"Siri, will HomePod be a big hit"

The author of the material analyzes the wireless speakers HomePod from Apple.

It’s hard to find someone who wouldn’t like music. According to a 2014 Nielsen survey , 93% of American consumers listen to music. 75% of them do this on the basis of an informed decision. In the rest of the world things are probably the same.


It is difficult to find a person who does not connect music with the most important moments in his life.

Apple chose music as a horse that will take out their latest Siri -based product and part-time Alex's killer , HomePod .

It seems that Apple’s development team for the new home device did not escape the fact that most users like to ask Alex to play one track or the other almost as much as they listen to music.

According to the results of a survey conducted last fall in Experian, which respondents were early users of Amazon Echo, it turned out that “put me a song” was the most popular team: more than a third of users (34%) asked Alex about this several times a day. Well, the most popular team, if you're curious, is “set a timer.”

During the HomePod launch on June 5, Apple CEO Tim Cook described it as a device that will help “revolutionize home music,” just like iPod and iTunes did in their categories in the distant 2001 and 2003. According to Cook, the music is "Apple's in the blood." He also added :

“We wanted to create something that would sound incredible. I think that when people hear HomePod, they will be shocked by the sound quality. Of course, he can do a lot of the rest, but, among other things, we wanted to achieve really high quality playback. ”

What innovative approaches did HomePod learn from the iPod and iTunes invented by Steve Jobs, Johnny Ive and Tony Fadel that really revolutionized music in the early 2000s?

Let's open this topic in more detail.

Or better or no

After talking with Tony Fadel in March at The Innovation Project , the author of the material learned something about the origin of the iPod that she did not know before. Like many entrepreneurs with whom she spoke, Fadel drew inspiration from the difficulties she faced personally.

Fadel was a DJ, and the fame of a DJ, as you know, directly depends on the tracks that they play. In the late 90s there was the only way to be a cool DJ with cool songs - buy a car of CDs, store them somewhere and carry them along with clumsy music players to perform. Fadel had his own vision of the correct design of a portable music player with a hard drive, which could store legal copies of music downloaded from the storage and music management system. Portable music players of the time were inelegant, cumbersome MP3 players , and Napster was a very attractive way for many people to get addicted to downloading illegal, pirated music.

Fadel shared his idea with Apple, but it didn’t arouse their enthusiasm, because the company at that time had not yet recovered from the failures of several of its consumer products. Remember Newton ? Fadel, however, did not give up his attempts and was eventually hired by the company in 2001, having received a small team and one year to bring the product to the market.

When the first iPod was introduced in October 2001, it was beautiful, had a 5 GB hard drive, was, according to analysts, “no thicker than a deck of cards”, synchronized with the desktop management system of the Apple music collection - iTunes.

Critics liked his design, but not the price tag of $ 399 .

Over the next eight weeks after the October launch and before the end of the year, Apple sold only 25 thousand iPods.

But soon, the reputation of a good consumer product and compelling marketing in the spirit of Apple ensured its success as an elegant portable music player that Fadel once drew in his imagination. Apple sold almost 600 thousand iPods by early January 2003, significantly pushing the positions of all other portable players on the market, including Microsoft Zune.

This success is due to the fact that the company managed to remain faithful to the Jobs design mantra - “if we cannot do better, then we should not do it at all”.

However, a true revolution occurred in 2003 with the release of iTunes. It is this event that will turn the iPod into a device that radically changed not only the attitude of the consumer to music, but also the entire music industry as a whole.

Previously, if a consumer wanted to listen to a song, he needed to pay a lot of money for an entire album from which he would listen to just one song (or he could just illegally download it from Napster). Opportunities to buy individual tracks were not. Jobs tried to offer record labels a model in which iTunes was supposed to turn into a digital commercial platform, allowing customers to buy individual tracks, store them and play from their iPods. Labels could monetize the sale of individual tracks that somehow passed them by Napster. The record companies, which at that time actually sold entire CDs for the sake of one song, were not thrilled that an intermediary appeared in their game, such as Apple, intercepting individual songs at a price of less than one dollar and putting an end to everything good accustomed to.

Jobs was able to negotiate with some of them. As a result, in April 2003, iTunes was opened with a library of 200,000 songs available for download for less than $ 0.99 each. Not even a week passed since the number of downloads exceeded one million, and so a new kind of relationship appeared between consumer and music.

Seven months later, iPod sales grew from 600 thousand to 2 million. Two years later, by January 2006, Apple was 20 times more - 42 million players. The iTunes digital platform, which opened access to millions of songs, has seriously affected iPod sales.

Five years after the launch of the “star duo,” in January 2008, Apple reported selling more than 5 billion songs on iTunes. The company also announced the sale or rental of 50 thousand videos. Despite the addition of TV shows and music videos to iTunes in 2005, the purchase or rental of films became available to consumers only in January 2008, when film studios opened access to their content for the platform.

