Sonos looks to hardware subscriptions to broaden customer base: Stacey on IoT

By Janko Roettgers

Sonos is taking another look at hardware subscriptions, at least if a new job posting is any indication. Based on the details in that listing, the company appears to be on the verge of expanding its Flex membership program, which lets people rent Sonos speakers for a flat monthly fee. Expanding the program could not only help broaden the company’s customer base, but help continue to grow it even as consumers cut back on spending due to inflation.

Sonos first launched Flex in end 2019 in the Netherlands, where it has since offered a handful of customers three rental packages starting at €15 ($15.50) a month for a pair of entry-level speakers and up to €50 a month for an audio full surround sound home theater package. As a Sonos spokesperson told me this week when asked about the job posting, “We’ve learned a lot about customer interests through this program and are continuing to explore how subscription models can offer more flexibility for listeners.”

The Sonos Ray soundbar costs less than many other Sonos devices. Image courtesy of Sonos.

Sonos began looking for an accounting analyst for Flex a week ago. “The role spans multiple accounting teams and is based on a preference (sic) on the east coast of the United States”, states the job listing, suggesting Sonos is eyeing more markets for Flex. Sonos currently generates approximately 60% of its revenue in the Americas and just over 30% in the EMEA region.

“Sonos Flex customers will be able to enjoy the Sonos experience at home, without having to invest in our speakers,” the listing continues. Customers will be able to choose from one of three Flex packages and get access to product updates, with the job listing promising that the company will always “hear the latest” of its products.

The company’s Flex trial in the Netherlands was limited to 500 homes. It appears Sonos suspended new Flex subscriptions in late 2020 and has been ever since tell visitors to its website that Flex is “currently fully booked.”

Reactions to the trial were mixed. The Verge called it a “strange bendingand Tien Tzuo, founder and CEO of subscription monetization startup Zuora, confessed that was disappointed. “This is not a very attractive subscription service,” Tzuo he wrote, adding that he would have preferred the company to include additional service features beyond device rentals. As he put it, “Automatic equipment upgrades aren’t enough anymore.”

However, not everyone is so skeptical of the potential of a Sonos hardware subscription program. “Expanding this rental model to other regions helps grow a more stable revenue base by adding monthly recurring subscription revenue,” said Erickson Strategy & Insights analyst Paul Erickson via e- mail. “I’d honestly be surprised if they don’t eventually roll this out in their top 3-5 markets to grow the total Sonos customer base available through a more affordable option.”

Like many consumer electronics companies, Sonos has long been exploring ways to diversify its revenue streams with subscriptions and services. The company launched an ad-supported music streaming service in early 2020 and added an ad-free paid tier later that year. It’s unclear whether Sonos has any plans to combine Flex with access to its paid streaming product, but such a move wouldn’t be unprecedented: Apple, which has had its own hardware refresh program for years, is reported looking to combine it with your Apple One service plan.

So are the service subscription plans increasingly becoming part of the consumer IoT. In fact, switching from device ownership to rental plans could actually improve the consumer experience and maybe even guarantee it obsolete devices are recycled.

For Sonos, Flex could also be a hedge against economic uncertainties. Other hardware makers have responded to rising component costs and inflationary pressures with lower powered gadgets sold at or below cost. The loudspeaker maker has less room to do this if it doesn’t want to compromise on sound quality, and its service revenues are so far too small to compensate for the hardware losses.

Giving consumers a way to get Sonos products without huge upfront costs could be another way to grow the company’s installed base, which has reached 14 million families at the end of the last quarter. “The Sonos product line is considered high-end,” Erickson said. “In order to support customer growth and domestic penetration growth during this time of rising inflation and consumer price sensitivity, Flex is a more affordable alternative for many who might not otherwise be willing or able to purchase Sonos hardware.” .

However, Erickson also cautioned that the success of a service similar to Flex depends on a company being good at, well, service. As he put it: “The long-term growth of your Flex subscription will ultimately depend on how adept Sonos is at pricing on a per-market basis and how well they deliver the service side of the equation: install, repair /support and timely updates”,

This story was written by Janko Roettgers, which can be found at www.lowpass.cc