One of the big holiday gift choices this year is likely to be smart speakers, such as Amazon Echos and Google Homes. Here’s the funny thing about smart speakers: while everyone was getting excited — or worried — about them as home shopping devices or yet another way for tech companies to spy on users, the first killer app for smart speakers has emerged: they’re table radios for the digital age.
The latest market research shows that smart speakers are quickly becoming the next major platform for digital audio. This has major implications at the intersection of smart speakers, digital music services, and device platforms. Among other things, it means that if you’re a tech platform vendor with hardware devices and a streaming music service, you can only maintain a walled garden if your smart speaker leads the market; otherwise you’re better off opening up your devices and services. Apple is discovering this now.
Three separate surveys conducted over the past several months show that the number one use of the devices is music listening. A Kantar Media study from July found that 64% of respondents used them for music; an Adobe Analytics study from August put the figure at 70%; and an AudienceNet study for Music Biz in October said 74%. That’s even higher than smartphones: the latest numbers we have on smartphone usage for music listening, from 2016, put it at 68% of smartphone owners. (And the second most popular use of smart speakers is another table-radio function: getting weather forecasts.)
And although smart speaker ownership is nowhere near that of smartphones — yet — it’s rising fast. The Adobe Analytics study in August found that 32% of respondents own smart speakers, up from 28% in January. Predictions from various analysts of smartphone penetration by 2022 range from “47% of US broadband households” (Parks Associates) to “55% of U.S. households” (Juniper Research). That compares with 83% smartphone ownership currently, according to Edison Research’s Infinite Dial study.
This chart shows the Infinite Dial figures for smartphone penetration compared to smart speaker household penetration, based on 2017 data from Forrester (2018 onwards are projections) and the U.S. Census. Bear in mind that smart speakers are used by households while smartphones are used by individuals. It shows roughly the same upward trajectory for smart speakers as smartphones enjoyed before their growth leveled off around 2016.
Two Edison Research studies also found that smart speakers are replacing traditional AM/FM radios in the home. The 2018 Infinite Dial found that household radio ownership has dropped over the past ten years, for 18-34-year-olds, from 94% to just 50%; while the NPR/Edison Research Smart Audio Report found that 40-45% of respondents spent time using smart speakers that they used to spend with AM/FM radios — the most common category of device whose usage smart speakers are replacing.
The leader in the smart speaker market is, of course, Amazon. But Google Home is a strong second, and Strategy Analytics predicts it will surpass Amazon by 2020. Meanwhile, Apple’s HomePod trails far behind, at less than 6% market share. HomePod is not even in third place; Alibaba’s Tmall Genie (available only in China) is slightly more popular. Other vendors are racing into this white-hot market, including Sonos, JBL, Polk, Harman Kardon, Samsung, Xiaomi, and Baidu.
Apple’s strategy around HomePod and music has been pure walled garden: the only streaming music service that works on HomePod is Apple Music, not Spotify or other independents, let alone Google Play or Amazon Music; and Apple Music doesn’t work on Google Home or Amazon Echo. (Although any of these services can play on any smart speaker from a phone or tablet through Bluetooth or WiFi.)
The walled garden strategy could hurt Apple. Apple has been trying to catch up with Spotify on streaming music subscribership ever since it launched in 2015, four years after Spotify launched in the U.S. market. Apple reportedly pulled ahead of Spotify in paid subscribership in the U.S. market, but it still lags Spotify worldwide and the gap is widening. Now it seems that a decent chunk of the growth in streaming music subscribership is going to be through smart speakers. And Spotify — as well as other music services such as Pandora and Deezer — is available on both Amazon Echo and Google Home devices.
This all has led to the announcement last week that Apple is starting to lower its garden walls: it will make Apple Music available on Amazon Echo devices starting December 17. (Interestingly, it was Amazon, not Apple, that made the announcement.) The deal involved a quid pro quo: Amazon has agreed to allow Apple to sell its devices — with the notable exception of HomePods — on its site and to ban unauthorized third parties from selling Apple gear on Amazon.com.
Apple went through a similar process with Apple Music on mobile devices previously: it introduced an Android client for Apple Music a few months after launching the service on iOS in 2015. A subsequent major revamp to the Apple Music user interface took much longer to make it from iOS to Android.
Apple hasn’t announced a port of Apple Music to Google Home devices, but it seems like such a move will be imperative if Google Home becomes the market leader, Apple HomePod continues to languish in single-digit market share, and Spotify continues on its steady growth path. Meanwhile, the various music services will be spending the next few years exploring the possibilities of voice-based systems as user interfaces, and competition among them will enter yet another dimension. Apple will need to apply its unparalleled skill at user experience design in this area; otherwise, if smart speakers really do become the table radios of the future, Apple risks being frozen out of the kitchen.