Narrative: Wearables are Struggling

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    Narrative: Wearables Are Struggling (Dec 27, 2016)

    Updated: July 8, 2017

    Note: this narrative was the subject of the Weekly Narrative Video for July 3-7, 2017. You can see the video on YouTube here, and it’s also embedded at the bottom of this essay.

    The wearables market was a hot one for several years, with lots of industry observers and players talking up the enormous potential. But for now we seem to have stalled at a point far short of those lofty goals. In reality, we now have several distinct wearables markets:

    • dedicated fitness trackers largely between $80 and $200, a category dominated by Fitbit
    • dedicated fitness trackers at much lower price points, dominated by Chinese vendors
    • smartwatches, a category currently dominated by Apple, with Samsung the only major other player, and Android Wear becoming increasingly irrelevant
    • GPS-centric smartwatches, where players like Garmin and other specialists have carved out something of a niche, albeit much smaller than the broader smartwatch market which Apple dominates.

    At this point, it’s clear that the wearables market is smaller and more specialized than once thought, though it won’t necessarily remain stuck there. Apple has refocused its efforts around the Watch with a health and fitness strategy, but there’s still potential for apps on the Watch to become more meaningful in future.

    The news that Jawbone was entering liquidation, which emerged in July 2017, resurrected lots of discussion about the state of the wearables market and the implications for other players in the market, including Fitbit, Apple, and others. The reality is that there is no single unitary wearables market, and each of the segments identified above has its own dynamics and future prospects.

    There clearly are some issues with a limited total addressable market and a high abandonment rate, which Fitbit is clearly bumping up against. And the market as a whole continues to be very fitness-focused, which means it won’t be nearly as broad a market as some other more mainstream technologies, at least in the short run.

    FDA Selects Nine Companies to Test Fast-Track Approval for Health Technology (Sep 26, 2017)

    The US Food and Drug Administration has pushed forward with plans to test a fast-track process for approving technological approaches to healthcare problems, and has selected nine companies to be part of its pilot program, including Apple, Fitbit, Samsung, and Alphabet’s Verily life sciences unit. Apple has long said that the need to get FDA approval for health-related products would likely dissuade it from entering that market directly, though it’s managed to serve that market indirectly through partners taking advantage of its ResearchKit and other programs. Both Apple and Fitbit have been pursuing health-related applications for their devices, and Samsung launched a virtual doctor service as part of its Galaxy S8 launch earlier this year, so this is clearly a hot area for these consumer tech companies. The FDA deals mostly with products with diagnostic or treatment applications, which is why so much health and wellness tech tends to stop short of those categories and merely provide data and alerts. But the potential for doing more is already clear, and with faster FDA approval we could well see these companies go deeper into this field. It’s still early in this process, and there might still be other downsides including the potential for leaks while approval is being sought, which is likely to give Apple in particular pause, but this is a positive step for both the industry and for end users.

    via Bloomberg

    Fitbit Ionic Smartwatch Goes on Sale October 1st (Sep 25, 2017)

    We finally have a firm date for Fitbit’s Ionic smartwatch to go on sale, which is October 1st – this coming Sunday, an odd day for a product launch, but consistent with the previous guidance that it would be available in the month of October, while giving Fitbit a full first quarter of sales to report in the New Year. The formal reviews of the Ionic were released before the device had an app store, and so were incomplete, but there really haven’t been any more since. Indeed, the SDK for developers goes live tomorrow, just a few days before the launch of the device, meaning that the app store won’t be a feature at launch. It’s going to be available in all of Fitbit’s regional markets, and in the US will be sold through a mishmash of channels, including Amazon, Best Buy, department stores, sports and outdoor retailers, and Verizon (though apparently not other carriers). As I said when the first announcement of the device was made, I don’t expect this to be a big seller in the overall context of the smartwatch market, and it’ll sell mostly to existing Fitbit owners and owners of Android smartphones, contributing a little to Fitbit’s overall sales and boosting its ASP nicely.

    via Fitbit

    ★ Apple Announces Upgraded Watch and TV Devices (Sep 12, 2017)

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    IDC Wearables Report Shows Basic Trackers Striking, Watches Growing (Sep 1, 2017)

