Get ready for inflation gadgets

A number of companies are looking to woo consumers with low-end devices priced for challenging times.

Roku devices.

Lower-priced gadgets may be here to stay.

Image: Roku

When the going gets tough, the low end gets to shine: This fall, a growing number of hardware makers are introducing new gadgets designed and priced to attract cash-strapped consumers who care more about keeping their household expenses in check than about the latest and greatest chips and specs.

On Monday, Roku announced its 2022 fall product lineup: a revamped version of its entry-level streaming adapter, selling for just $30, and a new, smaller subwoofer priced $50 below its existing model.

On Tuesday, Sonos followed up with its own Sub Mini, which is $320 cheaper than the company’s existing subwoofer model. And next month, Google is widely expected to introduce the Chromecast HD, a new streaming adapter that won’t support 4K playback, which may allow the company to shave as much as $20 off the device’s price tag.

Betting on entry-level hardware makes sense at this point in time, according to Paul Erickson, an analyst with Erickson Strategy & Insights. “It’s an effective way to hedge against deepening economic uncertainty, particularly as consumers’ entertainment-related device purchasing will be increasingly judged on value over this uncertain near term,” he said.

Roku executives weren’t shy about the reason the company decided to single out entry-level gadgets for this year’s fall update. “With the current economy, it's even more important to spend wisely,” said the company’s senior communications director Sarah Novatt during a press briefing earlier this month. The goal of Roku’s recent upgrades was to help consumers “stretch their entertainment dollars” and get into streaming “without breaking the bank,” she said.

The company did upgrade some of the innards of the Roku Express streaming adapter, adding better Wifi as well as more storage for downloaded apps and an updated chipset. However, the bigger news may be that Roku continues to sell the device for $30, and the company also isn’t raising the prices of any of its other products. It’s a step that Roku VP of viewer product Preston Smalley called “especially important in these times [to make] sure that we make the most of our money and continue to drive value.”

Roku has been keeping its hardware prices in check despite higher component costs by effectively selling devices below cost. The company lost $22 million on the sale of its streaming adapters in Q2 of 2022 alone, and it aims to make up for this by monetizing viewers via its advertising business.

It’s a strategy Roku shares with Google and Amazon, according to Erickson. “Products sold by platform/ecosystem owners are going to be priced aggressively to drive adoption — their revenue long game is not in the near-term sale per se,” he said.

Google has yet to reveal its fall hardware lineup — the company has an event scheduled for Oct. 6 — but leaks suggest it will include an HD-only version of its Chromecast streaming adapter, which Protocol was first to report on in January. In Europe, the device will reportedly cost 40% below the current price of its Chromecast 4K sibling. If Google uses the same pricing in the U.S., it may sell its new Chromecast HD for as little as $30.

Keeping prices that low, and then making up for it with other revenue streams, is not a strategy that works for everyone. That’s why a number of companies raised the prices of their devices in recent months. Meta, which is investing heavily into the metaverse, bumped the price of its Quest 2 headset from $300 to $400 in August. In a similarly surprising move last month, Sony raised the price of its supply-constrained PlayStation 5 in most major markets, excluding the U.S., by about 10%. Health devices maker Withings announced recently it was raising the prices of a number of devices next month, while Sonos raised prices for many of its products a year ago.

Sonos has since introduced several lower-priced products, including both its new Sub Mini and its entry-level Ray soundbar. However, the Ray also showed that this strategy of focusing on lower-end devices only goes so far. Sales of the device were “significantly missing our expectations,” admitted Sonos CEO Patrick Spence during the company’s most recent earnings call.

One reason for those disappointing numbers: Soundbars often get sold in bundles with new TVs, and consumers have been holding off on buying new TV sets because those, too, have gotten more expensive. “Unfortunately, Ray launched at a time where TV sales were down,” Sonos vice president of product program leadership Jeff Derderian told Protocol. “I have no doubt that that will all come back.”

Regardless of how individual products like the Ray perform, lower-priced gadgets may be here to stay. “Companies will increasingly focus their roadmaps and product strategies towards the value and mainstream segments,” said Erickson. “While there will continue to be hero models at the higher end, we will see higher competitive velocity in the ‘mid range’ of a variety of [consumer electronics] categories in 2023 than we’ve probably seen in the last five to 10 years.”


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