The Vergecast - Sonos CEO discusses the Arc and customer backlash over leaving old products behind

Episode Date: May 6, 2020

This week we saw Sonos announce several new products, most significantly the Arc, which is the company’s first soundbar to support Dolby Atmos. Other new devices include the Sonos Five speaker and a refreshed Sub, and all three will only work with Sonos’ new S2 app that launches next month. Sonos CEO Patrick Spence sat down virtually with Verge editor-in-chief Nilay Patel for The Vergecast to discuss the new products, the S2 update, the backlash that Sonos took from customers over its “Recycle Mode”, and the perception that the company is leaving customers with older Sonos hardware behind. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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dropping May 14th. Tap in with us. Hey everybody, it's now from the Vergecast. You might notice this week's interview episode is coming out a little late. That's because our guest is Sonos CEO Patrick Spence. Just today, Sonos announced what I've been asking for for a long time.

A replacement for the playbar, a new sound bar called the Ark that supports Atmos. That's right. Sonos. Atmos Playbar is finally here. It's called The Ark. They also announced a new Sonos 5, a new Sonos sub.

That's all on their new platform, Sonos S2. You might remember there was a lot of drama around the split between the previous platform, which is now called S1, S2. Patrick and I talk about the arc, the new products. We talk about managing that platform transition, the controversy that came out of it, what they've learned from it. And we talk about, of course, competition. You might remember in January, Sonos sued Google for patent infringement, unfair competition.

Patrick has been in front of Congress talking about what it's like to compete with the big tech companies. We get into it. Patrick is very strong on this. He really thinks Sonos has a responsibility. society to raise these issues and talk about what it's like to be an independent hardware company competing with tech giants. All in all, a super wide-ranging, really interesting conversation, everything from new products of Atmos to platform competition, public policy, to how to be a CEO

of a hardware company managing remotely in a time of epidemic. Patrick was super game for all this stuff. I love this conversation. Check out Patrick Spence, CEO of Sonos. Patrick Spence, you're the CEO of Sonos. Welcome back to the Vergecast. It is great to be back. very excited you're back the last time uh you were on the show i think i spent an hour asking you for an atmost sound bar well and that's why i'm back because i can actually talk about at most soundbar so i felt like i really couldn't return until i had something that you were asking for so well here we are so we got to talk about that that's the arc it just came out today it's very exciting you also

have a new sonas five speaker there's a new sona sub and then aside from that you've had a very few months. You announced a new radio service. Way back in January, you entered into litigation against Google. You've appeared before Congress talking about competition. There is a lot of controversy around a platform transition. There's a lot to talk about. So I'm excited to have you back. Let's start, though, with a new product. We've got to start with a new product. The arc. Tell me about the Seno's arc. So it really builds on everything that we've learned around home theater. And, And, you know, we've had the play bar out for seven years now. It's been a huge smash into the home theater space.

And what it really did was bring music back into the living room as well. So it wasn't just a home theater solution and great sound for your TV, but bringing music back in the living room. We built on that with Beam. And now we're really raising the bar with Arc. Just the, you know, the technology that's gone into it around Atmos, but as well, all the different transducers we put into it. and the sound, the amount of time we spent on the design, so it looks gorgeous for all the large TVs that are being sold today. It really raises the bar for really that premium sound and brings to life all this amazing content that we're consuming at home. We know right now everybody is at home,

but still wants to have that theater experience, and that's where ARC fits so well. And so this is obviously your first ATMOS product. I'm assuming, and we are going to talk with your new platform, but I'm assuming you weren't able to do Atmos until you launched the new S2 platform. That's right. This required the work, the plumbing, if you will, underneath the covers, right, to make sure that we could support the next generation of technologies like Dolby Atmos, and you know Dolby's getting into music as well and all the high-res music that's coming. So that was an important part of the element here. But I will tell you, the other thing is we don't implement, you know, we don't bring out a product just on the basis of one,

technology either. If we're going to do something, we're going to make sure that the overall experience is something that really raises the bar. And, you know, I just, people can't hear the product yet. I'm excited for everybody too, but obviously we're living in a different world right now. But having put it in my home in the place of where I had the play bar, I mean, it just blew me away the difference in terms of what's there. And you really see how far we've brought the sound over that period of time. And it's all the tweaks that come with that. And dole at most and the great content that's being created in that now, just is kind of like the cherry on top. Are you seeing increased demand during this time for your soundbars?

We have. This has been a really interesting time. In the month of March, our listening was up 32% year over year. So the number of listening hours jumped dramatically. 32% year over year. In April, it's up 48% year over year. So people are using their sonos a lot more. And it's actually been on the soundbar video side where we've seen like a lot of. portion of that. So definitely people are consuming more video and Beam and Playbar have played a huge role in making that content sound better. But are you selling more beams? Are people like, we're at home all the time, the TV, we're watching all of our content at home. We need a soundbar. We should just buy one. Absolutely. And if you look at the NPD data from the last couple of weeks as well,

I think it's roughly 70% year of year growth in sound bars. Beam has been in the month of April, we actually, knowing people were going to be at home and knowing that we could bring a little more joy to people's home during this period, we actually kind of threw out our playbook and said, let's talk about Beam and tell people how this can make their video content better. And so Beam was one of our top selling products in April. The other one that was interesting as a top selling product was Move. So Move as well has really taken off over the last couple of months. I think some of that's seasonality, but I think some of its versatility too. So Beam is at $399. That's a pretty accessible price point. The ARC is $800. It's sort of at the top end. Why price it there? What do you see that market developing?

