Honestly, I'd blame Wall Street here more than the tech companies, but it's really everyone's fault. Tech compensates people with stock, so everyone is incentivized to make the stock go up. That's not always doing what's best for the customer.
But also running a hardware business where every customer buys something once is a tough low margin business. New players don't want to get into the game and old players have to placate Wall Street. Even Apple is shifting more and more into services, but they can vertically integrate and are already "upscale". No one can pull of being an upscale light switch.
Honestly I think open source is the only thing that will save us here, but sadly there isn't a lot of money in that either.
Cloud servers cost money to run. Security updates cost money. Firmware updates cost money. Mobile apps have ongoing costs, you can't just release an app into the stores and have it keep working, Google and Apple keep demanding updates.
One time fees on low margin consumer electronics is not a sustainable model.
And surely an app can keep working with minimal updates, I don't see that as a huge expense for Hue.
Cost to build, around $7. Retail price, over $30. Profit for the company, around $3.
Distributors and retailers took the remaining.
Selling stuff in physical stores is a nasty business. I remember these numbers whenever I see people complain about app stores taking a 30% cut.