HomePod failure shows Apple should quit making pricey niche products

After throwing in the towel on the original HomePod after just three years, Apple should stop releasing pricey, niche products.

They don’t sell well — at least not well enough to keep Apple interested, apparently — and it’s not fair to consumers who shell out big bucks, then get stuck with a product that vanishes after just one generation.

Yes, Apple says it will continue to support the full-size HomePod with software updates, even as it refocuses on the $99 HomePod mini. But the old-school HomePod is a dead-end product.

You can read the HomePod debacle as an admission of failure regarding Apple’s framing of the device as a smart speaker rather than high-end audio gear. But it’s more than that. It’s an illustration of Apple’s faltering strategy of creating premium products for niche corners of the market.

Apple and its love of premium products

Apple has always had a funny relationship with premium products. In the 1990s, the company’s nadir in terms of overall success, Apple employed a “high right” strategy for its computers. That means occupying the high end of the market in terms of both performance and price.

For fans of the Macintosh, it was actually not a bad time to be into Macs. They weren’t cheap, but they were orders of magnitude better than the PCs of the time.

But when Steve Jobs returned to Apple, he pulled off an amazing trick. He oversaw the release of aesthetically beautiful products that, nonetheless, were affordable to a mass market. The iMac G3, the most stunning Apple computer available in 1998, cost just $1,299 at the time. By comparison, the Twentieth Anniversary Mac, from a year earlier, started at $7,499.

Jobs managed to parlay the reasonably priced iMac G3 into a series of hit products during his tenure as CEO.

No, Apple was never the cheapest computer company. (Those “Apple tax” accusations never went away.) But Cupertino did make devices that, by and large, were not all that expensive.

Another example: The original iPhone started at $499 in 2007. Even adjusted for inflation, that’s $632. That’s more than $60 cheaper than the iPhone 12 mini, the most affordable of Apple’s current flagship lineup. And within months, Apple had slashed the iPhone’s price to just $399 in an effort to make it affordable to the masses. (Apple did the same thing with the HomePod, dropping its $349 retail price to $299, but with far less success.)

The return of ‘high right’

Under current CEO Tim Cook’s leadership, the “high right” strategy seems to be creeping back in at Apple. Cook has overseen the launch of several unsuccessful products firmly aimed at the high end of the market. Unlike the aimed-at-professionals Mac Pro, these are targeted at regular consumers and their disposable cash.

First up was the Apple Watch Edition, the 18-karat, gold-plated wearable that started at an eye-watering $10,000. It was supposed to solidify the Apple Watch as a fashion product, but reportedly sold only in the low tens of thousands.

Apple quickly cut its losses, ditched the concept and pivoting to promote the wearable as an activity- and health-related product.

The HomePod wasn’t as crazily expensive as the Apple Watch Edition. But it was still a lot pricier than other smart speakers. At a starting price of $349, it cost a shedload more than sub-$50 devices like Amazon’s Echo dot, which hoovered up the majority of smart speaker sales.

The HomePod suffered from many of the same problems as 2006’s iPod Hi-Fi. (Apple’s love of expensive, niche products isn’t limited to the Cook era.)

Apple never released HomePod sales figures, but they’re likely not great. In the speaker’s first year, Apple sold an estimated 1 million to 3 million units. Even after cutting the price to $299, I’d be surprised if it shifted a lot more in the years since. Above Avalon analyst Neil Cybart thinks there are just 3.5 million to 4 million homes with a HomePod.

The Apple Watch Edition failed to find an audience, too.
Photo: Apple

Should AirPods Max be concerned?

What else that Apple currently manufactures falls into this same category of being far more expensive than its competition?

If I was toiling away on the AirPods Max, I’d probably be nervous. Apple’s pricey over-the-ear headphones, which debuted at the end of last year, sell for $550.

Again, Apple hasn’t broken out sales figures, but suppliers working on the AirPods Max reportedly view it as a niche product. We’ll have to wait and see if Apple releases a follow-up. If we do see a second-generation version of AirPods Max, that’ll make it a rarity among these high-end products.

Why does Apple keep making these expensive products that don’t sell? There could be a few reasons. Canny execs might be stress-testing the top of the market to see how far the Apple halo effect will extend. Cupertino already demonstrated, with its iPhone Pro models, that people will spend a lot more on smartphones than anyone ever expected. (Remember the “Apple is doomed” narratives surrounding the first $1,000 iPhone?)

Selling a high-end product also serves as a neat marketing ploy that cements Apple’s place among luxury brands. That makes its less-expensive products seem more affordable while still very desirable.

Perhaps the biggest reason, though, is this: Apple just can’t help itself. Apple isn’t a company that cuts corners. While people might scoff at the above devices, all of them proved exceptional in some regards.

Apple doesn’t skimp on materials, and you’d be hard-pressed to argue any of the above products were actively bad. In fact, most of them were pretty darn good.

In many cases, they were actually not overpriced based on what Apple offered, either. For example, the HomePod was, in reality, less of a smart speaker for answering questions than a premium speaker for playing music. It boasted beam-forming technology found in speakers many, many times its price.

Will AirPods Max be next on the chopping block?
Photo: Apple/Cult of Mac

Cheap products aren’t in Apple’s DNA

Creating cheap devices to cash in on the Apple name just isn’t in Cupertino’s DNA. As fans, we should probably be grateful for that. But as Apple continues to focus on growing markets like India and China, where average salaries are lower, the challenge of selling niche products with high price tags gets even tougher.

Apple lovers lose out, too. It usually takes a few generations for a product’s utility to really play out. And introducing expensive new products as experiments that will never be repeated breeds the same trepidation that accompanies using a new Google service. By this point, so many have been introduced and discarded that buying into a long-term vision is kind of a fool’s errand. Why would you shell out big bucks for a new product that Apple might forget about before long?

I don’t want to see Apple stop making high-end devices. Nor do I begrudge paying a premium for said products. But it seems like Apple faces a decision it faced before.

Back in the early 1980s, Steve Jobs and Jef Raskin, the originator of the Macintosh project, had a famous disagreement over the best way to build a computer. Should you start with the goal of building the best product possible, and let that dictate the price? Or do you start with an affordable price, then build the best product possible?

Both approaches are valid — but the second one brings in more customers. It’s time that Apple, as painful as it might be, embraces the latter.