I think we had these same conversations when we brought Playbar out and where it fit in the marketplace because it is a premium product. Look at what people are spending in terms of their televisions now, the size of the television displays. This is really about how you are enjoying that video content in a. a theater-like way at home. We know even after the crisis that we're in right now, people are going to be spending more time at home. They're going to want that theater-level experience at home. And so that's exactly where ARC fits. And I think for our consumers,

we've seen that they're willing to pay for great products, right? And this is a product that's going to last for years. So when you put it all together and you think about how much usage these products get, it really is, you know, fair for the price that you're paying. And so we obviously think about that. We try to find, you know, we've always tried to find that sweet spot from a price perspective of something that makes sense and is sustainable for a number of years as well. That's one thing that differentiates us from so many consumer electronics company is we find the right price point that we can sustain for years. And we feel like we've been able to do that again with Arc. It's interesting, the Arc. I haven't gotten to listen to yet. I'm looking forward to

listening to it, but I've looked at a lot of photos. It's plastic. It's probably carbonate. At $800, you sort of would expect it to be covered in fabric or to, I don't know, be made of diamonds or something. Why go with plastic? It helps. When you're thinking about materials, it's really, the first thing we do is think sound, right? And so when you think about there's rattles and there's other things that happen with some of the fabric and you can run into different issues in terms of dust collection, dirt collection as you think about the fabrics. And so we found a really great plastic to use that does not look like plastic when it's there with your television. It looks like it's metallic or something like that. I mean, you're going to see it. It is awesome. And it looks premium as we go through it.

And so we balance both the material for the use of sound and optimizing great sound. And then how does it, you know, look? What's the design at the end of the day? And so we found this plastic that works really well. strikes both of those and you know you can proudly display it in your home so it really looks like a premium product this is one of those things where I just realized how valuable it is to go to the events and see the things in person because it would have been the third sentence of our news story but so I'm looking forward to seeing it but that's the thing that has jumped out to me so far because all I can do is like a picture's but I'm looking forward to see um so you and I had a chance to talk last week and we were talking about voices since

And I want to bring up this conversation again. The arc has microphones in it. The beam has microphones in it. And I just, I, I still haven't seen voice assistance in the living room takeoff. And I have a lot of products with voice assistance in my, in my living room. And I basically never use them. And I'm wondering if you've seen data that shows people are using them, if there's something more you need to do, if there's a inflection point you think is going to come.

What's the hold up right now? People are still using voice for the same things they were when it first came out. And so largely that is starting music, right? So getting the music playing, that's timers or alarms, and then asking for the weather from what we can see today. And there hasn't been, not just in the living room, but broadly, there hasn't been a change in consumer behavior around that. And I haven't seen a lot of innovation in that space, either really as we've gone through it. I think it's great for starting the music. But it hasn't evolved the way most things have.

It certainly hasn't become the next mobile operating system type platform. We've talked about that in the beginning of what's the future of voice. It's a great way and probably even more relevant way as we think about hygiene and post-COVID, way to get the music started and not touch something. But I think the other data point we have is the Sonos 1 SL, which we brought out last fall, which is a Sonos 1 without the microphones in it. And it has done tremendously well. So, you know, it is a product that has surprised me, even in terms of how much it's sold.

And so the, the, so we are looking at it and we see a role for voice for sure as we think about the, you know, as we think about the whole experience. And obviously, we invested as well. We purchased a voice company, Snips earlier this year. And we think there's opportunity there. You know, we think there's opportunity around the experience. And particularly in our world, the music experience and that living room experience, things that maybe we can do from a depth perspective. We're certainly not going to build something to compete with Alexa and Google Assistant. Amazon and Google are great at that.

They can offer the breadth and everything that people want. But our focus is the music and the entertainment side. And so we really feel like we can do that. And there's opportunity there. And we can do it in a more private way. That was one of the things that SNPs also was very focused on is how you do that while maintaining. a user's privacy and stay focused on local, not always having to go to the cloud. So I think there's a lot of opportunity that's there. But today, at least on Sonos, the way we see people

engaging with voice is the same way it was three years ago when it first came out. Yeah. And I think my question is really just that seems pretty universal, right? We're still just setting timers and asking to play some music and then some random Spotify playlist is going to start. Who knows what's going to happen. But in the living room in particular, that was, it was always pitched to me as the opportunity. You would sit down and say, well, I guess you wouldn't say it now, but you would sit down and say, play the last dance. And it would figure out that it's on ESPN and it would light up the correct device and like it would just start playing. You wouldn't think about it. And I just have not seen that happen yet. You do sell a soundbar with a microphone in it. Well, not you saw two of them.

I'm wondering if, right, there's got to have been a blocker where you have wanted to deliver that experience and you haven't been able to. Are you seeing a path around it or path through it? You know, I think we'll see as we go through this. I don't know. I think the, even for music, right, it's for starting music, but I don't see a lot of people. We don't see data where people are using it to find the next thing, right, and using it as actively as you would, the app or how easy it should be. And so that's an area we're exploring because I do think experience matters. We've seen this right now. we're living through it with video conferencing where, you know, everybody and their brothers tried video conferencing and then Zoom just got it right, right? And all of a sudden,

it absolutely explodes. We believe there's something there in voice and that we'll be able to find it over time, starting with music, that gets people more engaged in using it. And that's what I'm most interested in right now. I think that opportunity exists in the living room. And I hope we're the ones that are able to actually find the way through it. So with Snips, you're planning to build your own voice assistant that sits alongside Alexa and a Google assistant. Exactly. This is a complementary strategy, right, alongside Alexa and Google Assistant. People love those assistants for a variety of reasons, and we, you know, we're all about freedom of choice. So we want to make sure people have an opportunity to run any voice assistant they choose.

