Speaker 1: Welcome, Welcome, Welcome back to the Plot West Steps podcast.
Speaker 1: My guest today the CEO Somost Patrick Spence publick, good day, Happy,
Speaker 1: good to be here, Bob. So a hearted COVID nine
Speaker 1: team effects so much. Well, wow, it's uh, it's sent
Speaker 1: everybody home almost overnight. Uh. And if you would have
Speaker 1: asked me, you know, back before Covid if we'd be
Speaker 1: able to run the company, uh, you know, from everybody
Speaker 1: working from home, I probably would have had a hard
Speaker 1: time believing it, quite frankly. And it was incredible because
Speaker 1: our team you know, just stepped up to really be
Speaker 1: able to keep the business going UM during that period,
Speaker 1: and in fact, we kind of threw out the playbook
Speaker 1: that we had UM and we got re oriented on
Speaker 1: a few key priorities. The first was supporting our people
Speaker 1: and making sure that they were set up for success
Speaker 1: and you know, able to balance kind of the demands
Speaker 1: of life at that point, UM. And then we got
Speaker 1: really focused on bringing the joy of Sonos to more homes.
Speaker 1: So we had a whole bunch of our retailers and
Speaker 1: distribution channels closed UM. And so what we did was say, okay, like,
Speaker 1: how can we help people through this period and maybe
Speaker 1: make life at home a little bit better. Yeah, so
Speaker 1: getting focused really um, you know at that time on
Speaker 1: Sonos at Home is what we called it. And we
Speaker 1: launched a campaign to help people you know, for their
Speaker 1: home office and how Sonos could help make their home
Speaker 1: office a little better, make streaming at home a little better, um,
Speaker 1: you know. And so so we were really trying to
Speaker 1: just um, you know, play into kind of what was
Speaker 1: happening and play our role right and kind of get
Speaker 1: back to our mission to how we get out. Well,
Speaker 1: let's slow down a little bit on a more granular level.
Speaker 1: Tell me about the office use in helping people in offices. Well,
Speaker 1: so you know, as everybody was going home, um, we
Speaker 1: felt like, you know, we could bring music into people's
Speaker 1: home offices, and so we I think it was the
Speaker 1: maybe the one at that point we were saying, hey,
Speaker 1: like think about putting a one in your home office
Speaker 1: to have some background music. And we gave some sound
Speaker 1: suggestions at that point, maybe some a s mr um
Speaker 1: you know, kind of background music that could help people
Speaker 1: kind of go through the day, um and navigate their
Speaker 1: day a little bit with some um, you know, some
Speaker 1: mood music. Uh. So it wasn't quite so stressful. Okay,
Speaker 1: so you are the band new facturer. How did you
Speaker 1: reach the people who have home offices? Well, you know,
Speaker 1: the good thing about son Nos is that we have
Speaker 1: all of our customers information from when they actually registered
Speaker 1: their system. So we reached out to all of our
Speaker 1: existing customers and then we actually so with with messages
Speaker 1: basically a tailored campaign that we created, you know, overnight
Speaker 1: as a result of Covid reaching out to them um
Speaker 1: and saying, hey, you know, think about putting a sons
Speaker 1: one in your office, um, and here's what you can
Speaker 1: listen to, and some recommendations that we had. We reached
Speaker 1: our existing customers that way, and then we actually went
Speaker 1: out and promoted the story if you also know us
Speaker 1: at home across all of the social media channels and
Speaker 1: all the digital channels out there that we largely use
Speaker 1: for a lot of our advertising efforts these days. Okay,
Speaker 1: was there a discount for pre existing users? There was, yeah,
Speaker 1: so we so in that period we gave some discounts
Speaker 1: um to people. We created a bundle for streaming for instance,
Speaker 1: during that period as well, so if people we knew
Speaker 1: people would be watching more video, so if they wanted
Speaker 1: at that point to get a playbar or a beam. Um.
Speaker 1: We put that together with surround sound system and after
Speaker 1: a discount on that to people as well. UM, so
Speaker 1: we're really pivoted to try and quickly get people, um,
Speaker 1: you know and meet their needs kind of where they
Speaker 1: were at that time and kind of the changes, the
Speaker 1: dramatic changes in the way that people were spending their
Speaker 1: time at home. So how effective was that campaign? What
Speaker 1: kind of percentage results are you're looking at, you know,
Speaker 1: like direct mail one percent is what targets want a
Speaker 1: campaign like this to existing customers, Uh, what kind of
Speaker 1: response to well, well above that? So in that quarter,
Speaker 1: Baba is the next one. You know, our director consumer
Speaker 1: sales were up year every year we had an absolutely
Speaker 1: incredible you know rise. Now, of course we had other channels,
Speaker 1: physical channels closed at that particular point in time, but
Speaker 1: we were able to kind of meet customers where they
Speaker 1: were and at that point we had all these retailers
Speaker 1: are closing, you know, the main um levels of distribretion.
Speaker 1: At that point of our sales, we're going through, um
Speaker 1: through you know, people that weren't us, weren't our stores,
Speaker 1: weren't weren't our online session weren't weren't That wasn't our
Speaker 1: online store pre pandemic, And so quickly we're like, okay,
Speaker 1: what are we gonna do? How you know, and how
Speaker 1: do we survive this period? Right? Because I think at
Speaker 1: that point everybody thought, Okay, we're going into recession. It's
Speaker 1: gonna be a very difficult period. Are people going to
Speaker 1: spend money? What are they gonna do? And um, So
Speaker 1: we we went hard in terms of directly to the
Speaker 1: customers both are existing and then new and sending them
Speaker 1: to Sons dot com. And we saw year of your
Speaker 1: growth in that period. We clawed our way back to
Speaker 1: I want to say, just short of the year before
Speaker 1: results in that period, and then we actually built on
Speaker 1: that afterwards and our business really took off. Okay, the
Speaker 1: references what that was in uh, I think that was
Speaker 1: our good the quarter last year where the pandemic um
Speaker 1: you know, really first started. So that was probably our
Speaker 1: fiscal key three of last year. When you're saying relative
Speaker 1: to what the year prior, Yeah, to the year prior. Okay,
Speaker 1: we're talking about quite quarter, correct, That's okay, let's just
Speaker 1: go back when there's not a pandemic. What percentage of
Speaker 1: equipment is sold direct by Sonos via third parties. Yeah,
Speaker 1: uh so direct was about ten percent prior to the pandemic,
Speaker 1: and what is it now? Um So through last year
Speaker 1: we reported that it was about of our total sales.
Speaker 1: Why do you think in a world that everybody is
Speaker 1: so comfortable buying on Amazon that most of your customers
Speaker 1: are buying through traditional retail channels? Um, you know, I
Speaker 1: think people if they're going to buy a TV or
Speaker 1: buy something else, you know, I think that's a time
Speaker 1: where people, um will buy through the physical channels. Right. Convenience.
Speaker 1: We've actually done some research to look at, but why
Speaker 1: did somebody who is already a Sonos customer purchase at
Speaker 1: best Buy or Costco? And in some of those situations,
Speaker 1: they just wanted to get another product today. So there's
Speaker 1: kind of like the convenience and I want it right now.
Speaker 1: I'm not even gonna wait for you know, overnight or
Speaker 1: two day shipping. But then for our um, you know,
Speaker 1: for our home theater products, there's very much the match
Speaker 1: of I'm buying a TV, how am I going to
Speaker 1: make it sound great? Right? And that's where Okay, there's
Speaker 1: these products from son Nos m whether you're s buy
Speaker 1: or costco that uh makes sense in terms of purchasing
Speaker 1: UM in tandem with a TV purchase. And so that's
Speaker 1: like a compelling a pretty compelling fact. And then the
Speaker 1: one thing that people underestimate is as well, the what
Speaker 1: we call our installed solutions channels, the dealers that install
Speaker 1: UM products in people's homes. And that's been an amazingly
Speaker 1: resilient channel. You know, it's almost it's been about nine
Speaker 1: years since I've been at Sonos, and when I first
Speaker 1: came in, I thought that would be one that would
Speaker 1: be decimated by a lot of the other channels that
Speaker 1: exist out there. But I think the UM those partners
Speaker 1: continue to show their value UM. They continue to solve
Speaker 1: customer problems and they're a big part of our business
Speaker 1: as well. And they've been amazingly resilient through the pandemic too,
Speaker 1: and so that's a big chunk of the business. So
Speaker 1: we we've got a nice distribution across a variety of
Speaker 1: the variety of the channels. And I think one of
Speaker 1: the other things, Bob, is some people may want to
Speaker 1: hear it, you know, they may want to touch it,
Speaker 1: feel it, hear it UM because because I would say
Speaker 1: we have a you know, at this point, I'm pretty
Speaker 1: surprised by the percentage willing to purchase online, you know,
Speaker 1: site unseen as well. We launched new products in the
Speaker 1: midst of the pandemic, are five sub recently Rome and
Speaker 1: you know, so all of these products people were purchasing
Speaker 1: site unseen, Sound unheard, which is pretty impressive and says
Speaker 1: a lot about the brand. Do you know if people
Speaker 1: who already own a Sonos product are disproportionately or much
Speaker 1: higher ordering online as opposed to new customers. Yes, we're
Speaker 1: we were able to tell if you're you know, if
Speaker 1: you've registered your product to an existing system that you
Speaker 1: already have, versus being a new what we call a
Speaker 1: new home um and so into a new home. And
Speaker 1: so as we see that, we can look at, okay,
Speaker 1: how are people doing it? And what we see is
Speaker 1: that existing customers are more likely to buy on Sonos
Speaker 1: dot com. They've developed a relationship with the brand, um,
Speaker 1: you know, and then they want to we announce a
Speaker 1: new product, we make it really easy for them to
Speaker 1: order on sons dot com. And so that's something that
Speaker 1: we see. Okay, let's go back to COVID. Could everybody
Speaker 1: do their job from home with a manufacturing or into business. Yeah,
Speaker 1: a great question, and it's something that UM was challenging.
Speaker 1: We ended up having UM probably at the end dozens
Speaker 1: of people in each of our Santa Barbara and Boston
Speaker 1: locations that started to come back into the office after
Speaker 1: the first wave. So immediately what happened right at the
Speaker 1: start is everybody had to UM and so uh you
Speaker 1: saw amazing like test rig setups in people's kitchens and
Speaker 1: bathrooms and basements UM in Boston and some of the
Speaker 1: pictures were it was just inspiring to see the way
Speaker 1: people were working to still launch a product. Right we
Speaker 1: were we were in the midst of trying to launch
Speaker 1: Beam five and sub and we weren't sure, Okay, are
Speaker 1: people even gonna launch products in these times? And what's
Speaker 1: going to happen as we go through this, And the
Speaker 1: team just did everything they could to keep it on track.