Life in the digital media mall Apple was boiling.

At the beginning of 2013, already ten years after the launch of the iPod, according to a study by research firm NPD, Apple’s profit amounted to $ 25 billion, or 69% of all digital music sales and 29% of the total music sold in the United States. This makes Apple the largest music distributor in the country. The iTunes store also turned out to be a money generator for Apple. In the 4th quarter of 2012, Apple reported a profit of $ 3.7 billion . So much was Apple’s total commission on the sale of all multimedia products for just one quarter. Six months later, in June 2013, Apple announced that the number of users of its iTunes store is 575 million people.

Apple and iTunes did the same with music stores as Amazon did with bookstores - transformed the industry so much that the need for them disappeared.

However, in 2013 there was another trend, which for a long time remained unnoticed against the background of the marketing of iTunes.

Crucial moment

Digital music plays a giveaway - this was the title of Rolling Stone magazine in January 2014. The material was devoted to the results of the study of music nielsen, published a year earlier. According to the information contained in it, sales of digital music fell for the first time in the last decade since the opening of iTunes.

Two reasons were found: the lack of hits that consumers were willing to buy and a 32% increase in streaming music. The number of downloads of digital songs, according to the report, decreased by 6%.

As Pandora is one of the pioneers in this field, so is Spotify, a Swedish company that first introduced the business model of streaming music in 2008 began to gain momentum and play an increasing role in the market. More than half of Internet users in 2013 heard about Pandora, which appeared in 2000, and a third knew about Spotify, which appeared in the USA in 2011. About half (Pandora) and a quarter (Spotify) of these consumers reported that they themselves used these services in 2013.

Pandora and Spotify captured the love of consumers for all popular hits and all their devices connected to the network, creating a new way to get access to music at any time and any place where consumers have such a desire. The idea of ​​these services was to give consumers the freedom to search for new artists and songs and the ability to create their own playlists without having to buy and download individual songs for certain devices. As conceived by the authors, such an approach should have increased the popularity (and hence sales) of artists, in parallel by motivating users to come to the service again and again.

If this sounds like something familiar, then it should be. The desire to make the experience of consumer interaction with music more personalized is the approach that was actively promoted among labels and artists by none other than Steve Jobs, back in 2002.

But streaming music needed a business model that encouraged people to continue using the service regularly and guaranteeing equally regular payouts for musicians. This time, Spotify took over the rethinking.

Spotify created a business model in which consumers could search for music and create playlists until they get bored and do it completely for free, provided they agree to listen to the ads. Listening to commercials between songs is perceived quite naturally, since this practice is familiar to many listeners. Consumers could choose one of two options: either a free listening with advertising, or the purchase of an ad-free subscription with a monthly payment of $ 10. Artists received their payments in both cases.

In 2013, 2 years after its launch in the United States, Spotify reported that its audience reached 24 million people, six of whom decided that they wanted to listen to music without advertising. This figure has grown rapidly: at the end of 2012, 20 million used the service, five of whom signed up.

It was a turning point: we had a new approach to buying music, which consumers will use in the near future.

By June 2015, that is, by the very moment when Apple will introduce Apple Music , the base of active users of Spotify, according to the service, will be 75 million people, 20 of which are paid subscribers.

By January 2017, Nielsen ’s eagerly awaited report on the state of the music industry revealed a serious Apple iTunes crisis: the data presented suggests that sales of digital tracks are plummeting as tech-savvy consumers switch to listening to streaming music.

According to the data from the same Nielsen study, by the end of 2016, streaming accounted for 38% of all audio consumed, that is, the streaming business model also performed well. A significant (76%) increase in the volume of listening to tracks compared to the previous year was enough to compensate for the drop in digital sales. In 2015, the music industry in general showed a 3% increase.

In many respects, it was Apple and the iPhone that provided the necessary support for streaming services, since it was the iPhone that became the very portable device with which consumers used the services. Apple realized that the clouds are gathering, but it's too late. In June 2014, the company acquired the Beats headphone brand for $ 3 billion , and with it a base of 250,000 subscribers to the streaming radio service, but this countermeasure did not bring any tangible results.

What will be next?

When Apple just recently introduced the voice of the HomePod to the world, it called the number of Apple Music subscribers — 27 million.

Four months earlier, in March 2017, Spotify reported that its paid user base grew to 50 million. Assuming that the ratio of paid and free users remains at about the same level, it turns out that the free user base has grown to 200 million people.

In April, Amazon introduced its latest in the Echo-device lineup - the Look . The Look allows its users to receive high-quality photos of fitting things and receive advice from professional stylists recommending the most successful ones. And of course, built-in support for Alex allows you to find and order suitable items with it. According to some reports, 10 million consumers already use Echo-devices. All of them ask Alex to play music, including the music from their playlists in Spotify.