Are they going to talk to each other the way that, like, Microsoft's Cortana can talk to Alexa? Are they, they're going to sit totally beside each other? I hope eventually. You know, I hope eventually, certainly the whole privacy aspect is going to be something that we're, you know, we're very thoughtful of. And so that we'll have to see how that plays out with those assistants which collect data and are very focused on customer data, right? Those things may not jive. But I do hope over time that they'll be able to and they'll interoperate. And I don't see any reason why they shouldn't be able to. I want to come back all the way to the arc and ask one last question about it.

It is obviously coming out. Again, I'm very excited to hear it. Atmos is sort of the top line format. Are you thinking about supporting the other object-oriented surround formats, DTSX, other things? we're always looking at that. Again, it's less the actual technology for us. And what does it do for the consumer, right? And what does it mean in terms of the average Sonos customer and the experience

that's going to have? So we'll continue. You know our calling card is making it better over time. So we're going to continue to make it better over time and optimize it. And that might include adding other new technologies to it, for sure. Is that like a chicken and egg problem? I don't see a lot of DTSX streaming services out there. it's very much a physical media format.

Does that play into your decision making? Absolutely. You know, you know, this question of what formats we support came up right with Playbar even, right? And some of the ones that we weren't or weren't supporting.

And we had Dolby Digital. And part of the part of our point was, this is what streaming services are using. And that's where we see the future going. And now that Atmos has become so prevalent across the streaming services, that fits our audience, and the content that people in the Sonos ecosystem are really consuming.

So it's a good fit. We haven't seen as much around some of the other technologies. And so we'll continue to monitor that and see whether it takes off in streaming or not specifically. Yeah. I think those of us with like Blu-ray collections, might just have to. I mean, it's a very small but very passionate audience. Very passionate. I get those emails.

So there's two other products that you rolled out that I want to talk about quickly. Sonus 5, which is the Play 5, but with new stuff inside. And a awesome white grill on the front of the white one as well in terms of what's there. But it is an update. That's right. In terms of just putting the latest horsepower inside of it and making sure that we give it a bit of a refresh on the design side. And it's the same with the new sub as well. That's right.

Exactly the same as we think about those products. And so it was a perfect time to do it alongside, you know, kind of the, premium part of our line to be able to do that all at once. And yeah, bring, you know, bring that great cinema-like experience home to everybody. Is that how you think about your line? There's the premium side of the line and then sort of the mass market side. Yeah, not, we're not that. I mean, I look at our, even our one as a premium product at that price point. So, you know, we look at it and we try to kind of bring something more premium at every price point as we go through it, but we certainly think about it in terms of like good, better, best and the way that we work through our portfolio overall.

And then there's no microphones on the new Sonas 5. That's right. You know, you and I talked a long time ago. There was a point there with voice, maybe a year in where I expected that consumers would demand that voice being every single product going forward. Our experience with the 1SL and then even the engagement of voice like we talked about has led us to believe it in certain products, it's really important. And then in other products, it's less relevant. And we feel for people that are really going for that premium sound profile and really want to enjoy, you know, high fidelity audio, it's less of an issue. It seems like that that's the customer base probably already has a voice device in that room.

I keep going back to the notion of where do the microphones live, like in which product should they live? And the answer doesn't seem like it should be every product. Is that something you're seeing from your customers, from your own research as well, that, people just don't want microphones and everything? That's been my hypothesis. And we as an industry have rushed to put microphones in everything, right? And I think that's been, that introduces its own responsibilities for manufacturers as well and complexities for consumers that I don't love, quite frankly.

And I do think, you know, I still, you and I may even have talked about this in the past, I still do wonder if it's not a case where, you know, in most homes, it's either in the light switch or in a light bulb or something like that and helping control, you know, all of the products and they're tied together. But you and I also both know that there's so much around interoperability and wild gardens between here and there that we're probably going to be living with multiple microphones in rooms for a while. Oh, we're going to get to interoperability.

You just, you wait. I'm building you up. Last new product, Sonos Radio. We've talked a lot about whether or not you do your own services, whether you would compete, right? You're open to all. That's a big part of the mission. Now you have your own content service with advertising.

It's a new revenue stream for you. What was the thinking beyond launching your own content? Yeah, you know, we ultimately have seen that radio has been a big proportion of our usage for a long time. So over half of the usage. And so we hadn't done justice to the experience for our customers that were there. And as we got into it, we did see the opportunity to, you know, really bring something new to customers and make that experience better. And also create a platform. So there's an experience aspect and making it by.

better for customers and driving engagement with the brand as well and the product. Then there's an aspect of the business, like you said, and you know, thinking about, okay, let's try this model and see how it resonates with our customers or not at the end of the day. And then there is an aspect still from the partnering that we do and the open ecosystem we have where we're able to serve up some of our partner content and give, like help introduce people to a Spotify or an I heart radio or things like that. So, you know, there's a few different angles on it. I'm most, excited by the fact that we're putting our toe in the water into trying something new. And we're going to learn a lot as we go through that. And we have a highly engaged customer base. And I'm excited for what we can learn and where we evolve it from here. So yeah, it's been great. We've seen really high engagement so far in terms of the people that have upgraded the software for Sonos Radio. And we'll see where it goes from here. That pitch about you can introduce folks to other services. When I hear the whole thing, it sounds a lot like what Roku who does with the Roku channel.