Speaker 1: And you know, having this test equipment at home, and
Speaker 1: then we created the conditions in our Santa Barbara and
Speaker 1: Boston offices where people could be distanced had ppe UM
Speaker 1: so that they could actually come in and start to
Speaker 1: use some of the test equipment, do some of the
Speaker 1: things that they needed to do. And so the reality
Speaker 1: is there's a number of jobs that you want, um
Speaker 1: in building these products, to be in the office for testing,
Speaker 1: for the manufacturing team in China, UM and our partners
Speaker 1: there and Malaysia. We had to you know, abide by
Speaker 1: the the local laws and that was a bit of
Speaker 1: a challenge. But at the same time, the team, you know,
Speaker 1: made it work. UM. We'd usually have people from Boston
Speaker 1: and Santa Barbara on the ground in China actually with
Speaker 1: those bills and those kind of things, but they didn't
Speaker 1: via zoom. UM. They did a via pictures and FaceTime
Speaker 1: and all the other tools that are out there, and
Speaker 1: so that we just figured it out. But it was
Speaker 1: it was hard to navigate in the early days. UM.
Speaker 1: But the power of the human spirit in it, in
Speaker 1: you know, kind of the creativity and just like figuring
Speaker 1: it out. UM, I think it's pretty incredible. And why
Speaker 1: are there two offices and what goes down in each
Speaker 1: respective offer? We actually also have one in Seattle. UM.
Speaker 1: So we started, believe it or not, in you know,
Speaker 1: to office is so simultaneously in Santa Barbara and Boston.
Speaker 1: And the thinking was trying to get the right talent right.
Speaker 1: We we are in a very uh complex kind of
Speaker 1: space in terms of marrying the worlds of hardware and
Speaker 1: software together. UM, and we knew we probably couldn't do
Speaker 1: it um and get all the talent we needed in
Speaker 1: one particular location. So we've actually started into We added
Speaker 1: Seattle to the mix about five years ago because we
Speaker 1: needed to add even more software talent into the company.
Speaker 1: And that's about two thirds of our engineering team is
Speaker 1: on the software side, and so we actually have all
Speaker 1: three offices. And I think Bob, this was a an
Speaker 1: advantage for us as we went into the pandemic because
Speaker 1: we've been working in a distributed fashion for years um,
Speaker 1: and so we already were using Zoom religiously. You know,
Speaker 1: we would have calls often where teams from all three
Speaker 1: offices are on Zoom together. UM. We were using Slack,
Speaker 1: we were using all the tools. We were on the
Speaker 1: leading edge of using a lot of the tools that
Speaker 1: some people only found for the first time when they
Speaker 1: were forced to work from home them. So that transition
Speaker 1: that probably served us well, UM in that transition. And
Speaker 1: there you know, being forced to work from home is
Speaker 1: very different than working from home and choosing to work
Speaker 1: from home but nonetheless we had the tools, we had
Speaker 1: the experience to actually make that work. UM, so we
Speaker 1: kind of know how to how to handle those situations.
Speaker 1: So if softwares in Seattle, what are the strengths in
Speaker 1: Boston and Santa Barbara? There we have we have software
Speaker 1: in all three offices. We have not we have not created,
Speaker 1: you know, an office and said this is the only
Speaker 1: place this can be. We've said, you know, talent, we
Speaker 1: need to find talent, and you can be in Seattle, UM, Boston,
Speaker 1: Santa Barbara. Uh, you know we have so, so that's
Speaker 1: kind of the way that we've approached it. And so hardware,
Speaker 1: you find a lot of hardware people in Boston because
Speaker 1: of the legacy there of audio companies and um, you know,
Speaker 1: just some amazing history uh there. And then you'll find
Speaker 1: hardware and software people here in Santa Barbara as well. So,
Speaker 1: um in all three and now we we've got a
Speaker 1: small office in San Francisco as well as we'll find
Speaker 1: both hardware and software people there. Okay, you talked about
Speaker 1: this office oriented, home oriented plan when COVID hit. Did
Speaker 1: you have enough inventory? Um? We did not, um. So,
Speaker 1: And and as you've probably seen, supply chain has been
Speaker 1: a huge issue over the past few months, and so immediately,
Speaker 1: I think not just us, but everybody in the industry
Speaker 1: and not just consumer electronics, anyone who builds anything immediately
Speaker 1: went to freeze. You know, let's see what's going to
Speaker 1: happen here, because our people gonna spend money, you know,
Speaker 1: job losses, everything closing up, and so everybody froze for
Speaker 1: a moment um. We saw that great momentum in Sonos
Speaker 1: at home, so we started to kind of ramp things
Speaker 1: back up and turn it back up, um and so
Speaker 1: you know, then we started to crank the engine again,
Speaker 1: but very quickly demand really started to move up, and
Speaker 1: we saw even more demand for a products and much
Speaker 1: more than we could actually um, you know build as well.
Speaker 1: And so we started, you know, seeing a ton of
Speaker 1: demand that we couldn't fulfill, you know, really as we
Speaker 1: got into the the you know, the September October period
Speaker 1: um of last year, and we've been trying to you know,
Speaker 1: really catch up if you will, ever since. And so
Speaker 1: that's been, ah, that's been an interesting learning you know
Speaker 1: for me and thinking through the UH, I think we'd
Speaker 1: all kind of been thinking, all right, we know what
Speaker 1: will happen in a situation like this, and there's probably
Speaker 1: it was probably time for a recession and some of
Speaker 1: those things. Yet the injection of all the money into
Speaker 1: the system, the ability for many of people in our
Speaker 1: target audience to continue to work from home, continue to
Speaker 1: have their job, you know, save money on entertainment, travel,
Speaker 1: all those things actually ended up benefiting us in a way.
Speaker 1: And so UM we did not know predict that, and
Speaker 1: I think it's a good lesson in you know, really
Speaker 1: being mindful that you probably don't know what's going to
Speaker 1: happen in those situations pretty unprecedented and just having to
Speaker 1: stay agile UM if you will, through that. So that's
Speaker 1: been uh, yeah, that's been one of those things that
Speaker 1: we've learned through this. And have you been affected by
Speaker 1: the chip shortage? Absolutely, yeah, So that's been something that
Speaker 1: our team has done a better job than most, you know,
Speaker 1: in in managing, but certainly it's something that impacts us.
Speaker 1: Impacts us UM today as well. As we've navigated through
Speaker 1: UM all of this and the container shortage. You know,
Speaker 1: the ports have had situations where the staff there UM
Speaker 1: as well caught COVID right, and so we've had all
Speaker 1: of these factors. I've never seen a year like this, Bob.
Speaker 1: As I think back, I've been in you know, smart
Speaker 1: hardware plus software kind of for twenty three years now,
Speaker 1: and I've never seen a supply chain situation like this
Speaker 1: and as many things kind of backing up as they have.
Speaker 1: And that's why I'm so proud of our team and
Speaker 1: the way they've managed it, because we've been able to
Speaker 1: continue to grow and deliver as much as we can
Speaker 1: to customers. But certainly we've been you know, we've still
Speaker 1: seen more demand um than we have supplied for, and
Speaker 1: we still have work to do and making sure that
Speaker 1: we're able to fulfill all of the customer demand out there.
Speaker 1: Do you believe after this crisis is over, the just
Speaker 1: in time philosophy of worldwide manufacturing supply chage chain will
Speaker 1: change or people just forget about this and we'll go
Speaker 1: back to the other one. I think it will change
Speaker 1: based on what I'm seeing right now in the industry, UM,
Speaker 1: you know, and so I do think there'll be more
Speaker 1: thought We've we've been more thoughtful in terms of Okay,
Speaker 1: how are you building more resilience into the system. UM.
Speaker 1: There are some high hurdles to get over in terms
Speaker 1: of the capital outlays required to build the kind of
Speaker 1: facilities and suppliers that we would need in the United
Speaker 1: States for instance, or let's say North America more generally.
Speaker 1: But I you know, I think even the government um
Speaker 1: seems interested in this area. UM, the largest companies that
Speaker 1: are in these areas are working on it. We're having
Speaker 1: lots of conversations with our partners. So I do think
Speaker 1: we have a window of time where we'll see if
Speaker 1: we can get enough momentum behind the movement of having
Speaker 1: more localized supply chains, if you will. And it will
Speaker 1: probably be some you know, combination in between, because not
Speaker 1: everything from an affordability perspective will make it work. But
Speaker 1: I do think there are some things and I do
Speaker 1: think for products like ours, UM, I think Apple's probably
Speaker 1: in this boat too, like that there's there's probably a
Speaker 1: way to you know, make it work over time. And
Speaker 1: so that's something that we're certainly investigating and trying to
Speaker 1: come out from a variety of angles, and that there's
Speaker 1: a lot of people in the industry working on the
Speaker 1: same thing. So I'm kind of optimistic UM that will
Speaker 1: get a little bit more you know, back more locally
Speaker 1: and I think that will benefit everybody from a resilience
Speaker 1: resiliency perspective and hopefully, you know, quite frankly, from overall
Speaker 1: society and economy perspective as well. So what is the
Speaker 1: manufacturing design process and how long does it take? Who
Speaker 1: comes up with a product? You tell me from beginning
Speaker 1: to end? Yeah, So, um, you know, we're always thinking
Speaker 1: and working on customer insights, so trying to understand which
Speaker 1: is fancy term for behavior around customers and what's happening
Speaker 1: there and kind of what's happening in the industry. And
Speaker 1: we're trying to marry two things together. So we have
Speaker 1: a team looking at how customers are using products, and
Speaker 1: then we have a team looking at technologies and how
Speaker 1: how do those things potentially come together? And so we're
Speaker 1: always considering where's that going? And really we spend time
Speaker 1: thinking about the next five years as we're thinking about
Speaker 1: what we want to build, and so we'll be looking
Speaker 1: at a variety of you know, opportunities out there as
Speaker 1: we think about where does the speaker go from here,
Speaker 1: where does the soundbar go from here? Where does sound
Speaker 1: go from here? Um, you may have seen that recently
Speaker 1: we launched a picture frame that's a speaker with Ikea
Speaker 1: for instance, And so we're always thinking about what can
Speaker 1: we do with you know, different form factors and our
Speaker 1: software to create sound in different and new kind of ways.
Speaker 1: And so we'll go through and we'll do some work
Speaker 1: on that. We'll try to think about what it is
Speaker 1: that we think will fit the market at the right time.
