I
am not sure they’re doomed, but I’d argue that for part of their
business the outlook is not good. In discussing the products, you’ve
touched on effect rather than cause. The cause is something earlier and
much more fundamental, that is now reaching a peak in one of Bose’s key
markets.
The wave that’s overtaking Bose in the
home and mobile audio space was generated many years ago, and is
something Apple is riding, rather than creating: the rise of personal
computing, and in particular distributed computing. Among a host of
other effects, that caused a market shift that turned consumer interest
away from audio quality, towards content availability.
If
you rewind to circa 2005, computers were still just one of many
electronic devices in middle class homes. They were generally
subordinate in the average consumer’s eyes to many other things, like
TV’s, and even the home stereo. Step back to the present, and audio
devices are now mostly computer accessories, with the smartphone and
cloud services being the dominant computer systems.
Over
that time, better, more networked computers have completely
revolutionized how easily people access content, and the market has
shifted alongside that liberation. Here is a rough outline of the
progression:
- Music becomes available for download on the internet. Now you have fresher, cheaper content on your computer than anywhere else.
- MP3 players become available. Now you have that content on the go.
- MP3 players get integrated into phones. Now you can eliminate one device.
- Phones get connected to the internet. Subsequently, they get high bandwidth connections.
- Online content vendors, and then streaming services, pop up, making music and video even more available.
- Local networking (mainly Bluetooth) extends the wide availability afforded by the internet to nearby available clients.
- Lots, and lots of cheap, commoditized Bluetooth clients are made, and people use them liberally.
It's
interesting that Bose still provides the same value proposition they
always have, and still hold roughly the same relative position in the
product range. In the home, they appeal to the consumer who is space
conscious, values simplicity, and also values audio quality, but not so
much as the “audiophile”. Their problem now is their core consumers care
less about that proposition, so it's harder to sell to them. In the
home, people watch and listen to less content on their home theatres,
because they can do it anywhere. On the go, they get free headphones
with their phones, and can buy Bluetooth speakers for $20 that are good
enough for the vast majority of people. So at the upper end of their
market consumer interest is reduced, hurting sales, and at the lower end
the market is commoditized, eroding margins.
There
were some other products mentioned, like the Amazon Echo and Sonos, and
those are also part of the equation in home. Again, these are products
backed by more powerful computing, and provide enhanced availability,
like asking Alexa for a song, or Sonos speakers distributed through the
home. Indeed, even Sonos has recognized the need to better surf the peak
of the computing wave, and are further increasing availability on their
systems through voice recognition and cloud service integration.
Ultimately,
Bose is not a computing company, so in today’s market that makes them
mostly a peripheral company. That is a very tough position to defend,
especially when big computing companies enter your space. They don’t
have the option of innovating much, since they don’t control any of the
standards and interfaces that deliver content. They can’t, for example,
develop an optimized music streaming protocol (Bluetooth isn’t great for
music), because no phones or media players will support it.
It
should be noted, though, that Bose has a fairly diverse product line.
They are a major car audio supplier, and have products outside the audio
space as well, along with some military contracts. Since they are
private, there is limited information about how their revenue is
distributed, so a lot of my claims here are speculative. As far as we
can tell, they had increasing revenue in 2015,
so as a company, they might be more like Motorola, who has survived
many market shifts by changing their focus to their most profitable,
defensible areas when needed.
No comments:
Post a Comment