Smart speakers from Google, Amazon and Apple

This is an article from Paul Erickson, senior analyst, connected homes at IHS Markit

New Google Home Mini and Max Deepen Battle with Amazon at Both Ends of Smart Speaker Market While Apple’s HomePod Faces Increasingly Competitive Environment, says IHS Markit

The smart speaker market

Two new smart speakers were announced at Google’s Pixel 2 smartphone launch event, closing the gap with Amazon in terms of market-penetrating low-end affordability of its smart speakers, according to IHS Markit

The first speaker, the $49 Google Home Mini, features a small, rounded, design-neutral form factor, and three color choices. The device incorporates far-field voice recognition, and inherits the same slate of Google Assistant, Chromecast Built-in, and calling capabilities as its larger Google Home stablemate. It will be available at retail 19 October in all seven countries where Google Home is currently available.

The second, the $399 Google Home Max, features the same capabilities as the Home Mini, utilizes four drivers (dual 2-way configuration), and has 20 times the sound output of the original Google Home. Home Max features Google’s new AI-driven Smart Sound technology, which automatically tunes the speaker to the acoustics of the room and adjusts volume based on time of day, ambient noise level, situational context, and other factors. Home Max can either stream music directly, or receive audio input from line input, Bluetooth, and Chromecast built-in-compatible casts. Home Max will launch first in the US in December, with 12 free months of YouTube Red included.

IHS Markit Analysis

With the majority of Amazon’s rapid Alexa footprint expansion driven by Echo Dot’s impulse-buy level of affordability, Google’s equivalently-priced Home Mini is a reactive product that needed to be launched as quickly as possible.

Though Google retains long-term ecosystem advantages for Google Assistant in the Android mobile device base, penetration of the Chromecast built-in standard, and presence across numerous platforms, it remained outgunned by Amazon in growing its footprint in the home via the increasingly important smart speaker market.  With the first foothold in the household being the most important, Google has taken a lesson from Amazon and now possesses a smart speaker proposition to similarly seed Google Assistant households via an affordable product. In the past, Google Home’s price disadvantage – at nearly 2.5 times the price of Echo Dot – essentially ceded affordable mainstream enablement to Echo Dot.

Speaker market pricing

With an official Google product at $49, and Google’s traditional stance of encouraging third party adoption, it is likely that third party basic-enablement speakers compatible with Google Assistant will appear this holiday season, or at CES 2018, at price points even lower than $49.

With the launch of Google Home Mini, Google now has rough parity with Amazon in terms of market-penetrating low-end affordability of its smart speakers, but remains at a competitive disadvantage in two obvious dimensions. The first is in the current positioning of the original Home speaker, still priced at $129 – bracketed by the revamped Amazon Echo with better two-way sound reproduction at $99, camera-equipped Echo Spot at $129, and the Zigbee-hub-equipped Echo Plus at $149. Over time, it would seem fitting for Google to drop the original Home to sub-$100, roll out a newer enhanced version, or both.

The second disadvantage is in bundling. Amazon’s current price-aggressive bundling of Echo Dot with its Fire TV products is expected to help keep Dot shipment volumes healthy despite the arrival of the Home Mini as a direct competitor. Though there have been leaks of a $25-off Home Mini promotion with Walmart and Google Wallet, and a free Home Mini bundling offer with Pixel 2 pre-orders from Best Buy Canada, these are short term launch offers. Google will be best served by taking another page from Amazon, and offering bundling offers combining a control device (Home-series device) with a destination/target device (Chromecast / Chromecast Ultra). Short of this, it is unlikely that Google will be able to catch up to Amazon’s Echo shipment volumes with its first-party Home Mini in the near future.

Google Home Max clearly places a stake in the high end of the smart speaker market, priced at $50 more than the $349 Apple HomePod – formerly seen as too expensive. At IFA, Harman’s $249 Link 300 and Panasonic’s SC-GA10 were two larger-form-factor Google Assistant speakers focusing on audio quality. With these as examples, the Home Max is currently the market’s most expensive smart speaker. It seems clear that Google set out to create a product positioned relative to the price, capabilities, and form factor of Sonos’ larger PLAY:5 connected speaker, a device also possessing high output, three 2-way driver pairs, and custom tuning to room acoustics.

Objectively, the Home Max is almost assuredly capable of higher, room-filling output than the much smaller Apple HomePod, while having similar custom acoustic tuning functionality. The question, however, will be how many smart speaker consumers consider the $349-and-up price bracket a worthy prospect. Additionally, Google’s Home Max potentially faces pressure from above from Sonos’ likely successor to its PLAY:5 – offering agnostic support of both Alexa and Google Assistant in line with the capabilities of the company’s just-announced Sonos One speaker.

Though the Home Max undoubtedly creates some oxygen for the previously-cited-as-overpriced HomePod by pushing the price ceiling of the category, it is an intentional upper limit to a three-price-tier product line that reaches all the way down to $49. The HomePod, however, is a sole $349 product in a market that now will see the majority of consumer sell-through velocity taking place at sub-$130 and particularly sub-$100.

Speaker market positioning

Google’s launch of Home Mini and Home Max solidifies and deepens the company’s presence in the smart speaker category and strengthens its ability to compete against a particularly-aggressive Amazon in the crucial mainstream low-entry-price segment. Home Max also redefines the top end of the market and provides a competitive counterpoint to the audio quality-based points of Apple’s HomePod proposition.

Though positioning issues remain for both Home and Home Max, Google now joins Amazon in having a smart speaker line with both depth and affordability. Collectively, these two players continue to build a competitive environment that is increasingly maturing and strengthening ahead of Apple’s HomePod debut in December. The pressure is now on Apple to perform with HomePod and Siri, and the company’s performance in the smart speaker market in the Q4 holiday season will be a telling bellwether of the year to come.

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