Speaker 1: We work through um things like all of the design
Speaker 1: and we start to get an idea on the design.
Speaker 1: We start to get an idea and we have a
Speaker 1: design team that works on that and it's looking at
Speaker 1: materials and finishes and everything that's out there and kind
Speaker 1: of what's happening in the world and what fits our
Speaker 1: design language. And then we'll be looking at that technology
Speaker 1: advanced technology team and what can we be incorporating in it?
Speaker 1: Is it voices, it ultra wide band, is it Bluetooth? Like?
Speaker 1: What what should be in the product? And it's what
Speaker 1: should be in the product in the interests of the
Speaker 1: customer experience, right and what behaviors we wanted to we
Speaker 1: want to deliver if you will, um as we're going
Speaker 1: through that and so so so then we'll start working
Speaker 1: on what we call a product requirements document which says,
Speaker 1: here's the thing we're going to build, and we'll have
Speaker 1: an initial take on a concept with some UM, initial ideas,
Speaker 1: some designs in terms of what's there, UM, an idea
Speaker 1: of kind of where it will fit in the market,
Speaker 1: and we think it can do UM, and we'll start
Speaker 1: to put that together and usually you know it'll be
Speaker 1: to market then. UM. In this day and age, which
Speaker 1: is forever in the in the era of like software
Speaker 1: moving UM quickly and shipping you know every day that
Speaker 1: that's usually an eighteen to thirty six month process, depending
Speaker 1: on what we're building. And so we are we're working
Speaker 1: very hard in those situations to determine what's going to
Speaker 1: be popular, what's going to resonate with customers, you know,
Speaker 1: year and a half, three years you know from now
Speaker 1: in some cases, which it is a is a high
Speaker 1: wire act, right because that's a long time away in
Speaker 1: this day and age in terms of determining, Okay, what
Speaker 1: is it, what's going to look like, UM, what's gonna
Speaker 1: fit with people's home decor, how is it going to
Speaker 1: sound at that particular point in time, UM, what formats
Speaker 1: are going to be out there at that time? UM,
Speaker 1: and all of those things, and so it's really like
Speaker 1: a process UM that takes a lot upfront and then
Speaker 1: there's a lot of work, but work that we know
Speaker 1: now after almost twenty years at this we know how
Speaker 1: to go execute on and from there UM and so
Speaker 1: it becomes very clear from the product requirements document, Okay,
Speaker 1: here's what we need to do, and then it's a
Speaker 1: matter of like managing it UM from that and making
Speaker 1: sure that we can actually deliver on the vision that
Speaker 1: we set for the product at the beginning. And we're
Speaker 1: always doing stage gates and checks and saying, okay, is
Speaker 1: this living up to the promise of the product that
Speaker 1: we had envisioned back in the you know, the first day.
Speaker 1: And so it's really a cross functional team, Bob. This
Speaker 1: is why I think we've been successful. And what we've
Speaker 1: done so design, sound UM, Technology, Marketing in their product
Speaker 1: management UM all working together to try and create something
Speaker 1: great UM shepherded by you know, a product manager at
Speaker 1: the end of the day that's going to take the
Speaker 1: ultimate responsibility for this product and delivering it to customers.
Speaker 1: Let's just say I stamped my fingers today and there
Speaker 1: was a big revolution in this sphere, and you had
Speaker 1: an idea today lock stock and barrel. If you had
Speaker 1: the idea, how fast could you get it out on
Speaker 1: the street. Depend depend ends exactly what it would be.
Speaker 1: You know, like there's some things that can be done
Speaker 1: through software, So we've gone back and we've increased the
Speaker 1: functionality of our products through software at times UM and
Speaker 1: that can be a six month venture, that can be
Speaker 1: a twelve month venture depending on what we're doing. If
Speaker 1: it's a new hardware kind of idea, let's say, design concept.
Speaker 1: If it's something that is known quite known, you might
Speaker 1: be out in eighteen months. But if it's something revolutionary
Speaker 1: that's going to take new technology, and even though you
Speaker 1: know the use case that you want to create UM
Speaker 1: and what kind of experience you want to deliver for customers,
Speaker 1: if it's taking UM invention right and creating new technologies
Speaker 1: or implementing them in different ways that UM that have
Speaker 1: never been done before, that could take you know, thirty
Speaker 1: six months UM in terms of doing that. So it
Speaker 1: just depends on how much you're trying to accomplish in
Speaker 1: the product that you're doing. Because and we have both right,
Speaker 1: we'll have revolutionary products are bringing out like ARC which
Speaker 1: is completely different and then we'll do things at times
Speaker 1: like bring out the one s L which is the
Speaker 1: one without a microphone. And so in a situation like that,
Speaker 1: that'll only take us twelve months because we just need
Speaker 1: to pull the microphone out and we need to make
Speaker 1: sure that it all works, and we can do that
Speaker 1: much more quickly now. Legendarily, when Steve Jobs came back
Speaker 1: to Apple, he thinned the product line. You wanted to
Speaker 1: make it very obvious, not confusing to the customer. You know,
Speaker 1: there's thoughts that I've been in retail a long time ago.
Speaker 1: If you show somebody to products will buy when you
Speaker 1: show them five, Sometimes they're overwhelmed. They'll leave the store.
Speaker 1: Needless to say, that is not the philosophy of Apple today,
Speaker 1: but it's so nos you have varying niches. Do you
Speaker 1: ever think, well, God, we're putting out too much, we
Speaker 1: should limit the product line. What are your thoughts there? Yeah,
Speaker 1: And you know, having come from you know, and growing
Speaker 1: up inside a mobile phone company, um BlackBerry, you know,
Speaker 1: really inventing the smartphone, I think there was there's a
Speaker 1: different mentality, you know there. And one of the things
Speaker 1: that I think we've been good at and one of
Speaker 1: the things that I actually manned add UM was around
Speaker 1: to at least two new products per year. I felt
Speaker 1: like that was the right cadence. So this is purely
Speaker 1: like an instinctual call, but I felt like, given the
Speaker 1: capability of the organization at the time and then the
Speaker 1: opportunities in front of us and creating things, that was
Speaker 1: the right thing to do. And you'll notice we don't
Speaker 1: this is very different than most and consumer electronics. We
Speaker 1: don't have a TikTok where like every year we refresh
Speaker 1: our entire product line. That is a classic thing to
Speaker 1: do from a lot of the tech companies that are
Speaker 1: out there, and they'll come about the new version of
Speaker 1: product X, Y or Z, they'll do it every year
Speaker 1: or every couple of years. We instead focus on building,
Speaker 1: you know, a few great products and you will see
Speaker 1: some that we do UM where we'll do a refresh
Speaker 1: like we did with five, which is a build on
Speaker 1: the play five UM and the sub last year build
Speaker 1: on the the original sub right, and so those are
Speaker 1: things that we'll do, but we'll do those on a
Speaker 1: five to seven year cadence, and then we'll bring something
Speaker 1: completely new out like an arc or um a beam
Speaker 1: when it came out or Rome for instance, and so
Speaker 1: those products, UM, you know, we we also will bring
Speaker 1: in the mix. But I think bob the right thing
Speaker 1: for us and the capabilities we have the customers were
Speaker 1: selling to. Thinking about sustainability, thinking about building products that
Speaker 1: last for a while and something you don't have to
Speaker 1: upgrade every year. UM. You know, I like the cadence
Speaker 1: of two per year. It gives us the right balance
Speaker 1: of being able to tell our story. Again, so there's
Speaker 1: two times a year you'll see s be pretty loud
Speaker 1: in media and then as well with our advertising, which
Speaker 1: is when we're telling the story around our new product.
Speaker 1: But it's all part of the system, right and so
Speaker 1: so NOS is usually told in a broader way at
Speaker 1: that time. UM, And it's I think our approach is
Speaker 1: quite unique compared to UM any other hardware company I
Speaker 1: can think of. Okay, let's talk about home audio. I
Speaker 1: want your take on the state of home audio. Just
Speaker 1: going through a little history. If you go back forty
Speaker 1: odd years ago, it was really about everyone getting a
Speaker 1: large home stereo to get closer to the sound. Then
Speaker 1: we went to the boom box, then we went to
Speaker 1: the your bud needle. Let's just say, that's not a
Speaker 1: market you're in. You're in the home audio sphere. What
Speaker 1: is going on there? You know, I think people it's
Speaker 1: been interesting. One of the things that that we've seen
Speaker 1: through this period is I think so I'll go back
Speaker 1: right to the beginning, and at the beginning, I think
Speaker 1: really one of the biggest things with son nos was
Speaker 1: making it easy for people to listen to audio in
Speaker 1: their home and digital formats, right so at that point
Speaker 1: downloads you know, eventually would get to streaming, and we
Speaker 1: kind of democratized that to some degree because it was
Speaker 1: a it was a much more difficult for people to
Speaker 1: be really enjoying good home audio in the early days,
Speaker 1: and so we tried to make that easier than it was.
Speaker 1: Uh And I think that was the magic through the
Speaker 1: first phase. Interestingly, you know, as the big tech companies
Speaker 1: jumped into the space, um then there were these poks,
Speaker 1: these you know, the small products Bucks or whatever it was,
Speaker 1: and all of a sudden, those are being given away
Speaker 1: for free when you subscribe to the New York Times,
Speaker 1: for instance, are all these other things or they're you know,
Speaker 1: there's cheap bluetooth products. And I think it brought sound
Speaker 1: into the home in a different way. And what we
Speaker 1: tried to do was tell our story on top of that.
Speaker 1: So if people got a taste of you know, the
Speaker 1: the Google products or the Amazon products at those those
Speaker 1: cheap levels, we want to show them there's something better
Speaker 1: there and something more premium for the longer term. And
Speaker 1: I feel like we've been successful at that if you
Speaker 1: look at our growth um kind of over the period
Speaker 1: that those companies have entered the space, and and I
Speaker 1: feel good about the fact that we're doing that because
Speaker 1: we're bringing a better experience. We're bringing open experience right
Speaker 1: supports all of the different services that there, so you're
Speaker 1: not trapped in one ecosystem UM and we're bringing better
Speaker 1: sounding audio um as the way the artist intended it
Speaker 1: into people's homes in that way, and we're still making
Speaker 1: it easy versus kind of the traditional audio solutions that
Speaker 1: were much more niche for people and had to you know,
Speaker 1: take a bit of a degree to figure out how
Speaker 1: to use. And so I feel like we're at a
Speaker 1: point where people are, you know, being thoughtful about the
Speaker 1: products that they're putting in their home. UM. They're thinking
Speaker 1: about the longevity, the premium, nous, the openness UM, and
Speaker 1: I think all of that has benefited us. Now, I
Speaker 1: would say the thing we push on is, Okay, what
Speaker 1: you know, what's the future hold as we think about UM,
Speaker 1: as we think about audio in the home, and one
Speaker 1: of these things that we've been pushing with Ikea UM
Speaker 1: and as well with our true play technology. You know
Speaker 1: that really UM shape sound in the room is UM.
