Few new product categories within consumer electronics show the type of insane growth and adoption as smart speakers. Pioneered by Amazon.com (NASDAQ:AMZN) and its sleeper hit Echo, smart speaker sales are skyrocketing as consumers place devices in multiple rooms around their homes, accessing music-streaming services and controlling smart-home gadgets. Apple (NASDAQ:AAPL) has mostly missed out on that boom though, as its HomePod didn't launch until earlier this year and is priced at a massive premium compared to the competition.
The tech titan rarely makes cross-platform plays, but Apple Music is one of those exceptions; the service has also been available on Android for years.
"Alexa, play Apple Music"
Apple and Amazon announced last month that Apple Music was coming to Echo devices. The music-streaming service launched on the e-commerce company's products last Friday. In the days since, Apple has ramped up promotional activity around the new partnership, even telling App Store users to ask Alexa to play Apple Music.
Top spot in the App Store right now is interesting pic.twitter.com/Y6MyPU8RgC— nilay patel (@reckless) December 18, 2018
But wait, there's more! Amazon confirmed that Apple Music will soon be coming to other third-party Alexa-powered devices, which will include a broad swath of brands like Sonos, Logitech's Ultimate Ears, and more.
Amazon boasts the largest smart speaker installed base in the U.S., so it's not too surprising that Apple is bringing its music service to those devices. However, bringing Apple Music to other third-party devices is an unexpected twist.
The cross-platform expansion is significant for a few reasons, beyond the mere acknowledgment that Amazon is crushing Apple in the smart speaker market. Perhaps most notably, Apple is also implicitly admitting that Alexa is far beyond Siri at this point, despite the fact that the Mac maker had a considerable first-mover advantage.
Apple launched Siri in 2011 after acquiring the eponymous start-up. Alexa wouldn't launch for another three years. Alexa is now the most vibrant virtual assistant platform, boasting over 70,000 third-party skills. It's safe to say that Apple squandered that lead and is now trying to come to terms with that fact.
Rival music-streaming service Spotify (NYSE:SPOT) may lead globally in terms of paid subscribers, but Apple was able to overtake the Swedish company in the U.S. market earlier this year. Spotify's cross-platform approach is key to its ubiquity, and Apple knows it. If Apple has any hopes of poaching Spotify subscribers, the company knows it needs to catch up in terms of hardware partnerships.
Even if Apple Music isn't all that profitable after factoring in royalty costs, the service is still one of the core pillars of the company's growth strategy for its increasingly important services business. Growing the subscriber base also helps another important metric that Apple now highlights every quarter: paid subscriptions.
When Apple first launched iTunes on Windows 15 years ago, Steve Jobs famously said it was "like giving a glass of ice water to somebody in hell." How would CEO Tim Cook describe bringing Apple Music to Alexa?
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Amazon, Apple, and Spotify Technology. The Motley Fool owns shares of and recommends Amazon and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and short January 2019 $15 calls on Sonos Inc. The Motley Fool has a disclosure policy.