Over the past several years, the young and particularly value-focused company Soundfreaq has become one of the best speaker designers in the Apple accessory industry: it has earned high ratings for numerous products, notably including its portable Sound Kick, which earned our 2012 CES Overall Best of Show Award — and the versatile earlier unit Sound Step Recharge. This year, Soundfreaq won another Best of Show Award for its new Sound Platform 2 speaker, which again ups the ante in performance and features for the price.
iLounge wanted to learn how Soundfreaq keeps generating hit products, and reached out to the company for the special interview below. Because company co-founder Matthew Paprocki shared many great insights with us, we decided to run as much as was practical, splitting the Q+A into two parts. In part one of our Q+A, Paprocki answered questions about the company’s design and pricing philosophies. This second part focuses on Soundfreaq’s perspectives on Apple and the accessory business as a whole.
iLounge: Apple has tried on a number of occasions to push accessory makers to create more expensive speakers — the Bose SoundDock, iPod Hi-Fi, and Zeppelin were all examples of Apple trying to shift attention upward from the $150-$200 market. Can you offer any insight into why it was doing that?
Matthew Paprocki, Soundfreaq: As much as we’d like to have a clearer idea of Apple’s intentions, Apple is traditionally a pretty insular company and collaborating and communicating with accessory makers doesn’t seem to be a priority. When it has happened, it seems like it’s been to steer the industry to showcase Apple’s own products in a particular light.
One of the obstacles to the acceptance of digital music was the perception that it was inherently lower quality than CD technology. The inherent issue wasn’t the technology, but the file size, so compression and loss of quality became associated with digital music and digital music players. My conjecture is that iPod Hi-Fi was created to demonstrate that iPod could be part of a high quality audio experience.
Early in the Made for iPod program, Apple’s fees for the program were based on a percentage of product cost.
Apple may have been motivated to support higher average selling prices to increase revenue from the MFI program. Later this was changed to a flat fee, but this may have been a motivation early on.
Another possibility is the limited space and high dollar-to-square foot demands of Apple retail stores. As more Apple products are created, there is even less space for non-Apple products. Their speaker assortment used to have products on display with demos throughout the store, but it has shrunk considerably. Presumably the dollar-to-square foot metric is driving the push for higher margins, which keeps Apple’s focus on accessories with inflated prices that support higher margins.
Another possibility is that Apple wants their iOS devices to be associated with “premium” brands; an iPod sitting on what’s perceived to be a better speaker dock has a halo effect on iPod. Since iPod eventually dominated the MP3 space, having higher-priced accessories further underscored Apple’s leadership position. The economics of making docks for non-Apple products proved to be financially unfeasible, especially for premium speakers and accessories. Michael Kors cases and B&O speakers feed the zeitgeist of the cult of Apple as an exclusive, luxury product. Apple products themselves are often at a premium price, so higher priced accessories correlate well. Even at their premium, Apple products typically offer more than their competition. So a higher price, to some degree, is justified.
I’m not fundamentally against higher-priced products. I’m opposed to products that are of lower value than what could be offered. While I can understand and respect the business point of view that dictates that your products are worth what people will pay for them, it’s not my personal style.
iLounge: We hear stories all the time about how Apple’s retail division is pushing developers to charge more for their accessories, to generate higher profits. Why and how have you resisted that pressure?
Soundfreaq: It has been suggested to us by Apple retail that we could charge more for some of our products and it was suggested that some features we offer weren’t needed because “consumers didn’t care about them.” Every retailer has, and is entitled to their own opinion; it’s their store after all.
Our products aren’t for everyone and we know that we may not be a fit for all retailers. We appreciate the opportunity to continue a dialogue with them, but at this point in the conversation, there hasn’t been a fit for our products in Apple retail. We don’t, however, feel pressured by Apple, because we’ve never designed our business to be dependent on Apple retail business or the Apple “stamp of approval.” Our products are designed to enhance your experience with Apple’s products.
While many Apple experiences are great, Apple retail is unfortunately a subpar place to buy speakers. You usually can’t demo and listen to the speakers before you buy them and oftentimes, they aren’t even on display to look at outside of the packaging. Apple retail also has a more stringent return policy and the shortest window to return of any major retailer.
The retailer is an important and powerful part of the value chain to deliver products to customers. With the U.S.