Speaker 1: You know, do we need to be constrained by the
Speaker 1: speaker form factor? UM? So this picture frame for instance
Speaker 1: making sound is a great example, or the lamp that
Speaker 1: we've done UM with Ikea in terms of making the sound.
Speaker 1: Because I'm not sure that the future is necessarily dedicated
Speaker 1: products in the way that they are today. The sound
Speaker 1: can be integrated into other household products, and certainly there'll
Speaker 1: be people that that want audio UM in such quality
Speaker 1: and fidelity they want a dedicated product. But I think
Speaker 1: for a lot of people, if you can find a
Speaker 1: way to ring UM great audio into the home and
Speaker 1: do it in some of the form factors or make
Speaker 1: it disappear to some degree UM, I think that's going
Speaker 1: to be even more compelling to millions more people. Okay,
Speaker 1: let's talk specifically about quality audio. So there's nowhere near
Speaker 1: the press nor the consumption of this stuff. But there
Speaker 1: are tweaks will spend a hundred thousand dollars on their stereo,
Speaker 1: no problem. Uh, there's magazines dedicated to that niche. There's
Speaker 1: not a mainstream audio magazine anymore. There's sound in video,
Speaker 1: which is an amalgamation of previous things. So how much
Speaker 1: will people pay for good sound? And where does Sonos
Speaker 1: fit in this? We've tried to democratize it as much
Speaker 1: as possible. So we've tried to say, hey, can we
Speaker 1: bring let's say, you know, probably with arc or soundbar
Speaker 1: eight dollars for instance. Uh, you know, are be hitting
Speaker 1: the point where most people would have to pay or
Speaker 1: people in the industry would expect to pay fifteen dollars,
Speaker 1: right Like, we're trying to bring it into um, you know,
Speaker 1: a lower price point to some degree, but we're still
Speaker 1: building premium products. And so we want that great sound,
Speaker 1: kind of want to have it all. We want that
Speaker 1: great sound, but we want to democratize it um a
Speaker 1: little bit. There's no doubt of you can still go
Speaker 1: out and spend tens of thousands of dollars right on
Speaker 1: creating like an epic home sound system. You could do
Speaker 1: the Dolby at most in sealing you know, seven dot
Speaker 1: one dot for um in terms of like a full
Speaker 1: set up if you wanted, and create just an incredible experience.
Speaker 1: But that's not where we play. We play very much
Speaker 1: at how are we helping what we call culture seekers
Speaker 1: like really fill their homes with music? Do it in
Speaker 1: an easy way, but not compromise on audio and certainly,
Speaker 1: I mean, you know, you're getting, um what you pay for,
Speaker 1: but we want to make sure that it's surprising sound
Speaker 1: at whatever price point that we're at, so that when
Speaker 1: people hear a one five and arc, they're like, wow,
Speaker 1: that sounds great for that price. Your your top of
Speaker 1: the line really music product is the five correct? Yes,
Speaker 1: that's correct, Okay, in the present retail price of that
Speaker 1: is uh four four nine nine. Who are your competitors
Speaker 1: in that sphere? If anybody? Yeah, you know. The interesting
Speaker 1: thing is Google took a run at that space with
Speaker 1: the home Max a couple of years ago, but they
Speaker 1: discontinued that. Apple took a run at it with home Pod,
Speaker 1: and um they recently discontinued that. Um, there's there's not
Speaker 1: a lot of people playing in that space. Bows has
Speaker 1: a couple of products in that space. UM, but you
Speaker 1: know five dominates uh really in that space. And I'd
Speaker 1: say the other interesting thing Bob on that is we've
Speaker 1: also seen over time, you know, where five would have
Speaker 1: been maybe the speaker in the living room. I think
Speaker 1: what we've done with arc and beam are soundbars have
Speaker 1: actually kind of changed that a little it where maybe
Speaker 1: instead what you're going to do is have an art
Speaker 1: or have a play bar that or a beam now
Speaker 1: under your TV. And now because you can use that
Speaker 1: as your SONO speaker, do you really need to add
Speaker 1: another speaker into the room. Um? Is it interesting question?
Speaker 1: And so I do think we're seeing a little bit
Speaker 1: of that and that convergence um to some degree, because
Speaker 1: why not play your music on a beam or arc?
Speaker 1: It sounds fantastic. Your product mix, how does it breakdown
Speaker 1: in terms of sales? How much is television, how much
Speaker 1: is audio, etcetera. Yeah, we we don't break it out.
Speaker 1: I mean it's pretty even um across the board. But um,
Speaker 1: you know we also don't forget like amp and port
Speaker 1: as well, and those are those products which power in
Speaker 1: ceiling in well speakers, UM, other company speakers as well
Speaker 1: home theater systems, and so we've got a really good
Speaker 1: mix across uh, you know, really are three now four
Speaker 1: with portables, aduct lines and um, you know so and
Speaker 1: and it's it's for us, it's about the system, right
Speaker 1: and people you know, people have a mix and match
Speaker 1: of all of those different products as well. And that's
Speaker 1: kind of what we're always thinking about, is how do
Speaker 1: we help customers with what they need next as they
Speaker 1: think about sound in the home. And that's why we
Speaker 1: got into home theater, so why we got into portables
Speaker 1: after as well as good people saw that need. Uh,
Speaker 1: And so we're always thinking about, Okay, what other categories
Speaker 1: do we want to get into? Okay, in terms of
Speaker 1: the traditional audio companies, is that really a completely different
Speaker 1: vertical at five hundred and it's a completely different customer
Speaker 1: or is there a competition? What's going on there? You know?
Speaker 1: I really think for traditional audio companies, many have tried
Speaker 1: to bring out Sono's killers over the years, and I
Speaker 1: think the biggest miss at the end of the day
Speaker 1: is on the software side. And we started, uh, you know,
Speaker 1: with a team and software and hardware. UM. I've often
Speaker 1: said that, um, you know, boring Mark Andresen's turn. I
Speaker 1: think I see son No says software eats audio because
Speaker 1: it is the difference. It is where we're born from,
Speaker 1: and we've married the two, and I just don't. I
Speaker 1: haven't seen any traditional audio company, you know, really get
Speaker 1: serious about the software investment to create the kind of
Speaker 1: experience that we do at Sonos. And so that's why
Speaker 1: I think we could were the leader in home audio
Speaker 1: UM and why we've been so successful. Now, does someone
Speaker 1: go into a store and say, hmm, there's a Keef speaker,
Speaker 1: here's the son speaker I'm comparing or is it really
Speaker 1: two different customers? Yeah, I think there's UM. I think
Speaker 1: there are some people that would be looking for a
Speaker 1: speaker um, if you will, in those situations, and that's
Speaker 1: where uh, maybe they're getting help from a blue shirt
Speaker 1: of s buy and kind of navigating through the different
Speaker 1: trade offs, if you will. But I also think that
Speaker 1: there are people that are going to look, let's say,
Speaker 1: like above, you know, a thousand dollars and above that
Speaker 1: are very serious into audio UM that you know, maybe
Speaker 1: would use and purport to power at the products that
Speaker 1: they purchased, but they'll be looking at speakers from other
Speaker 1: companies you know potentially there, but I you know that
Speaker 1: that's not a huge market from what we see today.
Speaker 1: What percentage of the marketplace do you have in television
Speaker 1: Beames and subs UM, we're the leader in the you
Speaker 1: know that we we play primarily in uh seven countries today,
Speaker 1: you know, so in Western Europe and then North America
Speaker 1: plus Australia. UM, and we're the leader by dollar share.
Speaker 1: So when you add up the dollars of ARC and
Speaker 1: you know Beam together where the leader, UM, we take
Speaker 1: the revenue of the leadership position and revenue share UM.
Speaker 1: But overall I haven't looked at it on the category recently.
Speaker 1: Overall in home audio, we are about nine percent of
Speaker 1: the annual spend in premium audio today. And who else
Speaker 1: is in that neighborhood? Uh, you know Bowes would be
Speaker 1: you know there, UM, J yell a bit because there's
Speaker 1: some Bluetooth in there. Um, the Samsung with some of
Speaker 1: their sound bars that they sell with TVs Panasonic a
Speaker 1: little bit over in Asia and Europe, and then it
Speaker 1: kind of goes into Europe a little bit. So there's
Speaker 1: really no one dominant player. Now, explain to my audience
Speaker 1: why the technology for sons is superior to competitors. It
Speaker 1: gets back to the software that we've built. So we
Speaker 1: from the beginning connected the system to the cloud UM.
Speaker 1: So there's really a few different layers. So there's the
Speaker 1: connection of the cloud, where we connect you to all
Speaker 1: the services that are out there, whichever music services that
Speaker 1: you want to use. UM. We also created obviously the
Speaker 1: app UM that allows you to control that, and then
Speaker 1: we created all the software that runs on the products
Speaker 1: that ties into your WiFi network. And it's the marriage
Speaker 1: of all of those things. And we took a very
Speaker 1: complicated situation which you could have put together yourself, like
Speaker 1: you could do certain things and bring certain l mints
Speaker 1: together by buying a certain set of speakers, setting up
Speaker 1: WiFi writer in a certain way, trying to tie into
Speaker 1: different services, or maybe using proprietary protocols. But we really
Speaker 1: sweat the details to bring it all together and just
Speaker 1: make it easy, Bob, so that when you set it up,
Speaker 1: you can be easily listening to whatever streaming music it
Speaker 1: is or your music library. And that that is fundamentally
Speaker 1: different than the way anybody else has really approached the space.
Speaker 1: And then there's been a number of companies that have
Speaker 1: come in seeing what we've done, started to copy what
Speaker 1: we do obviously, and in some of those cases we've
Speaker 1: had to um enforced the fact that they've copied what
Speaker 1: we've done. But that is the key at the end
Speaker 1: of the day, is is sweating the details of creating
Speaker 1: that experience in the system so that you can add
Speaker 1: these products on um over time and just make it
Speaker 1: really easy for customers. So there's a lot of complexity
Speaker 1: under the covers that we try to abstract from the customer,
Speaker 1: and that's the secret to success. Actually in any part
Speaker 1: of the consumer electronics. I would say Bluetooth was a
Speaker 1: technology that I had a long ramp before it was
Speaker 1: adopted by the public, and now things have really moved
Speaker 1: in that direction. A lot of people have no idea
Speaker 1: that Bluetooth is inherently the president standard, inherently not great audio.
