Apple released its iPhone in 2007, and Google followed with the Google-branded Nexus One, manufactured by Android partner HTC in 2010. The Apple TV, a set-top video streaming device aimed at the living room, was released in 2007. Google announced the competing Google TV platform in 2010, releasing a set-top box in partnership with Logitech (NASDAQ:LOGI). Apple’s iTunes has become the top retailer of music in the U.S., selling music online since 2003. Google’s online music store went live in 2011. The list goes on.
So a report in The Wall Street Journal that outs a Google-branded streaming music system should come as no surprise, given the domination Apple has enjoyed in the home music market in the past decade. But the apparent decision to sell the electronics and not just the streaming capability is the head-scratcher.
As Apple’s iPods supplanted virtually everything else in terms of portable music, a shift began to take place in the home stereo market. Companies began to offer speaker docks that gave the iPods the ability to replace traditional stereo systems. The speaker dock industry exploded, with the Cupertino, Calif., company launching its own Apple-branded version — the $349 iPod Hi-Fi — in 2006. Apple discontinued its system in 2007, recognizing that it made little sense to compete against its own “partners” in the iPod accessory marketplace. While competing mobile devices can be used with most speaker docks, the majority are optimized for iOS devices.
Apple then made streaming music from Apple devices its next front in home entertainment. The first step was AirTunes, a protocol that supported streaming of iTunes content from a computer to any stereo system connected to one of Apple’s Airport Express wireless routers. AirPlay, introduced in 2010, supports wireless streaming of audio (as well as video, photos and associated data) and enables not only computers running iTunes, but all of Apple’s mobile products to be the device that sends the data. Apple licenses AirPlay technology, allowing stereo manufacturers to incorporate the protocol within their equipment. The result is a slew of stereo systems capable of playing music streamed from an iPhone or iPad anywhere in the house.
Google missed the boat with speaker docks. It’s virtually impossible to find one that supports a digital connection to an Android device. But the real future of home audio domination lies in streaming.
Google took a run at this in 2010 with Fling, an attempt to let Android users stream audio and video to a Google TV device and use their smartphone or tablet as a remote. The attempt met with little fanfare and petered out. The lack of uptake on Google TV devices didn’t help, and then as Android developers began to offer apps that allow Android devices to stream content to Apple Airplay-enabled entertainment systems, it looked as though Apple was going to win the war over streaming audio.
Independent manufacturers continue to offer their own wireless audio streaming solutions (Sonos is the market leader in this area), differentiating themselves through integrated hardware and agreements with online music partners for greater content variety, but even they usually include at least iTunes streaming support.
Why would Google build its own wireless speaker system? Perhaps it isn’t yet ready to cede the home audio market to Apple and its partners. The direct revenue from such a device would be minuscule for a company of Google’s size (the WSJ report notes that Sonos sales for 2011 came in at $200 million), so it’s unlikely the company is looking to speaker hardware as a profit center.
The more likely answer is that Google hopes to chip away at Apple’s brand, preventing it from owning the home. Getting its logo into homes, encouraging Android users to buy music from Google’s own online music store and enabling the use of Android devices as multimedia platforms that can go head-to-head with Apple and its partners would help to slow Apple’s continuing encroachment.
Any success likely would boost adoption of Google’s TV platform and, as the WSJ points out, the home isn’t just about entertainment — there’s a market for using smartphones and tablets to control everything from appliances to lighting that’s barely been scratched. The standard that controls the entertainment system has a significant head start in this next frontier, and Google would prefer home automation to be controlled by Android.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.