As for Apple and its HomePod, here everything looks as if the giant from Cupertino is trying to sell premium-grade iron in the hope that there will be a sufficient number of fastidious music lovers with thick wallets that put the sound quality above all, and not, say, access to a clever voice assistant, including one who can play music from the Spotify playlist. Yes, Tim Cook said about HomePod, that he "of course, can do a lot of things," but today it sounds about as if we were discussing Amazon Echo 2014-2015 and its basic features, such as speaking out loud the results of sports matches, news , weather forecast, a list of restaurants close to home, or simply setting a timer.

However, HomePod is clearly lacking, at least for now, the voice control of music from Apple Music, which would be significantly different from the existing analogues, including exclusive access to the Taylor Swift song catalog. Miss Swift recently hit the headlines, breaking her exclusive deal with Apple Music and returning to working with Spotify, a platform from which she once disdainfully dismissed because of the latest advertising model. Someone might say that this event happened just in time for Katy Perry’s new album release on Spotify, however, even if it’s so that such a step clearly reflects anxiety to be forgotten, retaining an exclusive relationship with the streaming service, whose audience size is 8 times less than Spotify.

Amazon and his Alex, on the other hand, create a platform and voice ecosystem that can meet the needs of commerce. The company attracts consumers to this ecosystem with the help of a line of various devices tearing access to it. The voice assistant, whose support is built into all these devices, has 12 thousand different voice control skills created by a strong developer community. Using these skills, consumers can listen to music from a streaming service, get news and weather forecasts, buy items in 1 click from Amazon. Yes, in the Echo audio system there are no 4-inch subwoofers and 12 high-frequency pattern forming the HomePod boasts, but it also doesn’t make its users forget to play the Spotify playlists and start all over again in Apple Music, listening to music on the device, which allows you to do this only at home and without any additional functionality.

Analysts believe that the evolution of Alex and Echo will allow Amazon to grow to $ 10 billion in the next 2.5 years, mainly due to the operations that are possible thanks to these devices.

In many respects, Apple and HomePod announcement are quite natural and explainable.

Apple needs HomePod to be a hit, despite its huge market capitalization, huge cash reserves and approvals for software and services sales. More than 60% of the company's sales and revenues are provided with hardware products, and investors have long been accustomed to streaming the release of innovative devices that appear every two years and are capable of meeting the needs for increasing business profitability.

And here the company faces various challenges.

IPhone sales around the world are gradually falling, competitors' stocks are growing. Some analysts have expressed concerns that the hotly anticipated iPhone 8 does not look attractive enough to push sales and keep them high in the long term. Meanwhile, the Samsung Galaxy 8 has made the iPhone a serious competition not only in the US, but throughout the world. All these events coincided in time with the extension of the iPhone and iPad update cycle around the world, including in China, where Apple's business fell 14% in the last quarter .

Although the sales of software and services have a very high margin, they represent only about 11% of all Apple sales, but even in this area, success stories have become rare. Almost all of the programs and services presented by the company, iBooks, Apple News, Apple Music and Apple Pay, independent of the App Store and iTunes, did not show any impressive results. As for iTunes, for it, as mentioned above, difficult times have come. New devices presented by Apple in an attempt to stimulate sales by attracting developers, such as the Apple Watch, failed because they failed to attract consumers. In early May, Google, Amazon and eBay announced the removal of their Apple Watch apps from the AppStore.

The great German philosopher of the 19th century, Friedrich Nietzsche, once said: "Without music, life would be a mistake."

The future will show whether the bet on a device playing tracks only from Apple Music will be Apple's musical mistake in the era of universal devices, open ecosystems, a community of developers, developed competitors with a large market share.

The author of the material assumes that only the ending is common to the iPod and HomePod.

The iPod solved the problem of consumers and the music industry in 2001 and 2003, thereby making a revolution in music, at the same time providing its creators with huge sales of devices and digital products.

In 2011, Spotify saw an opportunity to change the approach to listening and selling music, which was emerging in the era of network devices and mobile technologies, developed a new business model that did not depend on individual devices and became popular.

In 2014, Amazon considered that the future was voice-activated, and began work on creating a platform for developers, developing skills and attracting consumers, the development of which can be used on any device, including cars and iPhones. Amazon’s business model is not focused on devices, but on the business processes that underlie their sales.

Finding the problem of the consumer and its solution is the very reason why the iPod became famous all over the world sixteen years ago. Today, in 2017, according to the author of the material, HomePod looks more like a device trying to solve Apple's problem - its need for the next “iron hit” - and that’s all.


Source: https://habr.com/ru/post/405017/

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