Speaker 1: So in your particular case, originally Sonos created its own
Speaker 1: separate wireless network in the home, Hey, how does it
Speaker 1: do it? Now? Still the same way? And can anybody
Speaker 1: else equal the sound? There's no equal when it comes
Speaker 1: to combining the wireless the way that we've created Sonos Net.
Speaker 1: The wireless network that you talked about which you still
Speaker 1: get if you use our boost products. So you can
Speaker 1: still create Sonos net in your home, and some homes,
Speaker 1: bigger homes actually require that. There's also UM you know
Speaker 1: straight I P. So if you plug one speaker in
Speaker 1: you don't have those products, you can actually run on
Speaker 1: the WiFi network. Today. We still do the work to
Speaker 1: make sure that that is reliable and the quality, the
Speaker 1: quality of the sound coming out of the speaker obviously
Speaker 1: is related to the WiFi network and everything in that.
Speaker 1: So we we work to make sure that's a really
Speaker 1: good UM and reliable connection. And I think you'll find
Speaker 1: that even though we're not perfect, the reliability UM and
Speaker 1: the consistency of the wireless connection delivers an ongoing quality
Speaker 1: experience that still UM leads the way you know M
Speaker 1: versus anybody else out there today. Okay, when you first
Speaker 1: introduce your products, certainly the play products, you know, they
Speaker 1: were moderately priced, but when Saunos entered the TV sphere,
Speaker 1: these were premium products. A sub it essentially eight hundred
Speaker 1: dollars you know a soundbar and the same price. You know, yamah,
Speaker 1: there are some companies that's still manufactures something in excess
Speaker 1: of a thousand dollars for either part of that component.
Speaker 1: But all day long, most people know a flat screen
Speaker 1: today comes with inferior speakers, So everyone buys a sound bar.
Speaker 1: Based on my casual observation, incredible number of people buying
Speaker 1: something in the hundred and fifty to two hundred dollar range. Okay,
Speaker 1: are you leaving money on the table? Well, and just apply,
Speaker 1: you know, appealing to a premium customer. Would so nos
Speaker 1: ever make it less expensive product? You know, I think
Speaker 1: the um you know, if you look at what we've
Speaker 1: done on the speaker side, right, we've and we came
Speaker 1: in with play five back in the day. We started
Speaker 1: at the it was actually four hundred when it first
Speaker 1: came out price point, you know, and then we brought
Speaker 1: out a three and a one. Uh. We started with
Speaker 1: playbar in home theater when we came out. We've replaced
Speaker 1: that with Arc because Delbian, Host and a number of
Speaker 1: other things felt we felt really compelled to create the
Speaker 1: top end experience there. But we did bring out a
Speaker 1: more moderate product in beam Um. So I certainly think
Speaker 1: there's a lot of opportunity there. Um. We're always watching
Speaker 1: and trying to figure out, Okay, what's the thing to
Speaker 1: do and where's the right balance in this. I feel
Speaker 1: like we get a lot of people that were looking
Speaker 1: at you know, two hundred two fifty two fifty dollar
Speaker 1: products to step up a little bit to beam um
Speaker 1: being at three ninety nine right now, and so um
Speaker 1: it's something we're always looking at. Bob is like where
Speaker 1: you know, where does the price experience you know fit
Speaker 1: and where's the market um in terms of what's there
Speaker 1: and so um stay tuned in terms of the you know,
Speaker 1: the next products you'll see from us. Okay, let's talk
Speaker 1: about you. Originally you grew up in Canada where I
Speaker 1: was born in Waterloo, Okay, outside of Toronto. And what
Speaker 1: was your experience growing up? Were you a tech nerd?
Speaker 1: Were you into electronics? I was so uh in second grade,
Speaker 1: second grade, third grade? It was second or third grade. Uh.
Speaker 1: My elementary school was fortunate enough to get a Commodore
Speaker 1: pet computer. Uh. And I was lucky enough, I think
Speaker 1: because my math grades were good and there was some
Speaker 1: qualifying thing. There were four of us that got to
Speaker 1: actually use it and created a math program. Was my
Speaker 1: first programming assignment. And then I distinctly remember as well
Speaker 1: creating a rocket shooting rocket that would go up the
Speaker 1: screen back with the displays that were just green and
Speaker 1: off green. UH. And I thought it was the most
Speaker 1: amazing thing ever. And so I was smitten by that. UM.
Speaker 1: You know, I grew up in a home we're making.
Speaker 1: The purchase for a computer was a big big deal.
Speaker 1: But my parents did it when I was in the
Speaker 1: fifth or sixth grade. UH ran my own bulletin board system.
Speaker 1: UM as well back in the days with the slow modems.
Speaker 1: Did a hockey like I've basically a fantasy hockey UH
Speaker 1: set up before it became a thing UM, and it
Speaker 1: was a bit of a nightmare. I had to go
Speaker 1: input scores like from the paper into that and keep
Speaker 1: a scoreboard and it was ended up being a lot
Speaker 1: more work that I thought it was going to be.
Speaker 1: But UM was I guess on the early edges of
Speaker 1: UM what was the precursor to the internet. UM. And
Speaker 1: so that was pretty formative for me. I'd say there's
Speaker 1: two formative things that I often look at. One was
Speaker 1: the technology, and I was very interested in computers and
Speaker 1: tech and where all of that was going. And then
Speaker 1: the other thing for me was team sports. So I
Speaker 1: played every team sport there was growing up and just
Speaker 1: I feel today that's like a huge part of what
Speaker 1: I put into practice every single day at work is
Speaker 1: everything I learned from team sports and personalities and how
Speaker 1: to manage different personalities, um to try and you know,
Speaker 1: get us to a victory if you will, or just
Speaker 1: to get people to work together. Um. So I think
Speaker 1: those are the two kind of most formative things, uh
Speaker 1: in my life. Okay, And what is your college experience?
Speaker 1: I went to college I'm sure you've never heard of,
Speaker 1: called Western in London, Ontario, and I took business there. Okay,
Speaker 1: so you graduate from college, what's your first job? Yeah, so, um,
Speaker 1: I've done an internship. I needed the money to finish
Speaker 1: my last year at university, so I did an internship
Speaker 1: at IBM in Toronto, works on the think pad, so
Speaker 1: the very first laptop team that was there, and it
Speaker 1: was incredible, had incredible experience. I thought I would probably
Speaker 1: go back um to IBM and worked there for five
Speaker 1: years and then start my own company. But I saw
Speaker 1: an opportunity with this company called rim back in Waterloo
Speaker 1: where I was born, and they had this They had
Speaker 1: this idea of this mobile product, a pager kind of thing.
Speaker 1: At that point, and I saw connecting to wireless networks
Speaker 1: and I thought, huh, like, I've really seen with the
Speaker 1: laptop the future of mobile computing. And we started to
Speaker 1: put wireless uh we started put wireless modems into the laptops,
Speaker 1: and I thought, this is the future. This is gonna
Speaker 1: be huge, big part of it. But this idea that
Speaker 1: this company uh in Waterloo of at that point hured
Speaker 1: and fifty people had, I thought was really interesting and
Speaker 1: it was massive. So this product at this this time
Speaker 1: was this huge called the Hamburger product. And you flipped
Speaker 1: it up and you saw like two lines basically at
Speaker 1: that point of the screen and had these bubble keyboard keypads.
Speaker 1: You still tried to hold it like this, but it
Speaker 1: was something else. And I thought, huh, this is pretty
Speaker 1: interesting because I've seen that mobile computing angle. This is
Speaker 1: wireless coming into it, um and so uh, this is interesting.
Speaker 1: And I went and met Mike and Jim, the two
Speaker 1: co c e o's uh down there, and I was like, wow,
Speaker 1: this is uh something something special it's happening here. I
Speaker 1: just got that feeling. Um. I think my mom thought
Speaker 1: I was crazy. All of my classmates thought it was crazy.
Speaker 1: Most of them were going off to you know, big
Speaker 1: established companies, to investment banks, to those kind of things. Um.
Speaker 1: And my dad who worked at the the hydro electric
Speaker 1: company in the province. We were in Ontario for thirty
Speaker 1: one years. UM, he was my biggest supporter and saying
Speaker 1: go for it, like you know, this may not work
Speaker 1: out or whatever the case is. There You've got this
Speaker 1: gut feel on this company and the people there. And
Speaker 1: I was really, um just felt go out to be
Speaker 1: part of it. Um, And so I jumped to join
Speaker 1: this company called rim Um that nobody had heard of,
Speaker 1: and uh we brought out. So it was after it
Speaker 1: was about a year after I joined. Year what year
Speaker 1: was that I joined? Ninety eight? And so really you early, yeah,
Speaker 1: really early, hundred fifty people and you do you get stock? Yes?
Speaker 1: I did? Did you ride it up and write it down? Well?
Speaker 1: So I wrote it. My friend told a very funny
Speaker 1: story at our wedding, you know, when our stock was
Speaker 1: up to you know, we went public at five what
Speaker 1: our stock was up to about fifteen? Um, you know
Speaker 1: he called me and I was like, it's getting kind
Speaker 1: of high. You know. It turns of where it ended
Speaker 1: up running up Bob to like a hundred eighty two
Speaker 1: hundred dollars. It turns where it was. UM. But you know,
Speaker 1: like so I I I did you know again better
Speaker 1: than I ever expected. UM. I feel very fortunate in
Speaker 1: terms of what's there. But I certainly didn't get out
Speaker 1: on top, that's for sure. So you live and learn
Speaker 1: through that stuff. Did you make enough money at RIM
Speaker 1: that the aically you wouldn't need a job again? No? No, okay,
Speaker 1: it wasn't that fortunate. Go back to and what you're
Speaker 1: doing there. So when I joined UM, I was our
Speaker 1: first product manager UM. There were a couple of people
Speaker 1: that they had brought in UM at a senior level
Speaker 1: VP level, and I was starting to sell the precursor
Speaker 1: to BlackBerry, pitching it, trying to get the story down
Speaker 1: with the precursor to what's a T and T wireless today? UM,
Speaker 1: it was Bell South wireless date at the time, this
Speaker 1: is a this is a long time ago now, as
Speaker 1: I tell it, UM and tried to we were really trying.
Speaker 1: They had this will show you the difference, right. So,
Speaker 1: what we started to believe at RIM was we needed
Speaker 1: to tie it to email systems, and specifically to Microsoft's
Speaker 1: email system because it was you know, that was the
Speaker 1: future and there's going to be a lot more email users.
