The Home Audio Battle

The battle over audio in the home may be a more fundamental one than many realize. The iPod kicked off the battle for personal audio. As music transitions to streaming services like Spotify and Apple Music, this battle continues. But as an extension of personal audio, the battle for the home may be as strategically important.

In my initial analysis of the smart speaker market, what I concluded was most consumers were gravitating to these relatively low-cost speakers simply to extend audio into places of their home it did not previously exist. This conclusion was born out of the insights we gleaned studying the mini-market boost of portable Bluetooth speakers from companies like Bose and Jawbone. These devices, while offering some value of portability, were largely being used as room speakers the majority of the time. It turns out, consumers simply wanted to play music from their phones on a speaker out loud in a room in their house where no speaker existed. This observation holds up when we look at the core value of smart speakers, which is still largely bringing a speaker for music into a room of the house no speaker existed.

What these observations reveal, is the unmet need and fundamental desire for consumers to have music playing throughout their house. And the realization that most consumers music/entertainment experiences are limited to their TVs speakers or their personal headphones. Clearly, the audio opportunity is a much bigger one than TV speakers and headphones.

In this light, I find the Sonos Beam Soundbar quite interesting. It turns out, ~80% of US consumers use only their TVs internal speakers to experience TV and movies. I knew most consumers did not have elaborate home theater audio setups but I didn’t think the number would be as high as 80% as was discovered in a research note from Parks an Associates. A data point which adds more context to my point about the opportunity for home audio.

Years ago, one of the fastest growing categories of consumer electronics was the home theater in a box solution. Consumers wanted an easy to setup, fully integrated, surround sound experience. That trend died, perhaps with the TV replacement cycle, and it seemed consumers were content with just their TVs speakers. What has changed, is the voice/smart speaker integration which has added layers of functionality to speakers being purchased now but until the soundbar integration, the TV/Home theatre experience was left out.

The way I look at these smart speaker solutions is from a platform perspective. Specifically, a platform to deliver rich services not an app platform. But also, they serve as the base of the entire home platform holistically, which includes smart home. Having a number of smart speakers all over my house, and watching how my family uses and interacts with them, I have no doubt the full power of this platform will be unlocked when consumers have many of these devices around their house and not just the one or two which exist in smart speaker households today.

As an early adopter, I tend to live ahead of the curve than most consumers and at the moment I have six smart speakers which are a part of a solution in rooms in my house. I have more than six smart speaker products but the six I mention support the same ecosystem. What’s interesting, is this number grew rapidly overnight as Sonos released the AirPlay 2 update which now allows all my Sonos speakers to work with my Apple HomePod’s. I have the Sonos Beam sound bar set up with two Sonos Play 1’s in surround sound mode, one Sonos Play 1 in my outside patio area, and a HomePod in my kitchen and bedroom. All of these devices working together to play Apple music in sync mean my whole house has audio simultaneously playing. An experience, which is transformative, to say the least.

Sonos is a solution which plays well with Amazon, Google Assistant, and Siri now even though Siri is not as integrated as the other two. But with AirPlay 2 support, I personally feel Sonos is playing better with Apple’s ecosystem than the other two simply because it feels more integrated with the iPhone where Amazon Alexa and Google Assistant feel like more stand-alone experiences.

So where does the battle lie then? Well, it lies in getting the most speakers into as many rooms as consumers houses, integrated into their core audio and entertainment experiences as possible. This is why Amazon and Apple are smart to start to think about their streaming TV boxes as a part of this strategy, and Sonos selling the more robust full entertainment experience to date.

When we look at sales, the vast majority of smart speakers sold are under $100. Most of these we will simply consider entry level smart speaker products. Consumers will most likely upgrade those products and start to look more to integrated multi-device solutions and I do think they will move toward more products which have better audio quality.

With the Sonos IPO now moving forward, it will be interesting to see what this holiday looks like with smart speaker sales. Again emphasizing my conviction this category is one where more is better and consumers will quickly want whole home solutions, not just single room solutions. My prediction is every company selling smart speakers will move to sell bundles relatively quickly. Consider the evolution of the home theater in a box trend, evolved into smart speaker solutions where consumers want a bundle of products. Sonos and the Beam soundbar seems like it may have the edge because of how well it integrates with the TV and a reason why I think Apple and Amazon need to make sound bars and would have great success if they did. But the point remains, this home audio battle is one where solutions/bundles will be the thing that consumers gravitate toward and this holiday will likely see the first push.