Apple's HomePod now pits Sonos against 3 tech goliaths worth a combined $2.4 trillion

• Apple will release its HomePod smart speaker on February 9, to compete with the Google Home Max and the Amazon Echo.
• This leaves only one significant small player in the space, Sonos, which has to take on three tech goliaths who are worth $2.4 trillion collectively.
• Sonos was late to adding voice controls to its speakers and people might not want to pay the higher prices for them.
• Sonos can still compete with Apple if it can maintain an open ecosystem and gives customers more freedom than its rivals.

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If you're having a tough day at work, spare a moment to think of Sonos.

Sonos makes the kind of high-quality audio setup favoured by your dad available to audiophiles who don't like massive speakers and a tangle of wires. Its small, aesthetically pleasing speakers broadcast high-quality audio, using WiFi and an app to keep buttons, dials, and wires to a minimum.

Sonos quietly built a loyal audience who loved the fact they could listen to Spotify, podcasts, and digital radio without plugging in their phones, or resorting to tinny Bluetooth speakers. The strategy has been successful - Sonos' new CEO Patrick Spence talked last January about a possible IPO and opening more retail outlets. He also said the firm was profitable - though this was partly only possible due to layoffs in 2016. The firm hasn't given figures on revenue and profit, though at its peak in 2014, it said it was on track for $1 billion (£705 million) in sales.

All of that came under threat last year, when Sonos lost its lead position in the WiFi speaker market to Amazon, whose cheaper Echo devices undercut the smaller company and had the added benefit of Alexa and voice controls. The one thing easier than swiping around an app to play music was to ask Alexa to do it for you.

Sonos was slow to integrate voice controls into its speakers, finally releasing the Sonos One smart speaker with integrated Alexa in late September. But even then there was still hope.

Here's what Strategy Analytics analyst David Watkins said last June, emphasis ours:

"[We] believe that demand for Amazon's own brand devices is having largely an additive effect on the overall wireless speaker market, particularly when you consider that the popular Echo Dot is often paired via Bluetooth to a better quality speaker. Sonos has long been synonymous with connected home audio and as recently as 2014 it accounted for 50% of the small but growing Wi-Fi speaker market. Although Sonos is losing share as new players enter the Wi-Fi speaker space, its dominant position at the high-end of the market remains untouched. "

2018 looks like that could change again. There's already Amazon and Google's Home speakers to contend with. Now tech's third goliath, Apple, wants to challenge Sonos at the high end with its HomePod speaker.

The HomePod is Apple's high-end gambit against the Echo

Apple's HomePod, the $349 / £319 smart speaker arrives in stores on February 9, and is available to pre-order from today. That is extremely expensive compared to the £89.99 Amazon Echo. Google's equivalent, the Google Home Max, is only available in the US, but its lower end Google Home speaker is £129.

Unlike the Echo, HomePod is intended to be a high-end audio device. Apple has always been obsessed with music and, according to one early review from Refinery29, the sound on the HomePod is crisp and clear. Alarmingly for Sonos, it seems to outgun its own smart speaker, the Sonos One.

Sonos still has one major advantage over Apple

Apple's HomePod will only work with Apple services to begin with, meaning you can only listen to Apple Music on your Apple HomePod, and use Apple's voice assistant Siri.

Neither Apple Music nor Siri are leaders in their field. Spotify has more paying subscribers on the music front, while both Google and Amazon have better voice assistant tech. It makes very little sense to lock your customers into an inferior music and voice ecosystem for an eye-watering £319.

Sonos, of course, can partner with the best. It has Apple Music on its platform, it has integrated Alexa, and you can control Sonos from inside the Spotify app. Unlike Apple, it also offers a range of speakers for a range of prices.

For now, Sonos has the advantage and has quickly capitalised by offering two Sonos One speakers for the same price as an Apple HomePod.

But there are still big risks on the horizon. Those same partners are also competitors and they could yank their services from Sonos at any time.

Sonos also isn't sitting on a pile of cash. Google and Amazon can afford to put huge discounts on their speakers, and probably lost money on their speakers over Christmas. If smart speakers turn into an all-out price war, it's the little guy that will lose.

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