LONDON (September 28, 2017) – Amazon recently announced a number of Alexa-related developments and products, only a few short weeks after the IFA 2017 tradeshow and a week prior to Google’s October 4 product announcement event, according to technology analysts from business information provider IHS Markit (Nasdaq: INFO).

Most notably, according to IHS Markit, a variety of new Echo products were announced with the following developments standing out:

• The redesigned and newly-less-expensive $99 Echo has improved audio fidelity, improved second-generation far field voice recognition, a more compact fabric-covered form factor, and interchangeable cosmetic shells. Amazon is offering buyers a $50 discount if they purchase three at once;
• Echo Plus is a $149 combination of the original Echo form factor with a Zigbee smart home hub, with a bundled Philips Hue light bulb;
• Echo Spot is a $129 apparent melding of the Echo Dot and the Echo Show into a table-top device akin to an alarm clock, with a circular 2.5” video screen combined with small form factor. It is capable of video calls and displaying video clips;
• Echo Connect is a $35 accessory allowing Echo owners to connect their device to a landline to enable speakerphone calling functionality;
• And, Echo Dot is part of new Fire TV bundles: $79 with the new Fire TV, and $59 with Fire TV Stick.

IHS Markit Analysis

The introduction of new form factors and a new, less-expensive and more style-conscious Echo reflects an Amazon that is being increasingly aggressive due to escalating competition, according said Paul Erickson, senior research analyst for service provider technology at IHS Markit. Amazon, he said, possesses a savvy understanding of its window of opportunity to firmly anchor the Alexa ecosystem. With mounting pressure from above, including new Google Assistant product announcements at IFA 2017 from Sony, Panasonic, Harman, and others, the baseline Echo product was facing increasing challenges from parties with greater consumer cachet in terms of brand, audio quality, and/or design.

Also, the current success of the Echo Dot — thanks to its affordability — could face challenges, Erickson said. Google is expected to soon announce new price-competitive products in terms of Google Home Mini and a diverse lineup of third party Google Assistant-related products in the pipeline for Q4 2017 and at the CES 2018 trade show.

“In the face of the larger overall device ecosystem advantages possessed by Google, particularly with its command of the world’s largest smartphone installed base, Amazon seems to be keenly aware that aggression is critical now while Google Assistant momentum in functionality and usage is still in the building phase, Erickson said. “Apple also remains in the background, with potential, related momentum from Siri, HomePod and HomeKit on tap to build in 2018 onward.”

As such, Erickson said, Amazon’s aggression in pushing the product development cycle, innovating with new form factors, and emphasizing pricing and bundling are collectively a well-timed display of competitive agility during this key window of opportunity.

With Amazon’s new announcements and the impending arrival of Google’s parallel low-cost competitor to Echo Dot, overall competitive pressure within the smart speaker market now falls most heavily upon Apple, IHS Markit analysts said. The past six months have seen numerous moves by Google and Amazon to add or match each other’s capabilities, or address competitive shortcomings in areas such as direct calling and telephony; casting/media playback control to compatible video devices; multi-room audio; shopping and e-commerce, and more. Competition has firmly driven both parties into an aggressive, intertwined cycle of innovation and maturation, and as time progresses, it will be increasingly difficult for Apple to match pace after starting from behind.

With the majority of market velocity and consumer mindshare focused under $150 and now arguably clustered under $100 going forward, Apple’s $349 HomePod will arrive into a fiercely-competitive market with a variety of options across the spectrum from affordability to audiophile, with mature core capabilities within their respective virtual assistants, IHS Markit said.

“Amazon’s moves escalate an already increasingly-competitive battle within the smart speaker and virtual assistant market, driving both innovation and price aggression to the long-run benefit of the consumer,” Erickson said. “They also underscore the positioning of the smart speaker as a primary interaction point within the smart home concept.

“Amazon’s diverse new lineup and capabilities paint a difficult picture for Apple,” he said. “Despite larger ecosystem advantages, it faces an increasingly long road to catch up with Amazon and Google in the smart speaker and virtual assistant race, particularly if HomePod and HomeKit do not make significant progress over the next year.”

IHS Markit offers additional insights in its Mobile, Consumer & Connective Devices research area.

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