Apple Responds to Poor HomePod Sales With Price Cut

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It's now been a little over a year since Apple (NASDAQ: AAPL) released the HomePod, its first foray into the booming smart speaker market. Initial reviews were poor, mostly due to limited functionalities related to Siri and the lofty $350 price tag. Somehow, Apple failed to predict that most consumers don't value audiophile-caliber high-fidelity audio quality and repeated the same mistake it did with the iPod Hi-Fi. HomePod represented a mere 4.1% of the market in the fourth quarter, according to estimates from Strategy Analytics.

The Cupertino tech giant is now cutting the HomePod's price in the hopes of spurring sales.

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Now just $300

Apple has cut the price by $50 to $300 in the U.S. The premium smart speaker also received price reductions in numerous international markets as well. That makes the device even cheaper than Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google Home Max, which similarly tries to justify the premium pricing with high-fidelity audio.

However, the search giant also offers its Google Home Mini for $50, a price point that has resonated with consumers. The Google Home Mini and Amazon.com's (NASDAQ: AMZN) Echo Dot, also $50, often command the bulk of smart speaker volumes thanks to affordability and more capable virtual assistants. Google Home Mini and Echo Dot also frequently go on sale or get other promotional discounts -- both are currently available for $40, for instance.

Spotify also ran a promotion last year giving away free Home Minis to Family Plan subscribers in the U.S., a deal it is bringing back for U.K. subscribers. Google is even giving away the diminutive smart speaker to certain subscribers of its Google One cloud storage subscription.

The goal has always been to convince buyers to place multiple smart speakers all around the house, a tall order to fill at $300 to $350 per device. Furthermore, a recent study by Park Associates suggests that households are extremely brand loyal once they invest in a smart speaker platform, with 97% of households owning just one brand. Apple wasn't just late to the smart speaker market; HomePod was also priced too high and rivals have already established themselves.

HomePod Mini to the rescue?

Apple is supposedly working on a "HomePod Mini" that would ditch the high-end audio in favor of a smaller form factor to better compete with Google and Amazon. The rumored price point was $150 to $200 -- still a considerable premium but more competitive. Investors haven't heard much HomePod Mini speculation recently, but hopefully the company still has something more affordable in the pipeline.

But even a HomePod Mini wouldn't address the deficiencies in Apple's smart-home platform, HomeKit. Behind listening to music-streaming services, controlling smart-home devices is among the most popular use cases of smart speakers. In addition to catching up in unit sales, Apple also needs to expand the HomeKit ecosystem.

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