Ben Thompson: Most commentary gets HomePod wrong

Apple’s smart speaker, arriving Friday, may be the best answer yet to the question “why Apple Music?”

From Apple’s Middle Age, mailed (several times) Monday to Thompson’s Stratechery subscribers:

Most commentary has assumed that:

  • Customer wants HomePod
  • Therefore, customer subscribe to Apple Music
  • Apple profits

[T]his doesn’t make sense because Apple Music isn’t profitable!

Instead, I think the order goes like this:

  • Customer owns an iPhone
  • Customer subscribes to Apple Music because it is installed by default on their iPhone
  • As an Apple Music subscriber, customer only has one choice in smart speakers: HomePod (and to make the decision to spend more money palatable, Apple pushes sound quality), from which Apple makes a profit

Strategically speaking, the point of services is to differentiate hardware. To that end, HomePod is not exclusive to Apple devices to prop up Apple Music; rather, Apple Music is exclusive to HomePod to sell speakers.

My take: I’m still struggling with “why HomePod?” I’ll find out soon enough, I suppose. Mine is scheduled for Friday delivery.

7 Comments

  1. John Kirk said:
    I think Thompson has it right (as usual).

    11) Apple’s secret sauce is their software.
    12) But they monetize through their hardware.
    13) They can do this because they sell an integrated product.
    14) Paying for the hardware is like paying for a ticket to Disneyland. It gives you all-you-can-use access to Apple’s ecosystem (Apple World).

    21) People get confused about what Apple is selling. They’re selling tickets (hardware) so their customers can access Apple World (software).
    22) Apple also charges for many other things — like AirPods, Apple Watches, and various services. But no matter how profitable these other items are, they are NOT what Apple is selling! Apple is selling iPhones, and don’t you forget it!

    31) For example, Disney World makes TONS of money selling food, souvenirs and renting hotel space. But that is not their business. Their business is selling Disney World. Everything else is designed to sell Disney World.
    32) If Disney forgets who they are and they try to become a hotel chain, they will be losing their strategic focus. Similarly, if Apple forgets who they are and they try to sell services, they will lose their strategic focus. Disney is not a hotel chain. Apple is not Netflix. The money Disney makes from hotels is great, but they’re not in the hotel business. Disney hotels serve Disney World, not the other way round. The money Apple makes from services is great, but they’re not in they’re services business. Services serve the iPhone, not the other way round.
    33) Never take your eyes off the prize. Everything Apple does is designed to sell iPhones.
    34) HomePods are no different. If they enhance the ecosystem and make it more likely that you will buy Apple products — or refuse to switch away from Apple products — then they are doing their job.

    41) This is one of the reasons why the comparisons between Alexa and the HomePod are so off-base. Alexa serves an entirely different purpose for Amazon than the HomePod serves for Apple. Alexa serves the Amazon retail stores. HomePod serves the iPhone (or the Apple ecosystem).

    3
    February 6, 2018
  2. Gianfranco Pedron said:
    I don’t care for smart speakers nor for Apple Music. I have all the music I want in my lossless ripped CD collection (I’m no audiophile but most MP3 sources just hurt my ears).

    I will, however, pay Apple’s asking price if the the sound quality is anywhere near what we’ve been promised. I have separate sound systems for our pool, home theatre and garage each fed by an AirPort. I don’t have anything in our main living area simply because I don’t want the hassle of finding a place to hide the receiver/amplifier, speakers and the wires.

    I’ve priced out basic systems using good quality, entry level components from reputable manufacturers, looking for sales and open box deals and I can’t beat the price of the HomePod, without even considering the hassle and the cost of a clean installation.

    But that’s just me. The HomePod might not be the best speaker system around, it might not be the smartest of smart speakers, it might not be the best at anything for all I care. If it does a bunch of things well enough for my needs, I’m sold.

    2
    February 6, 2018
    • David Emery said:
      How would you want/expect the HomePod to control your CD collection? (I have a large CD collection of relatively specialized stuff, and no interest in Apple Music.)

      0
      February 7, 2018
  3. Ken Cheng said:
    Can’t decide whether I should put it in the dining room or living room.

    1
    February 6, 2018
      • Ken Cheng said:
        Haha, thanks Roger! I think I’ll put the first HomePod in the dining room, and next year’s iteration in the living room. Then Siri1 can talk to Siri2.

        As an aside, whenever I see your name, I keep thinking, I wonder if there used to be an umlaut over the “u”? Cause that’s the way I would pronounce it.

        0
        February 6, 2018

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