Although Apple (NASDAQ: AAPL) currently has a lock on the premium smart-speaker market and Sonos (NASDAQ: SONO) remains a respected player in the space, both could be quickly displaced now that Amazon.com (NASDAQ: AMZN) has entered the market with new audio technology devices that might put a serious dent in their sales.
Amazon recently unveiled more than a dozen new products that expand its line of Alexa-enabled devices in new directions, such as a connected microwave, a smart plug, and an Echo device for your car. But it is the home-audio market where Amazon could cause the biggest disruption, particularly in the high-end space, and these four products should worry both Apple and Sonos.
This small gadget connects to your existing speaker setup via a 3.5 mm audio cable or Bluetooth and will retail for under $35 when it launches later this year. Essentially, the Echo Input turns dumb speakers into smart ones. Amazon is also partnering with third-party speaker makers to bundle the device with their speakers, since the Input doesn't have a way to play music itself. Bose is the first one to sign up; others are expected to follow.
Although Amazon's original Echo and Echo Plus speakers provide adequate streaming music sound quality for the majority of consumers looking to have a virtual assistant, the 100-watt subwoofer Echo Sub wirelessly pairs with them and vastly increases their versatility and quality by adding bass response. It can be purchased by itself for less than $100 or with two Echo devices for under $250, or 60% less than a Sonos Sub. As fellow Fool contributor Rick Munarriz notes, while the Sonos device and the Sub aren't exactly comparable, the Sub does dramatically undercut Sonos' ability to grow by having its devices accepted by the mass market.
Like the Input, the Echo Link connects to your existing stereo equipment, giving it Alexa control, but also allows audiophiles looking for multi-room audio capabilities a simple way to achieve that for just under $200. The preamp hooks up to existing receivers and amplifiers, giving voice controls to otherwise analog equipment through a variety of inputs. Importantly, you can connect it to a device in one room and audio can be streamed to other Alexa-enabled speakers or devices elsewhere throughout the house.
Echo Link Amp
Arguably the most important audio technology device Amazon introduced, the Echo Link Amp replaces a 60-watt, two-channel amplifier while providing multi-room capabilities and Alexa voice controls for just under $300. That places it at half the price of the Sonos Amp, though the latter is twice as powerful and comes with an HDMI input. The Link Amp has optical, coaxial, and analog inputs, but is also compatible with the Link and other Echo devices, which you'll need to issue voice commands, though you can also use the Alexa app.
What it means for the premium market
Other Amazon devices like the Echo Plus got an update giving users premium sound quality in a speaker that's still focused on smart-home connectivity, but these four audio tech devices will help Amazon deliver higher-quality audio performance and experiences. Being able to provide audiophiles with multi-room streaming music controlled via voice and at a good price should worry Apple and Sonos.
Apple's HomePod was designed as a premium sound speaker first and a voice assistant second, but at a much higher price than either Amazon's Echo or Google Home, while Sonos has similarly bet the ranch on quality components. Google recently introduced the Google HomeMax, which is targeted to the premium market and comes with a premium price.
Amazon.com has brought a number of low-cost devices to those looking for a high-end audio experience and allowed them to define just how far they want to take it with greater versatility and functionality. Although there will still be a market for Apple and Sonos, Amazon has just significantly broadened its own addressable market that attacks the base of its rivals, and they should worry about where it goes next.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.