On a cold and blustery day that the people of Hilversum call "summer," I caught up with Sonos’ affable CEO, John MacFarlane. He was visiting the company's European HQ, located about 20 minutes outside of Amsterdam, to make final preparations for launch of the Play:3, a new, stylish addition to the company's successful line of music-playing devices and accessories.
John was refreshingly candid for a chief executive, whether discussing Apple’s competitive AirPlay technology or the opportunities he sees in home theater audio. According to John, the latter "is awfully attractive" to Sonos because it’s so "horribly done" by the home theater industry.
The entire conversation lasted about an hour and was free of the usual bureaucratic double-talk and non-answers I'm accustomed to hearing from C-level executives. Just frank honest discussion from a man who clearly understands his customer base and remains boyishly enthusiastic about the company he founded in 2003.
Thomas: By talking about wireless audio or "Wireless Hi-Fi" as your new tagline reads, the mind wanders to a major competitor in the market.
They don't sell a product that's competitive with us.
True, but we saw a bunch of vendors jump on board when AirPlay was announced.
Oh, there's a boatload. That's who we compete with.
Well, until Apple brings back its Hi-Fi product with AirPlay.
Anyway, the ecosystem that's developing around wireless AirPlay audio is so simple to use. You're already integrating Sonos with AirPlay using an AirPort Express as a kind of bolt-on solution. Bridge Co's AirPlay chip can be an expensive item to include in your product...
It's not the expense, it's that it just doesn't work very well.
But in the marketplace, how will you compete? How will you explain to the consumer why they should choose Sonos over the AirPlay?
First off, "consumer" is a broad word. If you're in a dorm room, you're in college, I think an AirPlay solution is the right solution. Because the world is centered around your personal collection on your iPhone or whatever have you. If you're a music lover and you have a home, and you want to listen to music around that home then I think it's on the opposite end of that -- it's a no-brainer for us. You've got to focus on what you're all about. For in the home, we have to communicate that it's unequal and it's the bar in which everything else is measured. If you're going for the dorm room, or single apartment, or small flat in London, and you're just starting out in your career then AirPlay is great, it just depends. There isn't a one answer to that when you define it that broadly.
So your customer hasn't changed? Home owner, established, family with a large music collection?
Our customer hasn't changed. The mission from the beginning since 2002 is fill your home with music and be able to play anything on the planet. That's informed by who we're aiming at. It's a social environment, so you're way beyond the confines of an iPhone or two personal collections. It plays right to the subscription service because you want to play anything ever made. And I think we uniquely own that space. While you can hodgepodge together an AirPlay solution for that, it's going to be ugly. Because, let's say you drop Spotify onto your iPhone and you put three AirPlay devices around -- you can't play that on all three. You can play that on one.
"If what you’re after is getting your music off your phone and into the room, AirPlay is a no-brainer. If what you’re after is enjoying a wonderful experience around the home, it’s a no-brainer for us."
The data path is Spotify to your access point to your phone, at 320kbps Ogg Vorbis, turned into 1.5Mbps, back to the Wi-Fi access point then over to the AirPlay device. Good luck. For one stream that's ok, try and do three streams -- no way. And that frankly is what drove our AirPlay experience because we're big fans of AirPlay, it's just a feature on a multi-room music system. It's not what makes a multi-room experience. I would say those are apples and oranges. If what you're after is getting your music off your phone and into the room, AirPlay is a no-brainer. If what you're after is enjoying a wonderful experience around the home, it's a no-brainer for us. If we can't communicate that then we deserve to lose because it's about as easy as it gets. I mean, pick the Zeppelin [Air]. You can buy two Play:3s and have a wireless multichannel killer experience for under that price.
It's true, good AirPlay speaker solutions are really expensive.
Yeah, and we absolutely blow them out of the water with the Play:3. And in a rapidly increasing percentage of our homes, there's at least an Android device there. Maybe you give one to your child, maybe your wife, maybe you like it, there's one. Where does that work with AirPlay?
You launched your free Android controller back in April, but BlackBerry users seem more consistent with your demographic.
We'd love to go after that, trouble is, what do you go after? The Curve? They're all different. There's no way, you can't actually look at the BlackBerry crowd as a uniform group. It's segments of different phones, most of which don't even have Wi-Fi. So you'd have to do something where you go from the phone to the carriers network and back to the home -- those are just asking for trouble.
Regarding controllers, what’s the obvious next platform to address?
The obvious is an Android tablet, but we’re always looking at RIM, and we’re looking at Microsoft of course. The Windows 7 is not a bad phone. Whether they can, with Nokia, get enough going that it’s interesting… we’re definitely watching. Do we have any announcements about upcoming apps? No. We’ve already demonstrated our willingness to do that. We bet the company on smartphones and tablets.
Will Sonos offer some parental controls to dumb down the interface and limit speaker volume?