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    Samsung Announces Gear Fit 2 Pro and Gear Sport Wearables, IconX Bixby Earbuds (Aug 30, 2017)

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    ★ Fitbit Pre-Announces Fitbit Ionic, Its Second Smartwatch, Due in October (Aug 28, 2017)

    Fitbit has finally announced its second smartwatch, the Fitbit Ionic, following the launch of the Fitbit Blaze in May last year. At the time, Fitbit described the Blaze as a “smart fitness watch” but it seems to want everyone to forget that designation now as it launches the Ionic and wants to frame it as its first entry in this space. To be sure, when it launches, this device will have an app store, something the Blaze didn’t have, but it’s far from certain that there will be anything meaningful in it. One reason Fitbit is pre-announcing the device two months ahead of launch is to get developers going, while the other is surely to get out ahead of Apple’s third set of Watch hardware, which will be announced in a couple of weeks. Based on what we know so far, the Ionic looks very similar on paper to the Apple Watch in several respects: it has GPS, contactless payments, it’s swim proof, stores and plays music, provides personalized fitness coaching, and so on.

    But on paper is about the only place it does look like the Apple Watch – the Ionic is very much in the design tradition of Fitbit’s other devices: angular and industrial looking, with garish colors an optional extra. It hasn’t published the dimensions of the device, but at least a couple of shots in its promotional video make it look enormous, especially for wearing in bed. That’s important, because multi-day battery life and eventual ability to track sleep apnea are among the very few differentiators here against the Apple Watch, and if it’s uncomfortable to wear at night, none of that really matters.

    We’ll have to wait and see all the details in October, but based on what we’re seeing today, my guess is that the Fitbit Ionic will sell maybe a couple of million units, or roughly ten percent of Fitbit’s annual device sales, over the first year, maybe slightly more if the third party app ecosystem is stronger than I’m expecting. At those numbers, it’ll barely make a dent in the overall smartwatch market, which is dominated by Apple, with Samsung in second place and other Android devices in third, though it might provide a boost to Fitbit’s ASP, which is currently around a hundred dollars. I would guess it’ll mostly appeal to existing Fitbit users who admire its aesthetic, and will likely do better among Android users who have relatively few other compelling options than among iPhone owners. Fitbit today also announced wireless sports headphones called Flyer, which will retail for $130 and be available online right away: these are a sign that Fitbit recognizes its lack of an ecosystem is going to be an increasingly big challenge going forward given its lack of integration with either Android or iOS, and it therefore needs to build its own.

    via Fitbit

    Gartner Projects Strong Growth in Wearables, Led by Smartwatches (Aug 24, 2017)

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    Facebook’s Oculus Patents AR Glasses Despite Far-Off Timeframe for Launch (Aug 18, 2017)

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    ★ Apple is Talking to Aetna About Apple Watches for Insurance Customers (Aug 14, 2017)

    CNBC reports that Apple has recently held discussions with insurance company Aetna about providing Apple Watches on a subsidized basis to at least some of its 23 million customers. Aetna already has a program to provide Apple Watches to its employees, and both Apple and Fitbit have been talking to a variety of healthcare companies about partnerships to get wider distribution of their devices. This is the first real sign that Apple might do a deal which would be much larger in scale than anything that’s been contemplated so far. For context, Apple has likely sold just over 30 million Watches in total so far, so getting Watches to even half of Aetna’s members would be a massive boost to the business. Such a deal would likely see Apple supplying Watches at less than the usual retail price, both as a bulk discount and because the cost of acquisition would be much lower than a typical retail purchase, while Aetna would subsidize the remaining cost for its members on the basis that fitness trackers tend to improve health and fitness and therefore lower the odds of a medial issue that requires insurance coverage. The rationale there would be much the same as for insurers providing discounted gym memberships. Partnerships like this with medical providers probably have more potential than anything else to boost the addressable market for fitness-centric wearables, including the Apple Watch, because they substantially lower the cost of entry for consumers while providing strong incentives to make use of the devices. There’s obviously no guarantee any of this gets done, but it’s the kind of thing I’m sure we’ll see at least on a small scale in the near future, whether with Aetna and Apple or other pairings.

    via CNBC