Sonos, a Wireless-Speaker Pioneer, Plays Catch Up
October 04 2017 - 10:59AM
Dow Jones News
By Yoree Koh
Sonos Inc., the pioneer in wireless speakers, was on its way to
$1 billion in sales in 2015 when Amazon.com Inc.'s Echo smart
speaker took off. Sonos's sales fell off a cliff.
Sonos now has a new game plan: Partnering with its rivals -- all
of them.
On Wednesday, the Santa Barbara, Calif.-based company is
announcing its first smart speaker, the $199 Sonos One, powered by
Amazon's Alexa voice assistant. By next year, the company will
integrate Alphabet Inc.'s Google voice assistant, and down the road
hopes to make its smart speaker compatible with Apple Inc.'s Siri
and others. The partnerships would mean consumers wouldn't need to
choose one tech giant's services over another -- Sonos could serve
them all.
The company built a loyal fan base by letting customers play
music in every room of a home through a network of wireless
speakers that supported streaming services such as Spotify and
Apple Music. Speakers, though, are no longer just for listening to
music.
Chief Executive Patrick Spence admits the company became
"complacent" when it came to artificially intelligent assistants.
Sonos "missed the turn on voice," he said in an interview.
Amazon's Echo has become a game-changing product thanks to
Alexa, which can play music, answer questions, relay the day's
news, provide weather forecasts and more. The Echo has captured
about three-quarters of the U.S. market for smart speakers, with
more than 15 million total devices sold as of June, according to
Consumer Intelligence Research Partners.
On Wednesday, Google, which has the other quarter of the
smart-speaker market, is expected to unveil a successor to its
Google Home speaker. Apple is readying its $349 HomePod speaker for
a December release.
Sonos saw itself getting shut out of a category it helped
create.
Its pivot came amid change at the top. In January, founder John
MacFarlane stepped down after 14 years as chief. Mr. Spence took
over and has sought to make Sonos, known for its obsessive but
time-consuming attention to detail, move faster to catch up in the
smart-speaker revolution.
Sonos, which has raised about $110 million in primary funding
from investors, including Index Ventures and KKR & Co., also is
seriously considering an initial public offering, the company
said.
As part of its strategy of working with the very rivals that
upended it, Sonos said it would support Apple's AirPlay 2 in 2018,
letting owners control their Sonos speakers through any
Siri-enabled device such as an iPhone. A free software upgrade will
allow Sonos speakers to be controlled through any Alexa device such
as an Echo or Dot.
Partnering with a tech giant won't make it any less a
competitor, analysts said. The cash-rich giants are able to adjust
the price on their speakers more easily than a smaller player like
Sonos, said Ben Arnold, an analyst at NPD. Amazon flexed those
muscles last week when it cut the price on the Echo by $80 to
$100.
One hurdle will be getting tech juggernauts to play nice. For
instance, Sonos users can ask Alexa to play music if they also
subscribe to Amazon Prime, but they won't be able to use their
voice to start a song on Apple Music.
Mr. Spence said he isn't worried: "Our job is solving those gaps
over time."
Mr. Spence said the company is back on track to cross $1 billion
in revenue this year, helped by sales of its $699 Playbase, a
wireless speaker for TVs that launched in March. Sonos hopes its
inaugural smart speaker will continue that momentum.
"The promising tailwind that we have is more interest in smart
speakers thanks to the work of Amazon and Google jumping in," Mr.
Spence said.
Write to Yoree Koh at yoree.koh@wsj.com
(END) Dow Jones Newswires
October 04, 2017 10:44 ET (14:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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