Right? Most people, I say this a lot, but every time I say to somebody new, it's a surprise every time. Roku makes almost all of its money on the software and services side and almost none of it on the hardware side. Is that a transition that you're interested in doing where you're selling ad spots on your service? You're taking, you know, commission referrals, affiliate referrals to other service, signups. Are you thinking in those terms?

Thinking, you know, we're thinking more in new experiences that help us deepen the engagement. with customers and definitely are monetizable, right? So there's two sides of that coin. Is it, is it creating a better experience for our customers? And then are they willing to pay for it as we think of those experiences? And, but it's not, you know, it's not like we're getting out of the business of creating great hardware and selling premium hardware as we go through it. I think Roku's got a different business model in terms of, you know, they're going to basically give away the hardware and then, to your point, you know, try and drive advertising and subscriptions. And that, I don't see, you know, that for us in terms of where we are right now.

I think it's a little bit different in the way we're approaching it. Support for this show comes from Shopify. Starting something new isn't just hard. It can be really scary, too. So much work goes into this thing that you're not entirely sure will even work. But here's a better thought. What if it did all work? What if your instincts were actually right all along?

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Download Grammarly for free at Grammarly.com. That's Gramerly.com. The new arc, the sub, the five, all run S2. They cannot run the previous generation of the platform. They can't run an S1. Correct. When you announced, hey, we're going to slowly sunset S1 and when the new app and stuff rolls out, there's some hardware that we left behind.

There was effectively chaos. And you put out a blog post, you apologize to people for miscommunicating. You've stuck to the guns, though. You're splitting the platform into the new one and the previous one. Walk me through that drama from your perspective and why you've held on to this decision in this way. Yeah. So, the, you know, one, there's an aspect of trying to make sure that we are being, building for the future so we can support some of those new technologies like Atmos and some of the

high-res music that is, we believe, you know, over the next few years is going to be important to consumers. So this has been, obviously, you know, a lot of work internally to get us to where we got to in January. And I think part of the issue, you know, so we work through it, we looked at everything that we could do, how do we keep living up to the promise that we set and at the same time, you know, position it for the future so that we can deliver all this new stuff. And, you know, so we've worked through that. And I think when it came to January, almost internally, we had so, we had gone through this over and over and over again. It created a situation where we hadn't put the quality into that initial communication that we should have. And we tried to simplify it. And we probably simplified it to a degree that didn't make sense. Well, I know we did as we went through that. And we didn't clearly articulate what we were doing and when. And it was well intended because it was also well intended to help. people understand, hey, this is coming right in June. And that was back in January, as opposed to, doing it right at the time the new products came out. So we thought, you know, hey, we'll give people a

heads up. They can start to think about this and think about what's right for them. Because for some customers, staying on S1 is going to be the right solution. For some, it's going to be, you know, I'm going to run a mix system. That'll be very few that run S1 and S2. And then for some, it's going to be I'm moving to S2. And we've definitely seen that over the course of April. So we went through all of that. we just, we didn't land the communication the way we needed to. We left people with the impression that it would be bricked. And I think, I just think as an industry, it's so interesting that we've created this world where people think it's just going to stop working because that was never our intent. You know, we've always had a team set aside to be doing the security patches and updates we need to

and those kind of things. And so, you know, I think getting back out quickly was a learning to make sure people understood that and that they can stay on S1. And when they're ready to go to S2, they can actually go and do that. And yeah, it's not perfect as we work through this, but we also, through this interim period, you know, created that ability to run S1 and S2, what we call a split household if people choose to, you know, through this. Because we know we have some early adopters and really technical people in our base that will want to actually go do that. They may want to adopt ARC and run that separately and then they may want to run the rest of their system on S1. So we've tried to create a series of options for our customers that allows them to pace the

upgrade to S2 when they're ready. When you say split system, they're not going to talk to each other. So if I have a house full of S1 products and I buy an arc, it's a different app. You can't stream music through everything all at once. They're totally independent of each other. Correct. That's right. We think that'll be a small group of people that do that.

We've had a small group in beta that have been doing that as well as we go through it. I ran it myself for a while like that. And what I foresee is that somebody might have ARC in their living room and run it that way. and then the rest of their system is probably on S-1, and they're actually playing that. But again, I would say that's going to be a small contingent of people. Part of the reason people thought the devices we bricked was the earlier controversy about your recycle mode,

which I believe you've now sort of, you don't do it anymore. Correct. But that was, right, it sprung up because people said people brick these devices. There's no opportunity to refurbish or keep using them. What made you decide to just stop doing recycle mode? Yeah, so I'll tell you what started the recycling. cycle mode was we, you know, we knew we were coming to a period where people would be upgrading, right? We built these products. Some of the products that we're talking about are 10 to 15 years old. And so we could see that people were interested in trading up to the next generation. And our first, our primary goal was how do we responsibly recycle those products that they're taking out a commission? You know, and that, we were thinking more of the phone model, quite frankly, and we thought people would want to return it. So we said, we will even pick up that product for you, take it back and responsibly recycle it.