Speaker 1: UM Bell South precursor to a T and T at
Speaker 1: that point, was like, no, paging is the future, and
Speaker 1: it's all about paging and you guys, you know, we
Speaker 1: need to be able to do uh. They had this
Speaker 1: future which was text to voice for instance, and so
Speaker 1: it would call you and it would sound like Freddy
Speaker 1: Krueger was calling you. Was just like there was some
Speaker 1: it was fun, but it was it was not, you know,
Speaker 1: something that you could see really taking off, and so
Speaker 1: they wanted to go down that path to give us
Speaker 1: a big contract to do that. I helped them in
Speaker 1: terms of trying to market and sell UM and understand
Speaker 1: the products and train up their sales team. And then
Speaker 1: but in the background, you know, we were doing our
Speaker 1: own thing, and so we made it. We we took
Speaker 1: a huge chance for a startup in purchasing airtime from
Speaker 1: Bell South in the United States and Rogers in Canada
Speaker 1: so that we could put together a package and say,
Speaker 1: for at that point thirty nine dollars a month, you
Speaker 1: can get the hardware and the service that allows you
Speaker 1: to connect to your work email right and receive it
Speaker 1: on this product, UM, and so that was like that
Speaker 1: was the bet and that was the BlackBerry, which came
Speaker 1: out like a year after I had started. And what
Speaker 1: I started doing BOB during that period, as I said,
Speaker 1: it was, I was just it was crazy, like I
Speaker 1: was so young. UM didn't know what I was doing
Speaker 1: at all. But they gave me the chance to start
Speaker 1: working with the banks and brokerage is UH in New
Speaker 1: York City in particularly, kind of got in there with
Speaker 1: UM some of the people that we were selling with,
Speaker 1: and I started to seed all of the senior people
Speaker 1: there with blackberries. So I gave them succeeding give giving
Speaker 1: them basically blackberries to start using. And I would give
Speaker 1: one to uh, you know, like an influential executive, but
Speaker 1: I also give one to their administrator, their secretary, if
Speaker 1: you will, And so they could communicate back and forth
Speaker 1: and they absolutely loved it. And then the secretaries would say, oh,
Speaker 1: you need to get you know, you need to give
Speaker 1: this one one and need to give this one one
Speaker 1: and like and all of a sudden, we created this
Speaker 1: ground swell at all the banks of brokerages in New
Speaker 1: York City of having to have a BlackBerry and UH.
Speaker 1: It was absolutely incredible to see the kind of viral
Speaker 1: nature um of that as well, and so uh it
Speaker 1: was incredible. I did our first, um big corporate deal.
Speaker 1: So our first big one was with mary lynch uh
Speaker 1: for and it was for a thousand blackberries, which now
Speaker 1: sounds like so small in the grand scheme of things,
Speaker 1: but it was so massive for us as a company.
Speaker 1: Our stock price went up like on the day we
Speaker 1: announced that deal, even though I mean financial materiality, it
Speaker 1: wasn't that material um, but it was such an exciting
Speaker 1: time in terms of, you know, just watching the technology
Speaker 1: really take off and people being so excited to use
Speaker 1: at people being so passionate about it. Um. I just
Speaker 1: feel so fortunate to you know, have played a role
Speaker 1: in two different you know, technology companies that have built
Speaker 1: products that people actually absolutely loved and you know use
Speaker 1: religiously and have raved about the needless say, there was
Speaker 1: an evolution at BlackBerry, and seemingly from the street it
Speaker 1: appeared that the Palm Trio was ahead of BlackBerry with
Speaker 1: a phone. How did we ultimately get a phone in
Speaker 1: our Blackberries? Yeah? I think the technolog as you start
Speaker 1: to evolve in that way, and it made sense and
Speaker 1: the wireless network. So it was the next generational wireless
Speaker 1: networks Bob, that was super important to that. Right. We
Speaker 1: were writing on a data only network early on UH,
Speaker 1: and then as we got to the two point five
Speaker 1: G networks UM, we were able to actually put voice
Speaker 1: into there, and at that point is just another app
Speaker 1: that you can put in there. Another radio became pretty
Speaker 1: easy to do that UM. And I think people miss
Speaker 1: the fact that we integrated it all very well. We
Speaker 1: tied into the back end of people's Microsoft Exchange or
Speaker 1: I think at that point Lotus notes in terms of
Speaker 1: the email services they were using companies like Palm and
Speaker 1: other companies. They didn't do the software work often on
Speaker 1: the back end to tie into those systems and think
Speaker 1: about the encryption and do all of that. And so
Speaker 1: in a way, it's not dissimilar to sons where you
Speaker 1: would find that you know here at Sonos, you look
Speaker 1: at some of those traditional audio companies, they don't have
Speaker 1: the software that ties it into what's important to day
Speaker 1: to customers. Some of those hardware companies that were there
Speaker 1: earlier than us, like a Poem for instance, didn't do
Speaker 1: the work and didn't have the expertise to tie it
Speaker 1: into what mattered to users at that particular point in time. UM.
Speaker 1: And so you know, we were able to um out
Speaker 1: went over them. We were able. We were told we
Speaker 1: could never be successful. And I think this is part
Speaker 1: particularly of you know, being small town in Canada as well.
Speaker 1: People thought we were crazy that we were going to
Speaker 1: take on you know, Motorola and Glennair and these other
Speaker 1: paging companies in the early days. And then as we
Speaker 1: started incorporate phone, they said there's no way you could
Speaker 1: take on Motorola, Nokia, Sony Erics and some of those
Speaker 1: companies at that point. Um. But we did, and you know,
Speaker 1: obviously became very successful. What was the feeling inside the
Speaker 1: building when the iPhone launched two thousand seven, Yeah, so
Speaker 1: there was UM. I think that I think the public
Speaker 1: and there's a great book that I contributed to called
Speaker 1: Losing the Signal by um Sean Silkoff and Jackie McNish
Speaker 1: that goes through you know, all of this and and
Speaker 1: I think it's probably the best you know, history of
Speaker 1: BlackBerry lesson, if you will. But there was a perception
Speaker 1: that we you know, we were arrogant about it or
Speaker 1: not concerned about it. But we absolutely were so we
Speaker 1: saw it for what it was in terms of a
Speaker 1: threat and some of those things, and saw the innovation
Speaker 1: that was there. Um. Yeah, I think it's fair to
Speaker 1: say that we were all Apple fans, and many of
Speaker 1: us were Apple users as well. You know, at that
Speaker 1: point in terms of looking at it, um they you know,
Speaker 1: we one of the one of the biggest mistakes and
Speaker 1: one of the things I try to counsel others on
Speaker 1: and even you know, I think we've put into action.
Speaker 1: Here was one of the steps that we took, which
Speaker 1: was Verizon came to us. You'll recall that the first
Speaker 1: iPhone UM was an a T and T exclusive and
Speaker 1: a T and T and Apple had worked on that.
Speaker 1: So Verizon came to us and said, hey, we need
Speaker 1: a response, and you know, like let's do something together
Speaker 1: to do that. And yeah, they waved a big check
Speaker 1: in terms of building a product called the Storm, and
Speaker 1: you know, we went and we created our first touch
Speaker 1: screen product. We didn't build on our strengths. Instead, we
Speaker 1: were responding to what Apple had done and we brought
Speaker 1: a Storm and pretty much overnight when we brought that
Speaker 1: product out, Um, we threw away. You know, at that point,
Speaker 1: twelve years of hard work in building the brand and reliability,
Speaker 1: and people could count on their BlackBerry UM as a response,
Speaker 1: you know, and and you know, in the interests of UM,
Speaker 1: you know, really trying, I would say at that point
Speaker 1: the financials right and the money that was there. So
Speaker 1: to me, that wasn't the right response. UM. It would
Speaker 1: have been like us responding at Sonos to Google and
Speaker 1: Amazon launching pucks by launching our own twenty nine dollar puck.
Speaker 1: That's not what we do, that's not where our strengths lie.
Speaker 1: But that's what we did. And that was you know,
Speaker 1: that was that was to me one of those things
Speaker 1: that sent us down the wrong path at RIM. But
Speaker 1: we were concerned about the iPhone, UM impressed by you
Speaker 1: know what they've been able to UM, you know, to
Speaker 1: pull off UM. You may recall that too, is about
Speaker 1: two to three years post iPhone, BlackBerry continue to grow
Speaker 1: like crazy, right, And so there was also through their
Speaker 1: some period I would say from some people of denial
Speaker 1: and of like, oh, the touch screen will never catch on, right,
Speaker 1: So there was some of that in the organization, but
Speaker 1: I think much more was like no, no, the touch
Speaker 1: screens makes sense and it will happen over time. Um,
Speaker 1: but we uh we obviously um, you know, didn't make
Speaker 1: our pivot and the way we needed to um and UM.
Speaker 1: The rest is history. One of the two owners were
Speaker 1: the two founders of your company, went on and said, well,
Speaker 1: Blackberries had a very thin data profile and they dismissed
Speaker 1: the iPhone saying, you know, they're gonna hog so much
Speaker 1: data it will never play out. Now, factually that happened,
Speaker 1: but ultimately shifted people to WiFi and then uh networks
Speaker 1: became more robust. Was there you know, any wake up
Speaker 1: during that transition period? Not not really that that was
Speaker 1: one thing so you hit on it, and that was
Speaker 1: Mike Lazaridi's who is the father of BlackBerry. And you know,
Speaker 1: one of the things that Mike was so good at
Speaker 1: was understanding physics and understanding the fact that really in
Speaker 1: the early days that airtime we bought from Bell South
Speaker 1: and Rogers, nobody was using that for anything. They didn't
Speaker 1: think it could be used for anything. So we got
Speaker 1: it cheap, um. And but it was nationwide and Mike
Speaker 1: had realized, hey, we could actually do an email service
Speaker 1: over this narrow band wireless network. And so you know
Speaker 1: that that was a strength in that situation. But then
Speaker 1: when it came to three G and saying, hey, there's
Speaker 1: gonna be video, there's gonna be radio streaming all of
Speaker 1: the things that we're seeing today. You know, we're now
Speaker 1: five g um. You know, Mike almost couldn't get it,
Speaker 1: you know, couldn't get there in terms of this is
Speaker 1: going to work from a physics perspective and what it
Speaker 1: would mean to battery life and a bunch of the
Speaker 1: trade offs that people would have and the displays and
Speaker 1: those kind of things. And so we spent time trying
Speaker 1: to convince or Mike did in particular, trying to convince
Speaker 1: um any T and T for instance, like that that
Speaker 1: three G wasn't the future and instead we should focus
Speaker 1: on to an f G. And like, here's why in
Speaker 1: the late the physics case, which after the CEO of
Speaker 1: A T and T has spent twenty billion dollars in
Speaker 1: Spectrum doesn't really want to hear because they need to
Speaker 1: make that work. They've they've just met their career on
Speaker 1: making three G work. What they want to hear is,
Speaker 1: here's the three G phone you know you could sell
Speaker 1: in your network. And so even though you know Mike
Speaker 1: had like great physics argument. The business reality of what
Speaker 1: a needed at that time was completely different, and so,
Speaker 1: um so we missed it. How long did you ride
Speaker 1: the wave at BlackBerry? When were you done? Um? So?
