In the audio hardware industry, sound systems have traditionally been built around playback devices – from LP turntables to cassette and CD players. Since Sonos’s inception in 2002, it was clear that the prevailing playback format of the day, CDs, had a limited lifespan due to the advent of internet-delivered alternatives. This insight was the foundation for their strategy to design sound systems, comprising high-quality smart speakers that connect directly to the internet for content. Additionally, Sonos used rapidly improving home network technologies to introduce consumers to a wireless listening experience simultaneously in multiple rooms. Given that they eﬀectively created this category, for a long period of time Sonos had no comparable competition (charted below).
Technology underpins their market lead
Sonos has propelled itself into a leading position in the premium home audio market through their pioneering technological innovation and through striving for superior quality and exceptional user experience. Consequently, enhanced software and networking capabilities should set them apart from competitors in the future.
Their unique diﬀerentiators include:
Superior acoustics: Premium sound equipment typically optimises its performance within specific locations to perfect the user experience. Sonos’s differentiated engineering strategy aims to “fill rooms with brilliant sound” by compromising slightly on specific location sound quality (which traditionally appeals to extremely discerning audiophiles) in favour of above-average sound quality throughout the room (that is more widely appreciated) – enhancing the social experience of the sound.
Designed longevity: 90% of all Sonos speakers ever manufactured are reputedly still in use, often functioning eﬃciently within more modern Sonos sound systems. In a consumer electronics market acclimatised to designed obsolescence, the robust build of Sonos products, together with continuous spend on software updates, has helped the brand establish a reputation for enduring quality and uphold this advantageous modular expansion functionality through time.
Increasingly large amounts of development spend are however needed to keep the old technology in the system, particularly as the gap widens between older speakers and rapidly advancing new generation speakers. Sonos recently addressed this by gradually moving to a common architecture platform and carefully, through incentives, retiring very old technology.
Pioneering multi-room sound technology: Sonos users can engage with audio content across multiple rooms in their homes without compromising on sound quality. This involves sophisticated technology that enables the sound to “follow you” with no notable detection of delay between spaces, such as:
• Tight synchronisation – content played simultaneously in different rooms runs the risk of sound “bleeding over” between spaces due to synchronisation delays. Although human hearing can only consciously detect delays of a few milliseconds, we subconsciously experience audio irritation (mild jarring) at slight synchronisation delays. Sonos’s hardware and algorithms provide the tightest audio synchronicity.
• Shifting functionality – Sonos sound devices for television (sound bars) seamlessly shift from home theatre functionality to becoming part of a multi-room sound system when needed.
• Seamless volume control – allows users to toggle volume across a set of speakers in the house in ways that preserve room preferences. Patented hysteresis algorithms ensure no sudden sound spikes in a baby’s nursery, for example.
• TruePlay – patented tuning software that analyses acoustic factors impacting an individual speaker’s sound quality in order to recommend optimal tuning settings for each component of the sound system.
Widest range of content and multi-platform assist: Unlike competing systems, the Sonos ecosystem allows multiple music and podcast providers to oﬀer content on their single platform. This is achieved through long-standing partnerships and software enabling. Even though most music content is consumed via two providers, Apple Music and Spotify, this wider platform allows consumers to also engage with boutique audio content providers.
Voice control functionality: Uniquely functioning as an open platform, Sonos software allows users to choose from a wide range of embedded competing voice assistants such as Google Voice Assist, Apple Siri, Amazon Alexa or their own in-house Voice Assist. Sonos sound systems are also equipped to filter out noise to better pick up user voice prompts (can be distorted in a multi-room setting with diﬀerent audio content streaming).
Extensive patent portfolio offers buffering
Sonos’s research and development eﬀorts follow an “innovation pull” process, where customer needs are identified first and then followed by the development of the requisite technology solution. This contrasts with the traditional approach of basing innovation on utilising existing technological developments. It has led to the development of a disparate and extensive (close to 2 000) patent portfolio, which aims to protect Sonos’s key product attributes from competition. Moreover, solutions to customer-informed challenges, achieved using a multi-disciplinary approach, results in better product features and stronger patents.
US International Trade Commissioner findings have forced Google to remove certain multi-room volume control features from its smart speakers that infringed Sonos patents. US courts have also recently ordered Google to pay damages ($32.5 million) to Sonos for infringing speaker grouping patents. The company is actively seeking to defend numerous other patents with a view to potentially earning meaningful royalties from competitors in the future.
The Lego effect
Sonos has an unusually high level of repeat sales as the multi-room functionality of their sound systems dramatically improves as speakers are added. In particular, the repeat sale opportunity takes root once single product customers are enticed to add a second piece of equipment – thus beginning an arguably addictive multi-room connected sound experience.
The existing potential for growth in households using Sonos products is vast, but enticing consumers to add to their Sonos product portfolio for an enhanced sound experience presents an even more expansive growth opportunity. If all single product households upgraded to the average products per capita of multi-product households, the total number of Sonos products in use would increase substantially (43% higher than 2022 levels – illustrated in charts below).
Valuable information gathered from initial device registration and ongoing engagement with the software, aids in assessing current user habits, including the location of existing devices in the home in relation to one another, audio and music content preferences, and the level of engagement with embedded voice assistance microphones. This enables Sonos to encourage repeat sales through targeted promotions and associated incentivisation.
Calling all culture seekers
Sonos aims to target and cultivate relationships with a specific high-income segment of the market, referred to as the “culture seekers”, by addressing their specific needs through:
• Providing excellently functioning, aesthetically appealing, well designed and easy to use premium products.
• Enabling ease of consumption of high levels and varied forms of audio content (music, movies, podcasts, audiobooks) with above average acoustic quality, often in a shared social setting.
Such “culture seekers” are societal influencers that frequently share their experiences (good and bad) with their social networks. This word-of-mouth advertising method has been very eﬀective in building brand awareness for Sonos.
Sonos Radio1 also targets this market through the inclusion of a variety of Sonos-owned stations that typically feature content curated by renowned artists and industry experts.
1Free internet radio service available exclusively to Sonos customers, featuring 60 000 stations from around the world.
Differentiated distribution and products
In its early years, Sonos relied heavily on the distribution capabilities of certain large retail chains. As brand awareness grew, particularly through existing customer recommendations, the distribution strategy has evolved towards:
• Selective partnerships with retailers more closely aligned to their target market. For example, Sonos and Ikea have developed dual functioning, aesthetically attractive products like bookshelf speakers, kitchen speaker hooks and speaker lampshades.
• Increasingly encouraging direct e-commerce purchases through its own website. This fast growing (highest margin) distribution channel is best able to monetise valuable data-driven leads generated from customer engagements and observed behaviour.
• A large proportion of Sonos group revenue (25%) derives from professional sound system installations. Historically, professional installers were trusted consumer advisors who selected the equipment for a small high-end segment of the home audio market and managed the installation thereof (often involving building and lots of cabling). Since inception, Sonos has captured a share of this lucrative market (highest lifetime revenue, high net promoter scores and high margins) through simpler installations (wireless systems), aesthetically pleasing products and legendary product reliability. Additionally, the nature of their products reduces the need for clients to bear installer call-out costs for subsequent maintenance.
A sound strategy for growth
Strongly growing online audio consumption (across video, music, podcasts and audiobooks) and increasing demand to experience high quality sound (often in a social setting) presents Sonos – still a relatively small player – with the opportunity to steadily grow new users. Furthermore, increased product adoption per household will mean that Sonos should continue to grow profitably, well into the future.