Apple (AAPL 0.48%) is known for its steep prices and the $349 HomePod smart speaker that launched in January is no different.
But unlike Apple's late-to-the-game entries into smartwatches and streaming devices, its Homepod offering isn't making the splash the company hoped. The tech giant has been forced to cut its sales forecasts and scale back some orders with one of its HomePod manufacturers, according to reports from Bloomberg.
If these lackluster sales continue, the company will have trouble keeping up with other tech players in the smart home market.
Where does the HomePod rank in the market so far?
The HomePod claims just 4% of the smart speaker market, down from a high of 10% right after it launched in January, according to data from Slice Intelligence.
Homepod's struggle to gain meaningful market share boils down to three issues: 1) the product's late release 2) the product's functionality and 3) the product's price.
Apple wasn't able to get the HomePod out for its original release date in early December so it missed the bulk holiday orders. But even with a holiday launch, the device would have been way behind the field. The original Amazon (AMZN 1.21%) Echo came out more than three years before the HomePod while Alphabet's (GOOGL 0.77%) Google launched Google Home over a year ago.
To overcome the late start, Apple tried to pitch the HomePod as a smart speaker with superior sound quality. Unfortunately for Apple, customers don't seem to care as much about sound quality and have criticized the HomePod for offering an all around lesser experience compared to competing products.
Siri in general has been widely mocked recently for being years behind Google assistant and Alexa in terms of skills. For example, Amazon and Google's voice assistants can differentiate between voices, while Siri cannot. However, Siri's limitations on the HomePod are especially frustrating when it comes to third-party apps like Spotify.
For the 71 million paying Spotify subscribers, you're better off with an Alexa or Google Home device because they work seamlessly with third-party apps. On the other hand, HomePod users have to use AirPlay to stream Spotify from an Apple device. However, if HomePod owners want to use voice commands to ask for a song, they need the $9.99 per-month Apple Music subscription. That means the $349 HomePod acts just like any other bluetooth speaker unless you pay for Apple Music.
And for all the Android users out there, you will automatically need to choose between Alexa devices or the Google Home because the HomePod only works with Apple devices.
Lastly, based on the functionality, you'd think Apple's speaker would have a competitive price point. But the HomePod is about $249 more than the Amazon Echo and $220 more than a Google Home. So that's hardly a bargain.
Is Apple working on solutions?
The good news is that the HomePod should look better by the end of 2018 than it does now.
First, a software update later this year will give HomePod users the ability to use two HomePods to create stereo sound in a room. Second, Apple has said that AirPlay 2 will be compatible with the HomePod later in 2018. This will allow HomePod users to use their Apple devices to control the music and volume on multiple HomePods located in different rooms of the house.
Stereo sound and AirPlay 2 were features that Apple marketed heavily ahead of the HomePod launch so it was disappointing that they weren't ready for the initial release.
The company is also committed to improving Siri's capabilities -- Apple recently poached John Giannandrea, Google's former chief of search and AI, to head its own machine learning and AI initiatives.
As for the high price, Apple is considering releasing a cheaper HomePod in the $150 to $200 range that will have more limited features, according to a report from Taiwan's Economic Daily News. But nothing has been confirmed.
With flawless execution on these improvements, Apple might be able to begin taking back market share from the likes of Amazon and Google. Of course, Apple fans will be sure to point out that Apple stumbled with its initial iPhone and Apple Watch release and is now the leader in both categories. So maybe in a few years we can look back on this initial HomePod release as a trial run that eventually led to the making of the iPhone of the smart speaker space.