Speaker 1: How long did it? Was? Fourteen years? I wrote it,
Speaker 1: And I mean, you know, if you would have cut me,
Speaker 1: I would have led BlackBerry. Um. I started our business
Speaker 1: in Asia Pacific. Um So, I started our offices there
Speaker 1: and through those countries and built the team there. Came
Speaker 1: back I lead our our relationships with all the carriers
Speaker 1: and our sales teams in North America and then eventually
Speaker 1: going went over to Europe, Middle East, Africa, ran that
Speaker 1: out of England, and then I ran our global sales
Speaker 1: and marketing team. And so I mean I was I
Speaker 1: was in um you know, and I grew up with
Speaker 1: Jim and Mike right uh and and everybody there, and
Speaker 1: I knew most of the people there and so and
Speaker 1: as a Canadian, I was incredibly proud right of what
Speaker 1: we had built. But um it got to a point
Speaker 1: where it was the It was early twelve where Jim
Speaker 1: and Mike handed um the reins to a new CEO
Speaker 1: who was one of my colleagues to to that point,
Speaker 1: and we just disagreed on what needed to happen at
Speaker 1: the company at that particular point in time. And I
Speaker 1: think that to me was like a moment where, um,
Speaker 1: where I just said, okay, like, if I'm not aligned
Speaker 1: to where we're going and what we're trying to do,
Speaker 1: I think it's probably time for a change. Um. And ironically,
Speaker 1: like you know, and the world works in mysterious ways. Um,
Speaker 1: I got a call from John McFarland, the founder of
Speaker 1: Sons at that time, and we had Sons in our
Speaker 1: house in England, and Bob I must have sold you know,
Speaker 1: dozens and dozens of other people on so nos to
Speaker 1: that point. And when I when I had set it
Speaker 1: up in our house in England, I had I had
Speaker 1: said to myself, Wow, that was so easy. And it
Speaker 1: reminds me so much of the magic of BlackBerry in
Speaker 1: the early days, and so um, you know. So, so
Speaker 1: John had reached out and even when I was at BlackBerry,
Speaker 1: Steve Jobs through an executive recruiter, like they had their
Speaker 1: own executive recruiting team, had reached out and said I
Speaker 1: want to talk to you about iPhone sales whatever. And
Speaker 1: I said no, I said no, I'm you know, loyal
Speaker 1: to BlackBerry into rim and you know, this company and
Speaker 1: those kind of things. So I wouldn't talk. But you know,
Speaker 1: and part of it is probably being naive and just
Speaker 1: having grown up inside the company. But I wouldn't talk
Speaker 1: to people and John, you know, but John called John
Speaker 1: was It was different with John because I also just
Speaker 1: wanted to talk to a founder who had built something
Speaker 1: special that I used and loved and was selling to
Speaker 1: other people. So I agreed to talk to John, and
Speaker 1: um we were on vacation um in France, was with
Speaker 1: my family, and I said, Okay, this is gonna be
Speaker 1: you know, an hour That ended up being two hours.
Speaker 1: The next day, we we flew back to Lendon that
Speaker 1: night and the next day I spent another two three
Speaker 1: hour talking to John. And we were just so aligned
Speaker 1: on because he had a company prior that had really
Speaker 1: you know, risen and done to some amazing things and
Speaker 1: then didn't have a good end. And you know, I
Speaker 1: obviously at BlackBerry we were having challenging times, and I
Speaker 1: think he and I were both so aligned on building
Speaker 1: a company for the long term and not you know,
Speaker 1: cutting the corners, not doing the kind of things that
Speaker 1: we had seen sometimes that um, you know, I think,
Speaker 1: uh it was kind of the downfall, right and some
Speaker 1: of those things. And so I was just uh, I
Speaker 1: was super interested, um in terms of the conversation, and
Speaker 1: it was happening right at the time that I was
Speaker 1: having a disagreement on strategy with the new CEO at
Speaker 1: m Okay, what was the pitch? Was the pitch come
Speaker 1: in at this level and you have a potential of
Speaker 1: being CEO. That's exactly it. It was, you know, come
Speaker 1: come in, you know, joined the team now, um and uh,
Speaker 1: you know me be my right hand person and have
Speaker 1: a chance. You know, John was very clear, if I
Speaker 1: don't see myself as CEO forever UM in this and
Speaker 1: so you know, come and join the group. And we
Speaker 1: sat we sat together in the same office, you know,
Speaker 1: for the first was that like probably two three years.
Speaker 1: Then we actually moved offices, but um, so we sat
Speaker 1: in the same office and spent so much time together
Speaker 1: going through it and just you know, really the debating, um,
Speaker 1: trying to figure out, you know, where to go, how
Speaker 1: to maneuver everything going on in the industry, and how
Speaker 1: to build a company the right way and putting the
Speaker 1: effort into culture and the effort into the people and
Speaker 1: the recruiting and some of those things, which UM, yeah,
Speaker 1: I learned so much from John, and I think he
Speaker 1: learned so much from he's just a sponge from other
Speaker 1: people and other founders, but as well from what he
Speaker 1: went through in UM software dot com and everything they
Speaker 1: did the first time around UM that we had a
Speaker 1: really really tight relationship and a really shared view of
Speaker 1: trying to build something that would outlast both of us.
Speaker 1: So how did the decision to make the handoff transpire?
Speaker 1: And when it transpired did John disconnect? Where did you
Speaker 1: continue to give input? Does he still give input these days?
Speaker 1: So this is this is the incredible thing, you know. UM.
Speaker 1: So John's wife, Patty UM, you know, came down with
Speaker 1: cancer UM and so he obviously was you know that
Speaker 1: that was a big focus for him. And she's fine,
Speaker 1: UM today she's battled that thankfully. And so that was
Speaker 1: you know, distracting a little bit. But I'll tell you
Speaker 1: the number one thing was UM that I had seen
Speaker 1: and I had rung the bell around voice and said, John,
Speaker 1: like this voice thing, there's something to this and we
Speaker 1: need to be on top of voice and be figuring out,
Speaker 1: you know, how voice interacts with our speakers and what
Speaker 1: the strategy is here, and John was like, Nope, not
Speaker 1: gonna happen, not gonna happen. And you know, so eventually
Speaker 1: I had the conversation with him of like, now you know,
Speaker 1: now you're you're kind of like some of the people
Speaker 1: at RIM of like the it said no, no, the
Speaker 1: iPhone isn't going to be a big threat, right, you know,
Speaker 1: and and some of that, and I said, like, you know,
Speaker 1: we need to be thinking about how this plays out.
Speaker 1: And so to John, that was one of the most
Speaker 1: important things. To John, one of the most important things
Speaker 1: that anybody could have is a sense of where things
Speaker 1: are going and what the future looks like. And do
Speaker 1: you see that? And he said, you see it better
Speaker 1: than I do. And so I think now is the time, um,
Speaker 1: to hand the reins to you. And Bob. This is
Speaker 1: the most incredible thing and the most important thing, and
Speaker 1: probably the most unique thing is that I said to John,
Speaker 1: stay stay on the board. You know, you own a
Speaker 1: big chunk of the company. Stay on the board, um,
Speaker 1: you know, and why you'd be part of it because
Speaker 1: I think it will be a shock to the organization
Speaker 1: for you to just step away. And he said, Patrick
Speaker 1: he said, if I'm going to hand the reins to you,
Speaker 1: I'm going to hand the reins to you. I've seen
Speaker 1: this go badly so many times, and there's going to
Speaker 1: be things that you want to change that I will
Speaker 1: disagree with, and like it'll just be bad for both
Speaker 1: of us, uh in going through this. And John literally
Speaker 1: stepped away, Bob, like he just he left one day
Speaker 1: and if anybody would contact him, he'd say, talk to Patrick.
Speaker 1: And at the same time time you know today, you know,
Speaker 1: more than four years later, like four and a half
Speaker 1: years later. If I called him right now because I
Speaker 1: needed something, I needed his advice or help or something
Speaker 1: like that, he would answer like that, um, and he
Speaker 1: would be willing to help me. Um. And I mean
Speaker 1: it is just having talked to a lot of people
Speaker 1: that have gone through these kind of transitions, it was
Speaker 1: the most incredible gift that um, you know, he could
Speaker 1: give me to set really me, but all of sons
Speaker 1: up for success because we didn't need to change some things,
Speaker 1: and we did need to move on certain things and
Speaker 1: do things differently. And he was so right because you know, Um,
Speaker 1: we made the transition in January and at the February
Speaker 1: board meeting. There are a bunch of things I was
Speaker 1: doing that I know would have been a huge debate
Speaker 1: between John and I. Uh so, uh, he was absolutely right,
Speaker 1: and I can't you know, I can't thank him enough
Speaker 1: for like making that decision and making the transition the
Speaker 1: right way. You know. The perception was that SOS was
Speaker 1: behind on voice and it might be the death of
Speaker 1: the company, that you were late to market. How did
Speaker 1: you catch up there? Yeah? So, um, this was you
Speaker 1: know from my rim experience. Like one of the things
Speaker 1: again that I don't think that I think too many
Speaker 1: companies do is respond in some way. So there was
Speaker 1: a faction of people that would say, we need to
Speaker 1: go do our own voice system, we need to make
Speaker 1: our own Alexa Google assistant. I said, no, like that
Speaker 1: is not Amazon has ten thousand people Alexa. We are
Speaker 1: a at that point company, Like this is not gonna work.