Or you can go to a local responsible recycler and we gave people the addresses, all of those kind of things. You know, I think this is where we're not like a phone and we're not like any other consumer electronics. And it was an interesting learning because we listened and people said, hey, I can still use this one. I can give it to a friend. I can do these kind of things. As we said, you know what? You're right. At the end of the day, you can.

And we are different than anybody else out there. So we're going to get rid of this recycle mode. and if you do want to recycle it, we still have all that data there. We'll still take it back and here's your local recycling. Because there are people that are doing that, right? But if not, you want to use it, then go ahead and be able to do that. And so I think it's a strength of the organization that we listen and we learn and then we evolve, right?

And so that's what we've done in that particular case. But it came from a place that was, you know, trying to think about the environment and making sure these things were responsibly recycled. but, you know, we heard differently from customers and we adjusted. It does seem like one of the root issues here, regardless of the communications issues, is a really tough spot where people expect speakers to last forever. I have speakers that are 20 years old. Lots of people have speakers that are 20 years old. But computers absolutely do not last forever.

You nailed it. That is absolutely it. The number of emails I received, you know, when the communication first came out in January, around that very thing. I've had a set of speakers for 40 years, 50 years, right, in some cases, in terms of what people have had. Try recon those speakers. You know, it's not, and the consumer at the end of the day, like, it's not their responsibility to understand that what we did was put a computer and speakers together. And so it's made us mindful of what does that mean and trying to be as up front as as possible around, hey, the fact that these are different and there's software in them. But I think,

you know, that's not, that's not something that we're going to single-handedly educate people on over time. People are learning as we go through, you know, we were on the forefront of this, but you know, you see it with a multitude of products now where you've introduced computing and computing components into everyday appliances and you start to see there's the good of that from an experience side. And then there's the bat of that in terms of the life cycle. But with what we've tried to do with S1, you know, I think we're trying to do what we can. And look, I it is a it is a huge engineering achievement that that we have products that have been around for 15 years and continue to play music and do these things. And it is, you know, it's something that we're super proud of.

It is very different to the consumer electronics industry to the appliance industry or the pure passive speaker industry. It's, you know, it's not that different. And so we're just, we're just in that kind of period where consumers are learning what it means for a product to be smart. I would say as we go through this. And I try to be as empathetic to that understanding. And look, we want our products to last as long as they possibly can through this. But there are some technical limitations we run into every once in a while. The good news is the first time we run into it is 15 years into building products.

And so I feel good about that in the grand scheme of things. Do you still get emails about that one hardware controller you used to make? Because I would like you to bring that thing back. I absolutely do. There's a few people that would like us to, you know, in terms of what's there. And yeah, it's funny. I mean, my email's on our website, so I get a ton of different emails. And it's, I got a lot in January.

And I love it. I love to hear from customers and hear what they're thinking. I think I'm probably one of the only CEOs who can say they get a lot of emails, which say how much they love the product, right? And it's just left at that or how much they love the interaction they've had with somebody on our customer support team. You know, it is, I just, I think I'm very fortunate because to get that kind of input and feedback from customers is amazing. And I love the feedback that is constructive in terms of what we

should be doing as we go forward and things we got wrong. Like, that's helpful too. So it's all good. One of the things you and I have talked about a lot is how you've increased your product introduction cadence by modularizing some of the platform. Have you thought about modularizing some of the products so that you could actually upgrade the product without swapping out the entire speaker? It is something that through this, we definitely have started to talk about and think about, is there a way to do that? Because there's certain, to your point, there's components, like in our products that were from 15 years ago, like the chip and the memory, the Wi-Fi chip as well, that you'd love to be able to upgrade. And it was never contemplated at that time that we would

ever open these products or be able to do that. But now, as we look at it, it's definitely something that we're considering how we might be able to modularize that. Or over time, how do you make it easier for people to move to the next generation, you know, those kind of questions. But I do think from a sustainability perspective, the modularization is a really interesting one, really interesting one. I think of, and I honestly do not know how this went for them, is Samsung years ago, broke out the sort of CPU module of its TVs, so later on you could upgrade that module. And it was a big hit at CS, and then we never heard about it again. But are you thinking in those terms that you would, you know, you'd buy an $800 soundbar, and then 10 years from now, you would swap out the brain.

That is exactly the kind of thing we've been exploring as we've lived through this life cycle, what we call the life cycle of the 10, 15-year-old products and think about what the future might hold. So that's an interesting area. There's a lot of engineering between here and there, but it is something we're definitely thinking about because we've always built products that last for a long time for what's in them, right? It's all relative to consumer electronics as we think about that.

But we want to keep raising that bar. Do you think there's a difference in expectation that consumers should have between, I mean, you saw everything from, what, $150, IKEA lamps, which is still my favorite Sonas product, all the way now to, you know, an $800 soundbar, to people have entire racks of amps powering their in-home systems. Do you think there should be a different expectation for the cheaper products versus the more expensive ones in terms of duration? It's an interesting question. we don't think about it that way when we're when we're building them quite frankly and actually it starts at 99 with the ikea bookshelf speakers so 99 up to 800 we don't we don't think about it in that way but you know there are things i'm thinking like through the components and even as we we standardize the components inside and try to use the same try to reuse the same kind of brains and platform inside of them all there are some tradeoffs that happen that have to happen for the less expensive products but you know again we try to push and put as much as possible in there so we've never thought of about it like that. And I don't think you have to make that compromise. No. And, you know,

working with IKEA, too, that's the other thing. The reason they've loved working with us and the reason we've loved working with them is we're trying to build these products to last for a long, long time. And so no, I don't think it should depend on price point. I think everybody has a responsibility to be building the products that they have to last for, you know, as long as technically possible through this. So are you comfortable giving a guarantee? I noticed with inside of this drama, what you have consistently said is, we will support things for as long as we can. You've managed to extend support for S1. Have you ever thought about saying, look, it's a $800 soundbar, we promised to support it for 10 years? Have we thought about it? I think the,

