As Apple toyed with speaker, Amazon’s Echo left it in dust

MARK GURMAN

Apple audio engineers had been working on an early version of the HomePod speaker for about two years in 2014 when they were blindsided by the Echo, a smart speaker from Amazon.com with a voice-activated assistant named Alexa.

The Apple engineers jokingly accused one another of leaking details of their project to Amazon, then bought Echos so they could take them apart and see how they were put together. They quickly deemed the Echo’s sound quality inferior and got back to work building a better speaker.

More than two years passed. In that time Amazon’s Echo became a hit with consumers impressed by Alexa’s ability to answer questions, order pizzas, and turn lights on and off. Meanwhile, Apple dithered over its own speaker, according to people familiar with the situation. The project was canceled and revived several times, they said, and the device went through multiple permutations — at one point it stood 3 feet tall — as executives struggled to figure out how it would fit into the home and Apple’s ecosystem of products and services.

In the end, the company plowed ahead, figuring that creating a speaker would give customers another reason to stay loyal. Yet despite having all the ingredients for a serious competitor to the Echo — including Siri and the App Store — Apple never saw the HomePod as anything more than an accessory, like the AirPods earphones.

As a result, when the $350 gadget debuts early next year, the HomePod won’t be able to do many of the things the Echo can. Amazon offers thousands of “skills” (voice-activated apps) that let users do a range of things (including buying stuff from Amazon). The Google Home, which debuted earlier this year, is similarly endowed. The HomePod will be mostly limited to playing tunes from Apple Music, controlling Apple-optimized smart home appliances and sending messages through an iPhone.

“This is a huge missed opportunity,” said one of the people, who requested anonymity to discuss an internal matter. Apple declined to comment.

The HomePod was originally a side project cooked up about five years ago by a group of Mac audio engineers, who wanted to create a speaker that sounded better than the ones sold by the likes of Bose, JBL and Harman Kardon. Side projects aren’t uncommon at Apple, where employees are encouraged to follow their muse so long as their day jobs come first.

Two years into development, the side project finally got an official code name ( B238) and a home inside Apple’s accessories division, which also worked on the AirPods earphones and is run by Gary Geaves, who previously was research-and-development chief at audio company Bowers & Wilkins. When the HomePod project gained its own team, engineers were relocated to Valley Green 1, an office near Apple’s original headquarters in Cupertino, Calif.

While Apple engineers toiled away, Amazon unveiled the Echo. While it was officially called a speaker, the device’s main appeal was Alexa. By then, Apple’s own digital assistant, Siri, was 3 years old and had overcome initial glitches. But the Siri team was told that the HomePod was about music and quality sound, one of the people said. Yes, the speaker would be voice-activated, but it wouldn’t be positioned as a personal assistant. As of this year, the HomePod was just one of the four or five areas the Siri team was working on, the person said.

The Echo is a truly standalone product at the center of an ecosystem. The cloudbased operating system has made it easy for developers to create thousands of skills or voice-activated apps.

By contrast, the HomePod is essentially an extension of the iPhone, like an accessory. When someone asks the HomePod to open a thirdparty app, the request won’t go directly to the cloud, as with the Echo, but to an iPhone. As a result, developers can’t write apps for the HomePod. They must create tweaked versions of existing iPhone apps. What’s more, Apple has limited the kinds of apps to messaging, to-do lists and notes. If Alexa is the beating heart of the Echo, Siri is almost an afterthought.

Apple has told suppliers it expects to ship 4 million HomePods in 2018, according to a person with knowledge of the matter. Taipei-based Fubon Securities analyst Arthur Liao predicted those production numbers earlier this month. By comparison, Amazon has sold an estimated 15 million units since going on sale in 2015, according to analysts at CIRP.

This isn’t the first time Apple has tried to sell its own speaker. In 2006, the company debuted the iPod Hi-Fi for $349. It flopped and was discontinued a year and a half after going on sale. Once again, Apple is betting that superior audio will vault the HomePod past competing speakers. But rivals are following suit and improving the sound quality of their own products.

Sonos, a pioneer in quality wireless speakers, launched its first smart model last month, Google’s $400 Home Max will focus more on audio quality, and Amazon’s latest flagship Echo lineup has a more powerful speaker than the original.

Apple could still eventually add features to the HomePod. These might include its own app ecosystem and support for competing music services. Even so, until that happens, Apple will still be playing catch- up in a category invented by a company better known for e-commerce than hardware.