Is Amazon's Surprise Smart Speaker 'Echo' a Solution in Search of a Problem?

'Odd' Product or New Category of Device?

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Amazon's new Echo speaker
Amazon's new Echo speaker

Amazon on Thursday unexpectedly introduced a voice-controlled interactive speaker called Echo, letting people stream music and order items from the online retailer, as the company works to extend its reach into consumers' digital lives.

Echo is priced at $199, although members of Amazon's Prime fast-shipping program can purchase the gadget for $99 for a limited period. Consumers need to request an invitation to get the product.

CEO Jeff Bezos has been spending on new devices to tie people more closely to Amazon, and Echo expands the company's new hardware offerings this year, which include a smartphone and set-top box. Last week, the Seattle-based internet retailer introduced a media-streaming device, the Fire TV Stick, which plugs into a TV set to let users browse video and music from Netflix, Pandora Media and other content services.

Amazon says Echo works when a consumer speaks the word "Alexa" to wake the device up. The gadget is connected to the internet and runs on Amazon Web Services, the company's cloud-computing service. Over time, Echo can adjust to consumers' speech patterns and personal preferences, Amazon said.

Shopping too, of course
With Echo, Amazon can plant a voice-activated device in homes that lets users easily order things from the web retailer by adding it to their shopping lists via voice command and later confirming the purchase through a companion app. Yet it's unclear if consumers will see enough benefits and convenience to embrace another piece of hardware.

"It seems like an odd and not-very-useful product," said Sucharita Mulpuru, an analyst at Forrester Research in Cambridge, Massachusetts. "The consumer doesn't need yet another device in their home that replicates what they already have on their phone."

Amazon introduced Echo with little fanfare, simply putting up a web page about the device. In April, Amazon similarly introduced Dash, a barcode scanner and image-recognition device. Dash also has speech-recognition capabilities, with people able to push a microphone button on the device, say "chocolate chips" or some other item, and have the products deposited into their online Amazon shopping cart.

Many of the new devices are the result of work from Amazon's Lab126 facility in Silicon Valley. Amazon has made at least two acquisitions of speech-technology companies in recent years.

Echo is different from smartphones and tablets that can perform similar functions, said Kinley Pearsall, an Amazon spokeswoman.

"It's a new category of device," she said. "It will get smarter over time, including adding new services."

Sonos, Jawbone
Echo faces competition from other providers of connected speakers including Sonos and Jawbone. Jawbone offers a line of connected streaming home speakers called Jambox, in a range of colors and sizes costing $130 to $300. Sonos makes speakers starting at $199 that let people stream music from computers, mobile devices and online services such as Pandora and Spotify.

Some of Amazon's hardware offerings have flopped in the past. Last month, Amazon reported a $170 million inventory charge for the third quarter related to excess supplies of its Fire smartphone.

Michael Pachter, an analyst at Wedbush Securities in Los Angeles, said he doesn't understand why people might be tempted to purchase Echo.

"I think it's just a two-way speaker, but why isn't there just an app that lets me do the same thing without having to spend $99 on hardware?" he said. "I think this is a solution that is seeking a problem."

~ Bloomberg News ~

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