I'm not sure what, I'm not sure how much that helps necessarily, right, in terms of like putting that out there. And I don't think, I don't think consumers necessarily think in that way, you know, I don't look to my phone to get that guarantee as, you know, I don't look to my phone to get that guarantee as, I think, through what I'm purchasing or the laptop or any of those things as we go through it. I haven't found it like a big, I guess I would say it's not a big sticking point with consumers. The mindset is all over the map when it comes to what is the right number of years that a product should be supported. And so I think the best thing that we can do is just keep holding ourselves to be accountable to making these products awesome and then having them last as long as possible. And who knows, we might find breakthroughs, whether it's modularization or something else that we,

we do to bend the laws of physics around Wi-Fi or something that allow us to extend the life of products. And so I also wouldn't want to set an expectation, you know, that's actually too short in an era where maybe we find a breakthrough and it allows us to support it for even longer than, you know, than some X number of years. How long do you think people should expect right now with these products to last? Hmm. You know, I don't, all I can point to is say we have ones today that have been out there 15 years and we're still supporting them. But it's coming to an end. So is 15 is?

Well, but it's not, right? Because S1 continues to work. And, you know, I've been very clear that we're going to continue to try and, you know, keep that running for as long as possible.

So I would say that chapter hasn't even been written yet. And so we're still setting the bar for any audio product that combines computing into it. We're setting the bar for what the lifetime looks like. This brings me to the bar. the next turn, which is Amazon and Google. Here's my connection. You've got to support a legacy platform. You've got to build a new platform. You've got to put out new products. You've got to market those products. Those are all costly things to do. Your main revenue line is obviously selling hardware. You're up against Amazon and Google, who are very motivated to put speakers in

microphones in everybody's houses. Those businesses are deeply subsidized by their other much larger businesses. You have been very vocal about this competition being unfair, about your alliance on their platforms. You have sued Google. Amazon is now under all kinds of scrutiny from Congress. What is the status of your relationship with a big platform? See, I got there. So a couple things. One is, I do think focus is a strength for some companies in this situation. I think that's why we've been successful, even in the face of the Amazon and Google putting products out there at cost or below, and with a different strategic intent. So I think our ability to navigate that is a testament to the focus and the amazing people that we have at Sonos. And it's why

companies like Slack and Zoom continue to be successful, even in the face of some of these big tech giants. Now, that said, I think, you know, I lived through a period where, in my previous life, where Microsoft and Qualcomm got together to create wireless knowledge to kill RIM BlackBerry. And what was different? in that period. Because I think when you get in these conversations, it's always like, well, is it just that nothing's really changed or what's different in this time? And what's different is when Microsoft and Qualcomm did that, they still did it with a profit motive in mind, right? It was a different time where even like monopolists of the past have often entered new categories,

but they've done so with some degree of, well, we need to make a profit in this, to some degree. And what I think we're seeing now is an area. era where the, you know, big tech has learned from the mistakes of the past and is creating a situation where they use predatory pricing to effectively try and solidify an existing monopoly that they have. And with Google, you know, it's very clear that they're trying to prop up their customer data monopoly, right, and search on that with the products that they put out there. And I think the difference is they're willing to do this from and really at any cost, go and make sure that they prop up their existing dominant position.

And they do it also without innovation. And that's why we launched the ITC action, you know, the IP infringement, because they're just copying what others do in some cases. You look at whether it's speakers or home Wi-Fi or music streaming or now video conferencing, right, as you look at it. You know, Google jumping in, they haven't brought innovation to it. What they've brought is predatory pricing.

And they're jumping on the bandwagon. And we've never lived through an era, I haven't, where the big tech companies jump on the next thing. I keep calling it FOMO, right? They jump on whatever it is, gaming, speakers, now video conferencing. And they do it in such a way where they infringe on the invention of somebody else. And you saw it with ERO. You're seeing it with Zoom right now. You've seen it with us.

They are using their size and scale to do what's called efficient infringement because they know that down the road, they're basically counting that they will, even if they lose a court case, that it's worth it in the short term to keep propping up the dominant position they have elsewhere. And they're doing it with predatory pricing because they're coming in and they're using their strength in another category to fund, you know, cost or below cost offerings in another to make sure they don't lose their dominant position in search or retail or these particular other areas. And so I just think, you know, that a lot of companies have learned from the past how to keep a dominant position now in a way we haven't seen before. So has this affected your thinking on voice? We started out saying some of these

products have voice assistance and microphones. Some of them don't. The data isn't there. We don't see any usage. And now you're saying these companies are trying to crush us with predatory pricing and efficient infringement. What if I don't need their voice assistance anymore? Is that playing into you're thinking? No, well, less so. I, you know, from my perspective, it's more about the consumers in terms of what services we offer, whether voice or music streaming and those kind of things. If they want to use Amazon Prime Music and Google Play Music, YouTube music, those kind of things. We want to offer those, right? And we have good relationships with those teams. Same with, you know, a good relationship with the people that run voice over there. This is a different higher level societal issue, right?

