlay to stream Spotify from an Apple device, but they can't use voice commands to ask Siri to play a song from Spotify. If you want to use your voice to ask for a song, you will need the $9.99 per-month Apple Music subscription. That means the $349 HomePod acts just like any other bluetooth speaker unless you pay for Apple Music. On the other hand, Alexa devices and Google Home work fine with third-party apps.
This is significant because Spotify is crushing Apple Music in terms of subscribers. Spotify last reported its subscriber number as 71 million based on data from the end of December 2017. Apple Music reported 40 million subscribers in April 2018. That's 71 million people that, despite the superior sound quality on the HomePod, are probably better off buying a regular bluetooth speaker or purchasing a different smart speaker.
On top of all that, it's well known that Apple's Siri has fallen far behind Google Assistant and Amazon's Alexa in terms of what it can understand and the amount of skills it can perform. For example, Alexa and Google Assistant can differentiate between voices, while Siri cannot. However, Apple recently poached John Giannandrea, Google's former chief of search and AI, to head its own machine learning and AI initiatives. So there's hope that Apple is now making Siri a priority.
As for the high price, Apple is considering releasing a cheaper HomePod in the $150 to $200 range that will have more limited features, according to a report from Taiwan's Economic Daily News. But nothing has been confirmed.
Apple fans will be sure to point out that Apple stumbled with its initial iPhone and Apple Watch release and is now the leader in both categories. But the HomePod is going to need more than AirPlay 2 and stereo sound to justify its significantly higher price compared to its competitors.
