(Bloomberg) -- Fitbit Inc., months away from the debut of its smartwatch, has lost several people working on the project and fallen behind on its app store -- putting in peril the company’s most important product in years.
Hard hit by the sinking popularity of its fitness trackers, Fitbit has bet its future on the smartwatch. But such devices are typically wedded to an ecosystem of compatible devices, apps and services that lure then lock people in. While Fitbit’s watch can play music and handle payments, according to people familiar with the product, a discussed partnership with Spotify failed to materialize and technical challenges mean the app store may not be ready when the watch arrives this fall. Many app developers, meanwhile, are unenthusiastic about Fitbit’s watch.
“I’m more focused on the big boys like the Apple Watch and Android Wear,” says Damian Mehers, who developed a version of Evernote for Samsung’s Galaxy Gear watch. “I could consider developing for Fitbit if there was a compelling device and a large enough user base. I think it will be challenging to establish credibility.” Like many other developers, Mehers says the challenge is exacerbated by the fact that wearable devices still haven’t caught on widely, meaning they’re less desirable to write apps for than a smartphone.
In an emailed statement, Fitbit said the development of the smartwatch and third-party apps “are on track” and that “any claims that the developer program is struggling is false.” The company said it’s “well positioned to succeed.”
The global wearables market is expected to grow about 20 percent this year to 125.5 million devices shipped, according to researcher IDC. But Fitbit’s watch will be competing with not just Apple Inc. but dozens of cheaper Android products. Fitbit recently lost its position as the top seller of wearable devices, falling behind Apple and China’s Xiaomi Corp. Investors are skeptical of the company’s prospects, pushing the shares down 55 percent in the past 12 months. They fell a further 2.41 percent to $5.27 at 10:49 a.m. in New York Friday. And while Fitbit has a loyal base of users that it can push the new device to, analysts say the company could struggle to get traction outside that fairly narrow niche.
Last year, to help jumpstart its smartwatch effort, Fitbit acquired technology developed by watch maker Pebble, which shut down after failing to compete in a market that has taken off more slowly than expected. Pebble developers helped form the core of Fitbit’s smartwatch team in California, but most have since left, according to a person familiar with the situation (although a separate group of Pebble alums in Ottawa remains intact).
The Fitbit watch is expected to sell for less than $300 and will run a custom operating system based in part on the one that powered Pebble watches versus a more ubiquitous operating system like Android Wear. Choosing Wear would have immediately given Fitbit a vast ecosystem of applications, established developers and support of the Google software brand. Instead, Fitbit has devoted resources to creating a custom operating system, which requires the development of an entire ecosystem and risks a lack of developer support.
Fitbit also plans to follow industry practice by putting its app store not on the watch itself but on Apple and Android phones. Users would download apps on their phones, then beam them via Bluetooth to the Fitbit watch, the same way Apple and Google do it. The app store, while delayed, could conceivably be ready for the watch’s launch.
After the partnership with Spotify foundered, Fitbit began working with Pandora Media. Landing Spotify, the world’s largest paid streaming service, would have been a coup. Instead, Fitbit is working with a company struggling for relevance after clinging to an internet radio model. The feature Pandora is working on will let users store music on the watch, a person familiar with the plans says. Spotify and Pandora declined to comment.
Inside the company, skepticism abounds about watch itself, which will come in one size and feature a square touchscreen similar to the one on the Apple Watch. Some members of the team working on the Fitbit device consider it sub-standard and a project the company should never have embarked on, according to several people. “They’re building something that people internally never believed in,” one person says. “They look reactionary not strategic.”
Fitbit hasn’t tied all its fortunes to the watch. Engineers are working on sleeker versions of the Charge fitness band, the company’s best seller, and the Blaze fitness tracker, which includes a large color display, for next year. The company is also planning an updated version of a weighing scale that syncs data to a smartphone via Bluetooth.
Fitbit originally planned to debut its watch this spring, according to a person familiar with the situation, but various setbacks forced the company to push the release to the fall. That means the device will probably go head-to-head with the latest Apple Watch, which has an established app store, tight integration with the iPhone, built-in music and payments services, not to mention thousands of accessories.
“This thing is designed to compete with the Apple Watch 2,” says a person familiar with the Fitbit device. “But by the time it comes out, there will be the Apple Watch 3.”