So I am not going to hamstring our product experience, you know, in terms of what's there around this. But I do think I have a responsibility and we're in a unique position because we are strong to be able to speak out and say, hey, here's what it looks like is happening. It's obviously up to, you know, the anti-trust subcommittee, DOJ, FTC to be looking at these things and understanding, okay, what should we do. But when I look at it and understand what's happening and I compare it to previous areas where we had strong. strong players like Microsoft and Intel, I see that it's very different than it was at that point. And we're going to look, we're living through this era of COVID. I think we see that the big tech companies are probably going to become stronger. We're going to become more dependent on those companies.

And this is where we as a society just have to decide, are we okay with that or not? And we're standing up for ourselves against Google and saying it's not okay to infringe on our intellectual property and predatory price in this space. because it just drives out further innovation. And we have, the new business starts are at a 30-year low. That's crazy, right? That's crazy in this country of innovation and entrepreneurship. There should be more and more new businesses starting all the time.

We're at a 30-year low. We're at a 20-year low. We have half the number of public companies is 20 years ago. This concentration is not good for America. And so that's why we're standing up and taking the actions that we need to. So you filed your suit in January. You were in Congress in February, I think. Yes. Yep. What's happened since? Has there any movement on the Google side?

Is Sicily's committee come at you for more? What's been happening? Yeah. There are plenty of government organizations that have been knocking at the door, not just of us, but of many companies in our situation. So we continue to cooperate with those companies and give our perspective at the end of the day. And then the important thing to note with Google and our ITC action, which happens much, much more quickly than federal courts, which most people are used to. July 20th, we have our next, we have a pretrial markment hearing. So that's the next big milestone. And I think the timeline is something like hearings are supposed to happen and conclude by the end of calendar Q1 2021. So ITC has an accelerated schedule. That's kind of the timeline that we're in right now. And yeah, we're very confident in our position. And Google hasn't decided to just give up. We're very confident in our position. I'm curious. I mean, like, you still work with them.

You actually rolled out a new feature with assistant a few months ago where it can set Sonas as a default speaker now. You're obviously still working with them. Is the action caller in your relationship? No, I mean, not from a day-to-day working aspect in terms of some of the services they have and how we work on those services. There's an aspect of their business, which, you know, we feel, um, isn't doing the right thing, right? And there's obviously infringed on our intellectual property. And then there's a broader societal issue. It's not personal to anybody there or impact our day-to-day relationship around what's the right thing for society as we think about the power

that certain companies have and the way that they behave as they enter in new categories that, again, society needs to reckon with. We can shine sunlight on it and show people what our perception of that is. And so it's complicated in a way. But at the end of the day, they have services that they want to get out to consumers. We are in, you know, over 10 million of the most attractive consumers in the world's homes at this point. So, I mean, it's a mutually beneficial relationship and it continues. Is it fair to say that more people are using Alexa than Assistant on your devices? I actually have not looked at that data.

It's probably true just because Alexa was a year ahead of Google Assistant. So, yeah, that's probably still the case. I mean, you sued Google. You didn't sue Amazon. I'm guessing you suing both in at once was not a great idea. I think the more important thing is we don't want to sue anyone. So we've tried to, you know, as we've tried to work through this, we've tried to work through it constructively. Some partners have been willing to work through this because there's not just two companies that infringe on our intellectual property.

So as we work through this, you get to a point where sometimes if conversations aren't progressing the way you want them to, you do need to move to the courts. And that's the situation we've had to with Google. What's your relationship with Amazon? I mean, they're under an enormous amount of scrutiny now, right? That not only is Congress mad at them and potentially claiming that they lied in a hearing, there is workplace scrutiny of Amazon, there's the fact that, you know, their ship times have gotten longer. They just seem like one of their engineers just quit this week. It seems like the Amazon scrutiny is ever higher.

What is your relationship with them? Has it changed over the past few months? I have a pretty close relationship with Dave Lamp over there in the team. and respect everything that they've done, you know, as we go through this. So, I mean, we continue to have a good partnership with Steve Boom, too, over at the, on the music side. So a good partnership at the end of the day. And I think they obviously have, again, from a society level, there are questions of their power and where they sit. But as a partner to us, they continue to be constructive and we look at what we can do in the future and those kind of things.

So, yeah, this is where you have to split the two things out, right? there is the day-to-day and how are we serving customers together. And then there's questions that Congress and the Senate, the executive branch need to ask about what's the right thing for society. And that's where I think as well, they respect the fact that, you know, we are principled in our approach and how we do this. But it also isn't personal and it isn't something that should impact, you know, customers in a way and the services that they get. All right. Let's end on products. I'll bring you back out of fixing society.

Although maybe with great speakers, everyone will be healed. Arc, Sonos 5, New Sab, when does all this stuff ship? So it will be available June 10th as well. So, yeah, so announcing today and shipping on June 10th. So we're excited for people to listen to it. It's going to be a little bit different, right? Because we're online and we're in a different kind of world as we launched this product. But that's the other thing that's been amazing.

