What does Nike’s new game-plan mean for fitness tech?
Philip Ellison 24 April, 2014 at 02:04
Fitness apps and devices are a rapid-growth space within wearable technology. Which is why many pundits were more than a little taken aback when Nike recently announced that it would be ceasing development on the FuelBand, its flagship device, in addition to abandoning plans to release a slimmer version later this year. Nike will continue to offer support for existing FuelBand customers, but has downsized its FuelBand team considerably in order to concentrate on its Nike+ apps.
The announcement was preceded by a post on anonymous tech gossip site Secret: “The douchebag execs at Nike are going to lay off a bunch of the [engineering] team who developed the FuelBand, and other Nike+ stuff. Mostly because the execs committed gross negligence, wasted tons of money, and didn’t know what they were doing.” A number of commenters agreed with this assessment, with one going so far as to dismiss the company’s entire digital tech offering as “poorly managed.”
The FuelBand picked up a number of awards back in 2012 after making the rounds at the Cannes Lions Festival, where it was lauded as a device which “takes a thing that was for runners and makes it into a mass product.” So, rumours and hearsay aside, what were the real reasons for this sudden shift away from what seemed to be a sure-fire money maker?
“As a fast-paced, global business we continually align resources with business priorities. As our Digital Sport priorities evolve, we expect to make changes within the team,” Nike spokesman Brian Strong told CNET. “The Nike+ FuelBand SE remains an important part of our business. We will continue to improve the Nike+ FuelBand App, launch new METALUXE colours, and we will sell and support the Nike+ FuelBand SE for the foreseeable future.”
Despite Nike having an 18% market share in wearables, Peter Pachal at Mashable believes that taking a step back from hardware could prove ultimately beneficial: “Nike could have kept the FuelBand and still pushed forward with plans to bring the software to more devices, but it didn’t. That’s because the numbers don’t reveal two realities Nike was facing: building standout hardware takes extreme dedication, and making that hardware stand out is about to get exceedingly difficult.”
This sudden difficulty might have something to do with the fact that Apple is set to release its “iWatch” this year. And if there is one thing that company knows, it is stand-out branding. So instead of taking on Apple in the hardware stakes, Nike is working on making its apps better. The consensus seems to be that this will lead to a natural fitness partnership with Apple; which should come as a surprise to nobody, considering Apple CEO Tim Cook sits on Nike’s Board of Directors. A statement from Nike’s KeJuan Wilkins certainly supports this theory: “Building on these successful products and services, Nike and Apple continue to partner on emerging technologies to create better solutions for all athletes.”
“There’s increasing competition in the market for wrist-worn fitness trackers, and Nike’s digital app ecosystem, Nike+, has grown less reliable on wearables as smartphone sensors have improved,” writes Nick Statt. “It makes less and less sense for Nike to stay in the hardware race when its physical wearables are not bottom-line needle movers, especially as companies like Apple and Google prepare to join the fray.”
With that in mind, this could turn out to be an incredibly shrewd decision; by refocusing its efforts on fitness software and leaving the tricky hardware stuff to Apple, Nike has a golden opportunity to bring apps with an enriched level of functionality to a significantly broader audience.
But, while Apple and Nike are household names, smaller companies are proving more popular in fitness tracking, such as Fitbit, which has a whopping 58% share of the wearables market. And despite a recent lawsuit brought against Fitbit due to rashes and blisters caused by its Force wristband, the firm is forging ahead in other areas. These include “wellness programmes” in its corporate solutions department, which purport to be able to reduce employee sick days and healthcare costs. According to Forbes, these programmes are the fastest-selling offering in Fitbit’s current repertoire. And then there’s always the revenue that Fitbit stands to make from selling the data gathered by fitness and home tracking technology.
All of this is to say that fitness tracking and wearables are in a state of flux; companies are still trying new things and figuring out what works. The recent ups and downs at Nike and Fitbit are “growing pains”, says IDC analyst Ramon Llamas, and to be expected: “The sky is not falling. If anything, this is time for the market to say, ‘let’s stop and reassess… Is this something we want to compete in, and is this core to what we do?’”