We need to stop waiting for the next Echo or Nest, and start looking for the smart home’s Netflix.
2019 was a big year for Alexa. Amazon released a half dozen major Echo speakers and displays, filling out its roster of voice-driven products considerably. Amazon’s voice assistant also continued to mature, adding creative new abilities like Alexa Guard and a Food Network Kitchen app. And yet, the question many of us covering the tech industry increasingly feel bouncing around in the back of our minds is, “What’s the next real innovation?”
Despite all the new products from Amazon and the reworked smart home platform from Google, 2019 ultimately felt like an iterative year. Everything was improved, but no major new concepts were introduced. We’ve had voice assistants since 2011, smart speakers since 2014, smart displays since 2015 and smart home integration since long before all of those. So what’s the next big invention? Augmented or virtual reality? A voice-driven application environment?
Instead of looking toward technological advances — in the tradition of the iPod or the Echo — to understand the smart home’s potential future, it’s time for smart home developers to look at advances in distribution, which is already core to Amazon’s DNA.
In short, the smart home market doesn’t need a new Echo. It needs a Netflix.
The rise of subscriptions
In 2007, Netflix leveraged the ever-growing power of the internet to launch a streaming service that offered popular movies and TV shows on demand, via its online platform. Thirteen years later, amid theater shutdowns due to the coronavirus, streaming services like Netflix and its progeny — Hulu, Amazon Prime Video, Disney Plus and HBOMax among others — have replaced or are in the process of replacing essentially every major form of film and TV distribution.
In other words, even as TV and film have evolved over the past few decades, the most important innovation has been their paths of distribution. In fact, online distribution is precisely what has facilitated further innovation in artistic form and evolution in viewer practice.
The subscription model has been uniquely disruptive in the entertainment industry, but it’s also proved lucrative in plenty of other retail spaces of late — fueling dozens, if not hundreds, of popular clothing, food and toy brands. These companies allow customers to try new products for reasonable prices, cutting out much of the time typically associated with research, shopping and ultimately making difficult decisions. In fact, in the niche smart home market — where buying a simple light bulb can lead down rabbit hole articles on color temperature and wattage, ecosystem compatibility and voice control — a subscription box model seems to make a lot of sense.
What’s more, where subscription services often require customers to seek them out online, many people are logging onto Amazon Prime daily, whether to stream shows or order household essentials. Amazon is uniquely positioned to reach these individuals, who are curious enough to sign up for something that piques their interest.
So why haven’t they done it?
Subscribing to a smarter future
The key to subscription services is the monthly price tag. Few people worry about five bucks getting auto-charged from their checking account each month; a lot more worry about 50. It’s why Netflix and other streamers are so cautious about raising the price of their services, even by a dollar or two — and it’s why streaming services are more popular than subscription box services with much more expensive monthly fees.
Smart home tech has never been cheap. The original Amazon Echo was $180, and the original Nest Learning Thermostat was $250. I’ve worked alongside colleagues to install light bulbs and smart shades across the CNET Smart Home, and I can tell you as well as anyone how quickly those costs add up.
And yet the tide is turning: smart bulbs are going for less than $10 these days; you can find smart speakers for $20 during holiday seasons (and often for free with other purchases); and most recently, smart cams are down in the $20 range, too. My colleague Megan Wollerton recently wrote that the era of the $200 smart cam is over, but really, the same could be said for nearly the entire smart home.
The other problem is integration: Most subscription box services don’t include products from all different brands, and smart home products are notoriously difficult to integrate well.
So how would a subscription service look?
A $15-a-month fee, which is a dollar cheaper than Netflix’s premium plan, could easily help people start to fill their houses with smart home gear. Make it an Amazon Prime add-on that comes with a free Echo Dot or smart light bulb and customers battling the monotony of quarantine would likely give it a try. Within a year, with $180 down and brief installations once a month, average people could have a drastically different home experience.
The experience could even be personalized. In the same way meal delivery services let you choose from a limited menu each week or month, smart home subscribers could select more, say, security-oriented devices for the first few months, before switching to lighting or cooking devices.
Such an approach would echo Amazon’s aggressive sales of the Dot speaker — which often comes free during Prime Day and Black Friday sales. One crucial motivator for Amazon to get Echo Dots into homes has been to claim countertop real estate before people knew they wanted a smart speaker. The result is that Amazon maintains an incredible head start on competitors like Google and Apple — even as they release smart speakers that might be better than Amazon’s.
Likewise, if Amazon can get smart home devices into homes now, it could claim homes for its branded ecosystem before competitors get the chance, to a deeper extent than it already has with the Echo.
Should Amazon do it?
This is the big question: Should device subscriptions be the next big smart home innovation? From a business perspective, the answer is yes.
2020 has seen massive surges in online purchasing, particularly through Amazon, and the tech giant is already using its Prime service to distribute Amazon-branded smart home devices more widely. An Amazon spokesperson told me, “We frequently bundle Echo devices with smart home products on detail pages for customers. For example, on Echo Dot’s detail page you can make it a smart plug or smart light bundle for an additional $5.”
You can also bundle an Echo Show with a Food Network app subscription or a smart plug. And Amazon has shown a willingness to practically give away smart speakers to encourage people to subscribe to an Amazon service for even a single month.
The one risk is that the smart home might be coming late to the game — as subscription fatigue sets in on customers. But norms and expectations change over time. Ten years ago, we thought a couple of hours of screen time was a lot. Today, most of us spend hours staring at our laptops, phones and TVs without thinking twice about it (for better or worse). Likewise, Netflix felt like a uniquely good deal eight years ago. Today, there are more TV streamers than ever — which signals the degree to which customers keep responding to the model, even as prices rise.
Whether or not such an innovation would be good for people or the smart home industry is a different question. As Netflix ushered in what many hailed a new Golden Age of television, it has also changed TV viewing norms and reshaped the film industry in its image — an image that has left many filmmakers ambivalent about the future of the medium.
A subscription-based smart home market could be great for the industry — leading to more competitive pricing and more customer interest in what can seem like an inaccessible set of products. In a retail category full of hard-to-understand devices, a service like this could slowly introduce new products based on customer interests, all of which are guaranteed to work with their Amazon Echo speaker.
On the other hand, filling people’s houses with connected devices they don’t thoroughly understand could degrade security and privacy.
The question of the next big innovation has been lurking in the shadows of conversations at CES and Zoom calls with industry insiders for years now. Thanks to the mystique of characters like Steve Jobs, those conversations almost always orbit the next “smart technology.” But maybe, in an industry that few people really understand, we’d be better served by something simpler and a little less shiny: smart distribution.