You know, through the month of April, we've seen people using our direct the consumer channel like crazy. And so I think consumer behavior is changing in a way where people are willing to purchase audio products on the brand. And with that kind of level of comfort, they know they can return it if they want to. But it's been a pretty strong April in terms of what we would have expected versus where the economy is. And so I'm excited to see how consumers react to ARC, sub, and five. And it'll be interesting to see the difference between the situation when it's only available online and then it actually moves into physical. Yeah, I mean, this was a question I was getting to, which is usually you have events,

you have N caps and big retailers, you have demos, you get to do all the stuff. What has changed about the approach now when it's basically just people in the web browsers? Yeah, as you know, as you've experienced through this, the entire kind of rollout to people in the media has been different. It's all virtual. The team did an amazing job to pivot to that over, you know, just a few weeks and put something kind of unique together. so people could experience it and understand the product. It's not the same as listening to it, for sure. But with our brand, I think it'll be interesting to see do people purchase it

and want to listen to it in that way. But all we can do is make it available online at this point, prepare for a physical to reopen. It's still very hazy as to when stores will reopen. What exactly that means as we go through this. So we focus on what we can control in the short term, try to create a good experience online. We've done a couple neat things with voiceovers

and trying to give people a different type of experience. And we'll see how it goes. All right. I end every CEO interview I do by asking people when they work. But I feel like I have to change it now, which is, I mean, it's different. We're all, you know, we're all sitting at home. How is managing the company through a new hardware development, bring up cycle, launch? How is that change for you?

When are you working now? What's your strategy for managing remotely? It was, one, we started in two different places, right? We started the company in Santa Barbara in Boston simultaneously. So we've always known how to work in a distributed fashion. But this has been different, right? With everybody at home, like all the kids, you know, with kids, with parents, roommates, all of these things. I have been so inspired.

And I am so grateful to the way our people have reacted to this, setting up test labs in their kitchens, in their bathrooms, right, to test some of these new products and get ready to roll them out the way the PR team's pivoted and the go-to-market team so that we can launch these products. the way that we have, it has been tremendous. And when this hit, we immediately shifted our priorities. And I said our number one priority is to support our people. And so we helped get people set up to work from home. And one of the things that we quickly realized is people are struggling with getting their kids set up on remote learning. If their parents need help, if their neighbors need groceries, these kind of things. And so we instituted what we call care time.

And so everybody gets 10 hours a week to paid to be helping their kids with school or those kind of things. and try to create, you try to help people manage through this, because I think there's a real danger that people burn out and overwork themselves in this situation, since there isn't that clear barrier between work and home. And I just could not be more thankful for the way everybody at Sonos has stepped up through this period. And so I felt a responsibility to say, hey, make sure you're taking care of yourself, your family, your roommates, all of these things through this period. And so we, you know, we've tried to do that.

And I do, you know, I do think it's a, it's a whole different world right now, but I'm just very grateful. And the perseverance, the agility, the creativity we've seen through this has been just awesome. And it makes me, you know, makes me realize all the investments we've made all the time I spend, you know, I think I've told you before that there's two things I focus on strategy and culture. And all the time I've spent on culture and trying to get us to a place where, you know, people, you know, feel like they have, you know, something special they're doing. at Sonos and they want to be part of something special and we treat them well through this, I think it all pays off in a crisis because people are either going to, they're going to go one way or the other, right, which is they're going to withdraw and it's going to be harder or they're really going to step up and rise to the challenge. And our people have risen to the challenge like

I could not have imagined. And I'm just so grateful. That's great to hear. You've still got to manufacture the products. I'm assuming you've got to get people out in a facility. People are still traveling, you've got to put them in boxes, you've got to ship them. That's all not happening in this country. How are you managing that side of it? You know, and this is where, you know, our team in China started working from home in January. And they were coming back to the office in March when we all went and started working from home. So in a, there was a bit of a silver lining there, which is the people, you know, all of us going and started work from home could see, hey, wait, China has been through this. They've weathered it and now they're back. There is light at the end of the

tunnel. And I think we've done a tremendous job of getting creative so that some of those things could be done at home. Some of them have to be done at manufacturing. Remember, we've also increased the complexity in our manufacturing and supply chain since it's not just China. It's Malaysia. Then they went through a shutdown. So there's been tons of complexity, but the team continues to find creative solutions. And we've just made sure that we're putting safety first. So we've said, if you feel uncomfortable in any of the situations, you don't have to go and we'll figure it out. and the team's done an awesome job at doing that, but it's complicated, right? And it takes a toll on everybody. And, but, you know, I think we come out of it stronger and probably more creative,

quite frankly, in going through all of this. I wouldn't wish it on anybody. But you really, you know, you really see what people are made of through this. And Sonos people are just awesome from everything I've seen through this. Awesome. Well, thank you so much, Patrick, for joining us again. Thank you for finally taking my one product request and putting out this atmosphere. soundbar. I've only had one product across like two years. That's it for 10 years. You can come back to 10 years and give me your next one after that. I got to come up with a new surround format. I do. I couldn't come back until we had this product. So I'm glad to bring you your product. And it's always enjoyable to talk to you. So thank you. I appreciate it. And I hope you,

everybody at the verge and everybody out there, stay safe and healthy through everything we're going through. You know, just like we've seen in China, we will get through this. We will come out the other side and yeah, just hope everybody takes care through it. Awesome. You too, man, and I'm super excited to listen to this thing. Thank you for being here. Thank you. All right, my thanks to Patrick Spence, CEO of Sonos. I'm going to have to think of a new product to ask him for repeatedly so he can announce it and come back again. That's my entire plan here. We'll be back on Friday at the chat show. We've got some big guests coming up. I'm pretty excited about it. Stay tuned. Tweet at me. I'm at Reckless. I'd love to hear from you. Love your feedback. We'll see you soon.