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Spotify Wants to Compete With Apple, Inc. on Hardware Now, Too?

By Evan Niu, CFA - Apr 24, 2017 at 9:33PM

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Good luck with that.

The war between Apple (AAPL 2.45%) and Spotify over music-streaming subscribers is heating up, and it looks like the competition may soon expand to a new battleground: hardware. Spotify recently posted a job listing seeking a product manager for some type of hardware project, first spotted by Zatz Not Funny's David Zatz. Spotify has since taken down the listing after it got some unwelcome attention, but not before Zatz could take a screenshot of what the company is looking for.

Spotify is hoping to deliver Spotify "via fully connected hardware devices" and wants to create "a category defining product akin to Pebble Watch, Amazon Echo, and Snap Spectacles." The hardware will come "directly from Spotify" and "affect the way the world experiences music & talk content." Furthermore, Zatz says the device will be some type of wearable device, citing an anonymous source and other job listings that could play a role in developing the device, such as a voice product manager.

Apple Music on an iPhone and iPad

Apple Music. Image source: Apple.

What is Spotify up to?

It should probably be pretty obvious that Spotify isn't looking to create just a portable music player, a product category that smartphones marginalized long ago (even though Apple still sells iPods in small volumes). Since the Swedish music streamer lacks expertise in other areas, it seems likely that whatever it wants to make would focus singularly on music streaming without venturing too deeply into other functions.

Voice-controlled virtual assistants are on the rise, but it's not realistic for Spotify to develop an entire assistant without deep artificial intelligence (AI) proficiency. A voice-controlled speaker that integrates with Spotify could make sense on some level, but it would be extremely hard for Spotify to compete with voice-controlled speakers that offer a broader set of functions through virtual assistants and third-party integrations.

Spotify names two wearables as examples, potentially hinting at its plans, but the same fundamental challenge arises: Is there demand for a single-purpose wearable that only plays music? Broadly speaking, single-purpose product categories have been declining as multipurpose devices like smartphones become increasingly powerful and can handle just about any task you can imagine.

Apple is working on a Siri-powered speaker

Considering the rising popularity of Echo and products like it, I've been arguing for nearly a year that Apple should make a Siri-powered speaker. Reports surfaced last year that Apple is indeed hard at work creating a Siri-powered speaker, one that could also serve as a smart home hub just like current incumbents. Apple employees had reportedly already begun testing the device in their own homes, but the project could still get axed before ever seeing the light of day.

Incumbent devices may already offer music-streaming services, but Apple Music and Spotify are the clear leaders in the subscription music-streaming space: Apple Music had 20 million paid subscribers as of December 2016, while Spotify announced last month that it had reached 50 million paid subscribers. Combined, those two services represent the majority of the roughly 100 million paid subscribers that the music-streaming industry now has.

As the No. 2 in the market, Apple could strengthen its position with a Siri-powered speaker that streams Apple Music. Spotify will have a tough time competing on hardware.

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