May 25, 2024 - Business

Axios interview: Sonos CEO talks AI, Apple and consumer electronics

Photo illustration of Patrick Spence surrounded by abstract equalizer shapes.

Photo illustration: Aïda Amer/Axios. Photo: David Paul Morris/Bloomberg via Getty Images

Launching new hardware is hard, as they say, but Sonos CEO Patrick Spence looked very much at ease nine hours into a day packed with back-to-back media presentations.

Why it matters: The premium wireless speaker maker has built a loyal following and is accustomed to carving out space in crowded markets against the likes of Sony, Bose and Google and Amazon.

Yes, but: Laurels don't build futuresnew sources of demand do.

Driving the news: On the heels of Sonos launching its first-ever headphone product in its 22-year history, Spence spoke to Axios about OpenAI's controversial "Sky" voice, the question dogging Apple's Vision Pro, and why Sonos doesn't feel compelled to play the "game" of releasing incremental products each year.

The big picture: Sonos is planning to enter four new product categories as pandemic hardships and cooling hardware demand have curbed its overall growth.

  • Headphones is the first of the launches, with some rumors suggesting that video streaming could be another.

Threat level: The stakes are high.

  • Sonos just botched its app relaunch, diminishing trust among some of its customers.
  • Its stock is down 23% since it went public nearly six years ago.
  • And new categories should bring in new customers. But Sonos — which reported a net loss of $69.7 million in its most recent quarter — may not be immune to slowing electronics sales simply because it caters to higher income consumers.

Below are highlights from our interview with Sonos CEO Patrick Spence (edited for clarity and brevity) about the state of the consumer electronics industry on May 15, 2024:

What was your priority in this first iteration of the Ace?

The biggest pain point is the comfort. It's an intimate thing. It's on your body.

How big is your R&D team?

It's the majority of our company. I think if you look in our public filings, you'll see we invest more in research and development than any of the comparable companies in our category.

Have you ever been distracted by concerns that Sonos didn't have diversification in product lines sooner?

Not really, because we're only in about 9% of the homes that we think we can be in.

What's your take on other consumer electronics makers' planned obsolescence strategies and feature-driven product cycles?

The traditional consumer electronics approach is "We're gonna bring out an incrementally better version of that product every year." They need you to buy the next one. And that's just not the game that we're playing.

We've always kind of walked down a different path to some degree, and that is trying to build products that last. The best thing you can do is not use recycled materials in your products, but [rather] make products that last for a long time.

I think our path is better for the long term. It requires more patience on certain people's parts. It's also the thing that attracts a lot of the people that we have [working] at Sonos.

The twist would be some companies couldn't put a system together where there's new innovation, new products that customers add to their system. But 45% of our sales every year come from existing customers, adding another Sonos product.

That's unheard of in consumer electronics and we're proud that the number one way that new customers come into Sonos is from a referral of a friend or family member. Twenty years later, that's the way we get most of our new customers and that is a powerful model. That's just different.

Which features do you think other consumer electronics companies add frivolously, perhaps, to drive sales cycles?

The other thing I would say that consumer electronics has a tendency to do that we shun is — adding new technologies to the list of the 10,000 logos that are on the product and on the box.

Different wireless protocols like Thread, the technology standard Matter, and there was a period where Bluetooth was going into everything without a reason and NFC was being thrown in as well. Like what's in it for the customer?

What's your take on the Apple Vision Pro?

The Vision Pro is an ambitious push just like all the stuff Meta's doing. To me, it's technology looking for a reason to use it every day. The thing at the end of the day is how does this make my life better every single day? I haven't yet seen that in that AR/ VR world.

The newest OpenAI demos feature a woman with a flirty voice. I, along with others, don't love it.

I think it's a major statement about a company as to what voice they're going to choose. Now, I also think the other thing will be — you will get to choose whatever voice you want to hear.

The reality is, if it is going to be only a few companies that can afford to build large language models like this and control it, then [no one will have a voice] unless you're basically in charge of one of those four companies. That's not a great thing for society.

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