A few days ago, Apple made an announcement that came as a surprise to many — Apple Music is going to be available on Amazon Alexa enabled devices. A few days later, Apple Music for Alexa indeed went live, and Apple even started a somewhat aggressive promotion of this integration via App Store featuring and even push notifications in the US.
This is a very curious move by Apple. The company has its own smart speaker, HomePod, which is powered by Siri, and integration with Apple Music has been considered one of the key (and until recently, exclusive) features of the device. Apple’s business model has always been about selling hardware products, differentiated by exclusive software and services, and it appears that Apple is abandoning this approach — at least with HomePod — and thus sacrificing its own product in order to chase recurring services revenue.
In one of the recent pieces, analyst Ben Thompson said: “This is a decision that quite explicitly favors one of Apple’s services (Apple Music) over one of Apple’s hardware lines (the HomePod); that is a lot less like a services narrative and a lot more like a services strategy. It’s a shift that is not just fascinating, it’s frankly a bit stunning.” However, Apple analyst and observer Neil Cybart was less fascinated, stating that “Apple Music was never meant to drive HomePod sales. Instead, HomePod was about delivering great sound in the home. HomePod was a way to sell Apple Music… That doesn’t mean that Apple cared more about services versus hardware. Instead, it merely reflected the fact that Apple is selling a music speaker that offers a pretty good experience thanks to its seamless integration with Apple Music.” (From one of the daily updates to Above Avalon members).
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Vertical vs Horizontal
No matter how you slice it, though, it is indeed fascinating to witness the rise of internal identity and business model conflict within Apple. A company that sells differentiated exclusive hardware is by nature a vertical company, whereas a company that monetizes services needs to be a horizontal company. While it would be premature to state that Apple is shifting away from being a vertical hardware company to a horizontal services company, Apple Music being available on Android and now Alexa (and, what’s important, promoted by Apple as a cross-platform service) marks that Apple is now more open-minded than ever about exploring new business models. It remains to be seen what it means for Apple’s organizational structure — Ben Thompson has been arguing for years that Apple should separate its services division to have its own P&L and structure, similar to Apple Retail — with so much smoke around upcoming Apple subscription news service, and Apple video service, bundled with already cross-platform Apple Music, are we starting to see the first sign of this shift? All of these would be separate (or bundled) revenue generators for Apple, so from business standpoint, it would perhaps make sense for these to be decoupled from hardware products organization.
I applaud Apple’s move towards cross-platform play when it comes to services. I have stated several times that key concerns for Apple’s services are hardware-first business model and platform lock-in, which naturally prevents services from reaching as many customers as possible and thus analyzing customers data, compared to the competition. I also believe that many, if not all Apple services (not only ones that are directly monetized through subscriptions), such as iMessage and FaceTime, would benefit everyone, including Apple hardware users, from going cross-platform.
Some people, however, are not as optimistic. Well-known voice-first evangelist Brian Roemmele stated on the recent episode of Vector podcast that Apple Music embracing Alexa is a huge blow to the reputation of HomePod and Siri, and a big demotivating factor for certain Apple employees working on these products at Apple. Analyst Ben Bajarin took to Twitter to state that he was no longer confident that we would see an update to HomePod, and apparently the device hasn’t been selling well.
Neil Cybart, however, believes that HomePod was a hot seller during the Black Friday period, and according to his estimates, HomePod might be on track to hit 4 to 5 million units sold in CY2018, which is a good result for a niche relatively expensive product.
We will not know for sure unless Apple discloses HomePod unit sales (which they are probably not going to do anytime soon), but personally I don’t think that Apple Music launching on Alexa is a direct indication that HomePod is a failure and Apple is deprioritizing it. Apple’s services division is tasked with acquiring more users and more revenue from them, which doesn’t stop Apple’s hardware (and more specifically, HomePod) team from working on HomePod improvements and even tighter (and still exclusive) integration of it with Apple Music, Siri, and other hardware products such as iPhone or Apple Watch. When Apple launches updated Apple News and Apple Video services presumably next year, I would not expect these to be limited to Apple platforms either.
How important is voice?
Regardless of one’s take, it’s hard to argue that Apple is apparently not as fascinated by voice interfaces and “voice-first revolution” as some other companies (primarily Amazon and Google). Siri has been languishing for years and is still a product of a very questionable quality and even worse reputation and mindshare. Is Apple overlooking the next big wave, or is the company deliberately downplaying it by being skeptical about this whole voice-first thing?
There are analysts who have voiced their skepticism recently. Andreessen Horowitz’ Benedict Evans isn’t so sure that booming sales of Amazon Echo devices prove that smart speakers have product-market fit, and he believes there is no path to “something fundamentally better”. Many studies showed that people use their smart speakers for very simple and routine actions such as setting timers and alarms and checking weather, as well as listening to music, but not much else. While Amazon is busy selling stationary smart speakers, Neil Cybart argues that truly helpful digital assistants are the ones that are always with you — and this is what Apple is betting on with Siri on Apple Watch and AirPods.
It’s also important to keep in mind that the company that is pushing the voice-first and voice-only narrative more aggressively — Amazon — is the company that has little to no first-party presence outside of this UI paradigm. Amazon completely failed with Fire Phone and has no platform leverage over screen-first, touch-first and touch-only form factors, and they are currently also missing the wearables wave. For Amazon, voice interface and stationary speaker paradigm is the only available opening on the market. Google is in somewhat similar situation — Android ecosystem has been stagnating recently and failing with growing the share of the premium smartphone market over Apple, and Android Wear is currently going nowhere.
One could also argue that the rise of modern personal technology is actually somewhat shifting people away from using their voice as the primary means of communication. Text-based email is not going anywhere. Chat and messaging services are booming, and while some people prefer to share recorded voice messages, the majority are using text. Text is currently way easier to parse, index and search through, emphasizes more structured and streamlined communication, and arguably requires less brain power vs using the voice. Visual content, such as videos and photos, are also growing in popularity as means of communication, just take a look at Instagram and Snapchat. Finally, it’s sometimes way easier, faster and less stressful to quickly tap on a screen, rather than to talk to a device while thinking in advance how to structure your phrase. At least currently, while undeniably being very useful in certain use cases, overall voice interfaces cause too much anxiety and frustrations for me personally, and for those of us who are introverts and prefer more structured and thought-through approach to communicating, text is a way more comfortable way of doing many things.
The next wave?
So, with not moving Siri forward rapidly, does Apple indeed not believe much in the “voice-first” narrative, instead betting on screens, touch and sensors? Or is the company lacking vision and completely blinded by their iPhone success and misguided by its hardware-first business model? As mentioned above, there are good arguments to be made that voice is going to be just one, and not very crucial one, aspect of the user interface of the future.
Microsoft, however, also had perfectly good arguments and reasons to believe that Windows would continue to dominate the world, and laugh at the idea that somebody would buy a “toy” in the form of the “overpriced” iPhone with no physical keyboard — too focused on their PC and enterprise expertise, Steve Ballmer’s company completely misunderstood and missed the mobile revolution. By downplaying the importance of voice interfaces, Apple could be making a very similar mistake, caused by somewhat similar reasons.
To envision the future of technology, always look to science fiction — and according to some classic films and books, in the future, we are going to talk a lot to our computers. Well, if Amazon is right and Alexa is the next dominating platform that would reshape personal technology, at least we would be able to listen to Beats 1 radio with it.
