Editor’s note: With the announcement of HomePod, Apple’s strategy for the digital home comes to life, says Technology Business Research Analyst Jack Narcotta.

HAMPTON, N.H. – Apple’s unveiling of its Siri-powered HomePod wireless audio speaker on June 5, 2017, at the company’s annual Worldwide Developers Conference is a necessary about-face for Apple in the digital home market it had largely ignored — and had nearly conceded leadership in to Amazon and Google.

Priced at a premium but not excessive ($349), HomePod has the potential to be Apple’s “next big thing” when it is released in December 2017, and HomePod is to-date among the most visible components of the company’s digital home strategy and a strong indicator of its post-iPhone identity.

Where Amazon and Google have created devices allowing task automation and near-ubiquitous access to information, including the Amazon Alexa-powered Echo and Echo Dot and Google Assistant-powered Google Home, Apple’s approach is more conventional, and TBR believes this approach carries greater revenue and market share potential. HomePod’s focus on music playback strengthens ties to Apple’s growth engine, its $7 billion per quarter and climbing Services segment, of which iTunes digital music downloads and tens of millions of Apple Music subscribers are significant revenue contributors.

Additionally, the sound-sweetening technology integrated into HomePod will give it advantages against Amazon Echo devices and Google Home, devices that have proven to be capable, albeit underwhelming, wireless audio speakers. HomePod also harkens back to Apple’s iPod, which was able to resoundingly beat competitors, despite its higher price compared to other portable digital music players, because of the breadth and depth of the iTunes ecosystem.

TBR believes choosing to focus HomePod on music playback in lieu of competing head-on with the information and task management capabilities of Amazon Echo or Google Home allows Apple to shift the competitive field from artificial intelligence and machine learning, where Apple’s Siri lags behind Amazon Alexa and Google, and to a consumer market segment in which music, and the quality at which it is heard, is a larger opportunity.

HomePod’s value proposition will fall flat with more casual listeners due to its price being about twice that of Amazon Echo or Google Home. However, HomePod’s $349 price undercuts many wireless home audio solutions from premium vendors such as Sonos and Bose, allowing Apple to leverage the brand strength of its hardware, services and user experience in consumer device markets adjacent to the iPhone, the iPad and Mac PCs.

TBR expects HomePod to be a massive success upon its release, especially in Apple’s loyal install base, generating upward of $1 billion in revenue in its first quarter of availability, which would place it on par with the Watch when that device was introduced in April 2015.