Apple Music’s arrival on Amazon’s Echo is both surprising and logical - Rickey J. White, Jr. | RJW™
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Apple Music’s arrival on Amazon’s Echo is both surprising and logical

Apple Music’s arrival on Amazon’s Echo is both surprising and logical

Last Christmas, we had a platform dilemma at my mom’s house. The only thing she loves more than her iPhone 8 is the Amazon Echo in her living room. She likes to call out old jazz tunes from the couch at night. Even so, she let her Amazon music service subscription expire. She refuses to pay for two music services, and she doesn’t like having two digital assistants in her life.

Things will be simpler this Christmas. Apple made the surprising move last week of bringing Apple Music to Amazon’s Alexa-powered devices. Now my mom can standardize on Apple Music—which has some pretty great curated jazz collections—and feel a lot better about the ten bucks a month she pays for it. Like her, millions of other people will benefit from Apple’s user-friendly move, including lots of iPhone owners who will become new Echo owners this holiday season.

In one sense, Apple’s decision to put its music service on the Echo replicates its earlier decision to put Apple Music on Android devices. But it’s emarkable because it seems to come at the expense of Apple’s own ecosystem.

Until now, the only smart speaker Apple Music worked on was the company’s own HomePod speaker. Theoretically, the removal of that exclusivity means one less reason to invest in a HomePod. On top of that, the HomePod no longer boasts the key differentiating feature of sounding better than every other smart speaker, now that Google and Amazon (and Sonos) have release more audio-focused models. Listening to music is still by far the number one use of smart speakers, research shows.

So why would Apple do this?

While the company competes with Amazon and Google in the smart speaker market, it is also in a fierce battle with Spotify for the subscription music service market. Apple Music has about 56 million paying users to Spotify’s 87 million. It could be that it’s now more important for Apple to get access to all those Alexa/Echo users than it is keep Apple Music exclusive to its own smart speaker.

It’s hard not to look at that choice and see it as another sign that consumers have largely rejected the HomePod. Gene Munster at Loup Ventures estimates that Amazon will sell 28.5 million Echos this year (the majority of them in the $29 to $99 range), and Google will sell 16.2 million of its Home speakers. Apple, he forecasts, will sell only 3.5 million HomePods. There are reasons for this disparity. The HomePod is relatively expensive, at $349. While it does sound great, it’s deeply locked into Apple’s ecosystem; you can’t do a lot with it other than play music from Apple Music, the Apple cloud, or other iDevices.

Had HomePods been flying off the shelves, it’s far less likely Apple would have put Apple Music on Alexa/Echo. Even if it’s not an admission that the HomePod is a flop, it could be a sign that Apple recognizes the limits of its own voice ecosystem.

Or not. Again, it’s hard to do battle with Spotify without being on a whole lot of devices, not just one $349 speaker. “Apple’s decision to make Apple Music available on Echo has little to nothing to do with how HomePod sales are trending,” writes Above Avalon’s Neil Cybart in a research note Monday. “Instead, it has everything to do with Apple Music.” Cybart says that if strict platform lock-in was ever very important to Apple’s music strategy it never would have made its music service work on Android and Windows.

Quid pro quo

Apple’s decision could be based on still other factors. Stratechery’s Ben Thompson, writing in a research note over the weekend, proposed that Apple Music-on-Echo was the result of a trade-off between Apple and Amazon. Recall that a few weeks ago Apple announced that it would, for the first time, be directly selling iPhones on the Amazon marketplace (resellers can still sell the devices, but they’ll all have to be authorized by Apple). Thompson proposes that that’s something Apple wanted, while Amazon wanted for Apple Music to be available on its Echo devices (Above Avalon’s Cybart agrees with this analysis).

Thompson likened the arrangement to another deal between the two tech giants. Up until last year, Apple had wanted to sell its Apple TV box on Amazon. Meanwhile Amazon wanted to get its Prime Video streaming app onto Apple TV. Both things eventually happened, the apparent result of another calculated quid pro quo arrangement.

Whether it was Apple or Amazon that wanted Apple Music on the Echo, it does seem like a good move for Apple once you peel back the layers. The simple fact is that Amazon is selling the sh*t out of low-cost Echo speakers, and will likely sell a whole lot more during this holiday season. Confronted with that fact (and, likely, disappointing HomePod sales) Cybart points out that Apple had three choices–do nothing and cede the music subscriptions for Echo owners to Amazon or Spotify, or release a much less expensive HomePod, or make Apple Music work on Echo. Since Apple would have to sacrifice a lot of style points and sound quality to sell a cheap HomePod, that seems unlikely. Better to let others have the budget smart speaker market, and sell one of your key services through those devices.

Startling though the news is at first blush, Apple Music becoming Alexa-friendly is yet another sign that Apple cares about its larger services business. “Apple is starting to prioritize services over hardware which I believe is a smart move for the company,” says Moor Insights & Strategy principle Patrick Moorhead. “Apple needs growth and at this juncture, monetizing the base with services is a better bet than a new hardware category.”

Actually, in my mom’s case, Amazon will benefit just as much as Apple. Now that she can listen to her beloved Oscar Peterson and Dave Brubeck in the living room, I’m probably going to need to upgrade her to the improved audio of the $150 Echo Plus.


Source: Fast Company

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