Market Insight

Amazon Announcements Suggest Plan to Make Smart Home Simpler

September 29, 2017

Blake Kozak Blake Kozak Principal Analyst
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Background:

On September 27, 2017 Amazon announced several new Alexa-related products and integrations.

  • The redesigned and 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, combination Dot and Echo Show 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;

 

IHS Markit Analysis

Reducing apps and skills

For smart home enthusiasts, perhaps the biggest news from this announcement is the Echo Plus doubling as a smart home hub. By using a single-voice command, the Echo Plus will discover ZigBee and Wi-Fi devices in the home, with no need for additional apps or skills.

This is a significant development because despite the promises of voice-controlled devices in the home, such as light bulbs and thermostats, the native app was still required for setup and in some cases, the user would need to know the brand of that device (or the Skill) in order to control it with voice commands. For example, to adjust the temperature of an Ecobee thermostat using an Alexa-enabled device, the consumer would have to say something along the lines of, “Alexa, ask Ecobee to change the temperature to 70 degrees”. With the Echo Plus, the idea would be that the consumer could just say, “Alexa, change the temperature to 70 degrees”.

Although this sounds like a very modest update, consider when a consumer has 20+ devices in the home, half of which require the user to remember the brand or Skill name. Moreover, it can be confusing for a consumer to know when the brand or special phrase is needed to interact with a device. The reason is because, with Amazon products, an invocation name is required with all custom skills (Alexa Skills Kit [ASK]). Along with the invocation name, a supported phrase must also be used. For example, with the phrase “Alexa, ask Garageio if any of my doors are open”, ‘Garageio’ is the invocation name. Philips Hue doesn’t require an invocation word because Philips used the Smart Home Skill API, not ASK. By removing the need for apps and Skills, controlling smart home devices with voice commands becomes much simpler.

Easy for newcomers, disappointing for enthusiasts

Although removing the need for apps and skills is significant, it is tailored toward less tech-savvy users and those who are just looking to dip-their-toe – rather than leap – into smart home. For example, although the Echo Plus automatically discovers ZigBee devices, such as Philips Hue bulbs, Philips announced that the full feature set is not available with this method.

What this means is that users can control Philips Hue bulbs with the auto discovery of the Echo Plus, but automating lights, creating scenes and over the air updates are all limited with the Echo Plus. In order to have the full features of Philips Hue lighting, the Philips Hue Bridge is required.

This note from Philips does not come as a surprise. One of the primary challenges consumer-grade smart home has faced since day one has been interoperability and although the Echo Plus is a step in the right direction when being brand-agnostic, full features of devices still requires multiple hubs connected in the basement or closet.

The Competition

The ability to control smart home devices through auto-discovery on the Echo Plus will create more competition for hubs already on the market, such as SmartThings and Wink. However, despite the auto-discovery feature of the Echo Plus using voice commands, a mobile app with a solid user-interface will be required to set advanced scenes and automations.

While routines can now be created with Alexa-devices (a new and much needed feature), adding devices and setting triggers to these routines will not likely be a smooth process with voice-only. Instead, a combination of voice and a display will be necessary for a better user experience – especially for users that are not sure what routines (scenes) they can create.

Additionally, price will be a consideration. For example, the SmartThings Home Monitoring Kit comes with four devices (2 door/window contacts, 1 motion sensor and a smart plug) and a hub for $150. Each device on its own costs about $40. The Echo Plus costs $150 on its own and comes with one light bulb. So to get the additional 4 devices that come with SmartThings, brings the total cost of the Echo Plus hub to about $310. Overall, the additional hardware and integration announcements by Amazon further cement the company as the clear leader for voice in the home today.

In the short-term, although Sonos is expected to release a digital assistant agnostic speaker (one that uses Apple Siri, Google Assistant and Amazon Alexa) and Google is expected to come out with a less expensive alternative to Google Home and announce additional partnerships, this likely won’t be enough to supplant Amazon over the next 12 months – which can currently control about 24 million smart home devices (roughly 9 million more devices than the nearest competitor).

In terms of the smart home hub battle, there will be about 4.8 million do-it-yourself (DIY) hubs shipped globally in 2017. Amazon should be able to gain market share quickly, but the likes of SmartThings and Wink will be difficult to overtake in the short-term.  

 

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