We had lots of debates about this early on: how do you personalize a controller. With the CR100 and CR200 you don’t really know who’s using it. You can’t really put an identification step up front, it’s just getting in the way of time-to-music. But if we’re on your phone, that’s your phone. So we can start doing things like, maybe you have a mode on the Android controller or the iPhone controller to dumb it down. But that’s the challenge with doing things like parental controls, which one are you using and which one are they using. You can’t put, "hey, type in the three numbers to start using a controller" because that’s going to drive you crazy usability wise, you’ll turn it off and never turn that feature on again. We view the tablets as the social controllers, the one you’re going to pass around, and the smartphone as your personal controller. There’s a real nice opportunity to have zones that are ordered based on how often you use them and stuff like that.
You now have the Play:3 at the low-end and the Play:5 at the high end, yet there seems to be an opportunity to go even higher.
You mean higher end than even a stereo pair Play:5? Because Rick Rubin who’s an adviser for Sonos would tell you that’s as close to studio quality as you can get. I think we have that market well covered already. A stereo-paired Play:5? Nobody can touch that. We can do so many interesting things like the bass happens out of both of them so we get even lower bass than a Play:5 which already gets outrageously low bass. That combination is just unbelievable. We blew Rick Rubin away with that.
Is that something you’ll be promoting more with the Play:3 as it’s the more obvious candidate for stereo pairing?
Yeah, it’s a stealth feature right now. Because of the dual-nature of the Play:3, it actually creates that, "hey, can you use them as a stereo pair" and that’s a perfect avenue to promote them. So the answer is yes. We didn’t have the right avenue to drive that message because the Play:5 doesn’t look like it should be paired with another one.
The home is still the focus, but there was talk about you getting into the car…
Ain’t gonna happen. Look, there are three key places where people listen to music. Portable, which Sony gave to Apple and Apple owns. And we’re not going near that, because it’s even becoming a feature on the smartphone. It’s a complicated thing to go after. The iPod is uninteresting to Apple now, they’re shrinking. There’s the home and that’s the one we think has just started. 99.9 percent of people have something they bought 10 or 20 years ago so it hasn’t even started yet. And there’s the automobile. Each one of those is really different. If you ask Apple about the automobile, you can just play the iPhone or iPod in that environment and the same thing about the home. So they approach it from the perspective of iPod- iPhone-out. The home is really different than an auto or personal, because those are two very personal experiences.
"Apple will come out with a TV and I think that it’s going to rapidly change that whole space."
You’re usually alone in a car with one primary listener. I can easily see that playing to Apple’s view of the world. The car manufactures don’t agree with that so we’ll see how that plays out. But getting in the middle of that doesn’t play to any of our strengths. You can see this play out with Pandora or anyone going after the automotive environment because, how do they get into the car? Well, all of their solutions right now go into the smartphone and move from the smartphone into the car’s audio system and then move some of the controls to the car. That doesn’t play to any of our strengths. The home is a social environment, you’ve got a family, your kids have very different tastes than you, your wife probably does, that’s a perfect play for all the music ever made. You’re on a broadband internet connection. That’s just a really different world than those other two. And I think that’s where we have real strengths and real opportunities. So why go outside of that unless that’s too small. Because we’re not doing that one nearly well enough yet.
So the other obvious application of audio in the home is home theater
That one is awfully attractive, it’s horribly done. It’s a little complicated because quite frankly the existing consumer electronics industry short changed the audio on movie because TVs have become the switcher. You go HDMI into the TV and you choose from the TV which one you’re watching. And the way that TVs get the audio out is really messed up. You can do two-channel out, that’s probably the most common. You can do an optical cable which supports some stack of the audio formats out and even on some TVs it only turns into 2-channel. And you can even get it over the HDMI on an HDMI-out but only on some TVs. So it’s a really fragmented thing. And in my personal view, and I don’t think it’s terribly controversial now, is that Apple will come out with a TV and I think that it’s going to rapidly change that whole space. But we look a lot at it because it’s a very unhealthy space in terms of getting great sound with your video. But it’s a really hard one to bite off well right now. And if we can’t do it well, we’re not going to do it. You can see that I’ve thought about it a little bit.
I know you’re hiring people in the home theater space.
Yeah, we’ve hired some great people.
You seem to have an obvious solution for making the two rear channels wireless.
We could knock that dead. But it’s just not enough of a solution. The best selling home theater gets rid of all the side channels, fools you into thinking the front channels are everything. The Bose 3-2-1. Number one in revenue share and number one in unit share.
And then you have the soundbars with faux surround sound.
The soundbars do the same thing, yep, probably a little bit better. Same set of challenges.
You would seem to have the software chops to pull off 5 channel wireless.
It’s not a question of software chops, it’s how do you make a whole solution. Not to mention that TVs now are flatter and flatter and sit on the wall. So, do you want a cable coming out of the TV? People hate that. But that’s the only solution you have right now.
Wiring a room for multichannel audio is almost impossible to do cleanly without breaking into the drywall. When will Sonos solve this as you did whole-home audio?
We’d love to. Look, if we came out with a solution right now that didn’t live up to our bar, you wouldn’t make many happier. Same bar as Apple: outrageously great products. And I think you’ll think the Play:3 is outrageously great. When we can do one for home theater we will. It’s a complicated space.