SANTA BARBARA, CA - In 2002, a few months after the launch of the first iPod, John MacFarlane made his push to get digital music out of the computer, headphones and earbuds - and into the living room.
He started Sonos, a wireless music company that in June will celebrate its 10th anniversary. In its first decade, Sonos has sold nearly 1.5 million units of its wireless music system to 550,000 customers. Revenue for the privately held company has nearly doubled during the past three years to more than $200 million in 2011, says MacFarlane, who was interviewed at Sonos' corporate headquarters here. "We're just getting warmed up."
Sonos high-fidelity systems - which connect to an Internet router to stream music around the house - used to be sold mainly at specialty stores but are now also sold at Target and Best Buy. The price of a basic package has dropped from about $1,000 to $350. And fans of the product gush with enthusiasm on Facebook and Twitter. "Love it," wrote Andrew Matuszak on Facebook this week, after he bought a Play: 3, the entry-level $299 speaker, and a $50 Bridge, the device that connects to the Internet router.
Matuszak, who lives near Reading, Pa., says he first heard of Sonos while shopping with his girlfriend last week at a local audio shop. They decided on the Sonos, brought it home, and use apps on their smartphones - he's Android, she's iPhone - to select music to play through the speaker. "We put it in the master bedroom, but we can move it throughout the house," he says. "We've put it in the bathroom and living room with no problems whatsoever. You just unplug it, and plug it back in, and music starts playing."
Musicians love it, too. Mike Shinoda from Linkin Park, former Spice Girl Mel B (Melanie Brown) and Colin Meloy are all vocal fans of Sonos, MacFarlane says.
Meloy, lead singer of the Decemberists, started with one speaker and now has six spread through his Oregon home. He also bought Sonos speakers as gifts for friends. "It's so much easier to just throw these speakers into a room and not have to have wires," Meloy says.
Three developments helped Sonos turn the corner, says MacFarlane.
•Reaching store shelves in Target gave Sonos access to a larger, female customer base. Before its Target launch in October, its customers had been primarily male.
•Devloping an app that lets listeners control the music from anywhere via smartphones and tablets.
•The rise of online music services such as Pandora, Rhapsody, Rdio and Mog. Two-thirds of Sonos' customers use the services. Pandora, which is free, is the most popular, MacFarlane says.
MacFarlane says Sonos has had some profitable years, but "some years we make money, some years we lose," he adds. "We bias toward growth." He declined to discuss current financials.
Sonos isn't alone in selling wireless speakers but dominates the market. Bose and iHome have similar $299 mobile speakers, while iHome and Logitech offer Bluetooth speakers, with a more limited range than Sonos, starting at $99.
Home audio - amps, speakers and boom boxes - has been on the decline for years, says Ross Rubin, an analyst with researcher the NPD Group. Sonos has a "difficult" time persuading consumers to buy speakers - especially when their old ones sound fine, Rubin says. "As prices have fallen, we've seen their (Sonos) sales grow."
The living room competition could heat up even more later this year, courtesy of media giant Google. Earlier this year, Google asked the FCC for permission to develop an entertainment device for the home. Google has yet to officially announce or show a product. MacFarlane isn't concerned. Eventually, "everyone's home will be filled with music," he says. "The only question will be, what's on the label? If Google does make a great product, some will be named Google."
But MacFarlane says the living room, with connected TVs and devices, is a natural for any company. He's itching to tackle marrying Sonos with flat-panel TVs, a natural area for expansion. "We'd love to tap into TVs," he says. "That sound is getting worse, not better, as the screens get more beautiful."
Of more immediate concern to Sonos, he says, is for the company to bring new products to the home. MacFarlane has a new audio hardware product scheduled for later this year, which the company declines to discuss.
Rakesh Agrawal, a principal analyst at market researcher reDesign Mobile, says he expects Sonos to eventually be "scooped" up, perhaps by Apple.
By Jefferson Graham
USA Today
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