Speaker 1: And so, you know, so I said, we need to
Speaker 1: co opt what these companies are doing and they have
Speaker 1: a strategy around why they're doing these things. Let's go
Speaker 1: talk to Amazon, let's go talk to Google, and we
Speaker 1: can just like with streaming services, we can be Switzerland
Speaker 1: in this and we can offer all of the voice
Speaker 1: services that are out there, there'll be more. You know,
Speaker 1: It's not gonna be one that's going to satisfy everybody,
Speaker 1: So how do we go and do that? And kudos
Speaker 1: to our product team that very quickly came up with
Speaker 1: a way to basically retrofit and figure out how to
Speaker 1: put voice on microphones in a son nos Play one right,
Speaker 1: which we rebranded as one and got out very quickly,
Speaker 1: so that Bob was like a twelve to sixteen months
Speaker 1: development cycle, which was our fastest on record. Nobody thought
Speaker 1: was possible. Um our team did an incredible job to
Speaker 1: do that. It meant a lot of hard engineering work
Speaker 1: both on our side and Amazons to actually make it work,
Speaker 1: but it wasn't you know. I think it's really important
Speaker 1: that we looked at it in a way of partnering
Speaker 1: with these companies as opposed to building our own and
Speaker 1: trying to you know, outdo Amazon or Google, um at
Speaker 1: something like that. And so that was that was the strategy.
Speaker 1: It's kind of taking the momentum of those services and
Speaker 1: bringing them into the Sons ecosystem. Okay, perception from the
Speaker 1: outside was that you were essentially the first licensee when
Speaker 1: you approach these two companies, Amazon and Google, were they
Speaker 1: willing to license their technology and what was their perception
Speaker 1: and status? Yeah, thankfully we um. Dave Limp at Amazon
Speaker 1: absolutely fantastic in terms of thinking about this and his
Speaker 1: his respect for Sonos, and I think Bob at Google
Speaker 1: to like so many of the people that were involved
Speaker 1: in the executives all had and loved son Nos and
Speaker 1: saw the fit. And so I think we were in
Speaker 1: a unique position. We've been working with these companies before
Speaker 1: on music services, you know, cloud, a variety of different things,
Speaker 1: and so we had good relationships with the companies and
Speaker 1: they you know, my my impression was their goal was
Speaker 1: to get their voice services out in as many products
Speaker 1: as possible, as many places as possible, and and that
Speaker 1: was right, like, that's what they wanted to do, and
Speaker 1: so um, we just gave them a path to be
Speaker 1: able to do that. And having you know, some of
Speaker 1: the most important and affluent homes out there, Um, it
Speaker 1: seemed like a golden opportunity. And so it worked. Okay,
Speaker 1: let's talk about the lawsuits. Tell me the thinking and
Speaker 1: play out what happened. So um, you know, we we
Speaker 1: obviously have nineteen years at this point of hard work, blood,
Speaker 1: sweat and tears that people have poured into building the
Speaker 1: experience that you see today on so noes inventing a
Speaker 1: whole bunch of things that we've patented, and and again
Speaker 1: that's a that's a lesson. John and I both had
Speaker 1: equally learned from our first go round. Right So at
Speaker 1: RIM you I'm not sure if you'll remember, but there
Speaker 1: was a massive lawsuit where basically twenty three lawyers in
Speaker 1: Chicago had a patent and sued RAM basically tried to
Speaker 1: shut RIM down UM and it did shake us down
Speaker 1: for six d and twelve million dollars UM. When you
Speaker 1: know that that was a lot of money for us
Speaker 1: UM at that particular point of time, because we hadn't
Speaker 1: patented and hadn't like kind of ticked and tide things,
Speaker 1: And so I never wanted to be in like that position,
Speaker 1: even from a defensive side of it. And so early on,
Speaker 1: you know, John had made the decision to start patenting,
Speaker 1: and I was a huge advocate of that. So we
Speaker 1: were patenting all of the inventions that we had because
Speaker 1: we knew this was going to be a big category
Speaker 1: someday and we would get giants jumping into it. And
Speaker 1: so UM you know, and so one of the things
Speaker 1: that transpired was we tried with Google to be able
Speaker 1: to say, hey, look like you are you are copying
Speaker 1: what we do, like you can see it, you can
Speaker 1: see it and experience the marketing all of these things.
Speaker 1: We put our patents out there, Bob. That was the
Speaker 1: other thing that we did. It was around the same
Speaker 1: time Tesla. Did I think we were like maybe two
Speaker 1: or three months ahead, is just putting our patents out
Speaker 1: on our website saying here's where they are. You know,
Speaker 1: innovation is fine, but don't copy um what we're doing.
Speaker 1: And so we're just making people aware. And so it
Speaker 1: got to a point with Google where I didn't feel
Speaker 1: like they were taking it seriously, that they were infringing
Speaker 1: on our intellectual property. And so UM we decided that
Speaker 1: we needed to take the next step, which UM, I think,
Speaker 1: which you know, we're actually now close. It's been a
Speaker 1: it was what January of last year, August thirteen, will
Speaker 1: actually hear from the I T C on this UM
Speaker 1: is are they infringing you know the patents that UM
Speaker 1: we had there and did they copy what we invented?
Speaker 1: And I felt it was important. I felt it was
Speaker 1: important for all of the people at Sonos that have
Speaker 1: put um all that work into the products and inventing
Speaker 1: these things. I thought it was important for standing up
Speaker 1: for smaller companies, you know, in the face of what
Speaker 1: has been called efficient infringement, where these big tech companies
Speaker 1: just copy what smaller companies do and drive them out
Speaker 1: of business. UM. And we were in the position where
Speaker 1: we could afford to do it from you know, we
Speaker 1: had the dollars because we've gone public, and you know,
Speaker 1: we had a strong intellectual property, you know, portfolio, and
Speaker 1: so I felt a duty in that way to our people.
Speaker 1: But as well to this notion that you've got to
Speaker 1: stand up to these big tech players and UM, you
Speaker 1: know you're not. You can't let them trample all over
Speaker 1: the inventions that you've made. And so um, you know,
Speaker 1: we're full steam ahead on that. UM. I testified at
Speaker 1: Congress as well around the antitrust and dominant platforms as well, because,
Speaker 1: like I was saying, I've been in this the whole
Speaker 1: technology space for twenty three years, and I remember the
Speaker 1: days of Microsoft and Intel and the dominance that they had.
Speaker 1: Microsoft and Qualcom actually created a company called Wireless Knowledge
Speaker 1: to basically destroy rim and UM. But it was very
Speaker 1: different at that point, Like, you know, it wasn't something
Speaker 1: where they were willing to undercut price and you know
Speaker 1: sell you know, give things away, right to to basically
Speaker 1: undermine other companies and those kind of things. And so
Speaker 1: it was important to me to testify at Congress and
Speaker 1: share our experience with the dominant platforms and the way
Speaker 1: that they're um, you know, using their muscle if you will,
Speaker 1: because I think it's important for the country and for
Speaker 1: the future of innovation and entrepreneurship that we make sure
Speaker 1: that there's not a situation where it's you know, it's
Speaker 1: too much power in too few hands. Okay, how much
Speaker 1: does it cost to sue Google? Um should be available
Speaker 1: in our public records, but it's yeah, it's tens of
Speaker 1: millions of dollars. Okay, let's just say hypothetically you lose
Speaker 1: and they can continue to do with their away. Would
Speaker 1: that affect the future of sons? No? Um. The other
Speaker 1: thing I would say is one, just like on a
Speaker 1: more technical note, you know, we've you can only sue
Speaker 1: on five patents. We have a hundred and five that
Speaker 1: they are violating. So um, there's a lot more to
Speaker 1: go in this battle until you know where we are.
Speaker 1: We're confident about where we are. But also the other thing,
Speaker 1: Bob is that it wasn't and this was very important
Speaker 1: to me, is that it's a very small group of
Speaker 1: people that are involved in this matter. So it takes
Speaker 1: a certain amount of my time and I try to
Speaker 1: be disciplined about that. Eddie or chief general counsel obviously
Speaker 1: him and a few of our inn electoral property people
Speaker 1: very focused on it. And then outside Ferns that's why
Speaker 1: we pay the money UH in terms of going through it.
Speaker 1: But I also said to the company, we cannot let
Speaker 1: this take away from us continuing to drive innovation and
Speaker 1: bring at least two new products out every year and
Speaker 1: drive the business and get into more homes. And so
Speaker 1: we've successfully been able to do both UM and so
Speaker 1: I am not by no means like would I rely
Speaker 1: on that as the only way forward for so nos
Speaker 1: like we have to continue to compete and win UM
Speaker 1: and we've shown we can do that too. Okay, let's
Speaker 1: talk about the big software issue where it came out
Speaker 1: and it appeared to customers that you were not going
Speaker 1: to support old products with new software, and then ultimately
Speaker 1: to the point where like, I have a lot of
Speaker 1: stuff on son Nos one, but for the room I
Speaker 1: have to download Sonos two. Ye, So walk us through
Speaker 1: all that. Yeah. So, after by that point sixteen years
Speaker 1: of shipping products UM and then looking at what we
Speaker 1: wanted to deliver for the new products as well, we
Speaker 1: came to basically a point where we couldn't support the
Speaker 1: processor and memory and the limitations that we had on
Speaker 1: those early products three early products UM that were was
Speaker 1: required to do things like Debbiamo's music, Debbie atmos UM
Speaker 1: and some of the other things that we have planned
Speaker 1: and coming that we we UM that we're using with
Speaker 1: ARC and new five, New sub and now as well
Speaker 1: roam and so it was hard and we had lots
Speaker 1: of you know, we spent so much time trying to
Speaker 1: figure out the right way to work through these kind
Speaker 1: of things, and we thought we did the right thing
Speaker 1: and trying to get out in front of it. We
Speaker 1: flubbed the messaging in a in a big, big way. UM.
Speaker 1: But we're trying to alert people of like, hey, this
Speaker 1: is coming and give people a chance to get their
Speaker 1: system to S two if that was the right thing. UM.
Speaker 1: So that was tough. We you know, um, it was
Speaker 1: a communications issue. It was a it's a technology issue,
Speaker 1: and what a technology life cycle issue? You would say
Speaker 1: that we have to walk people through and thankfully, um,
Speaker 1: a lot of our customers you know, continue to stick
Speaker 1: with us through that. But we certainly flubbed the communications
Speaker 1: up front where we said, okay, like we almost gave
Speaker 1: the impression. I got a lot of emails, um, people
Speaker 1: my emails on our customer support site so people can
Speaker 1: email me directly. And I got a lot of emails
Speaker 1: from people who thought that meant their products for stopping,
Speaker 1: you know, in May of last year when we communicated
Speaker 1: it in the end of January, which is not the
Speaker 1: case and never been a plan to be the case.
Speaker 1: So yeah, so it's um, it's really about trying to
Speaker 1: how you balance I guess I would say from a
Speaker 1: you know, from a company perspective, is how do you
Speaker 1: make sure you are inventing the future and do everything
Speaker 1: you need to do to create great new experiences in
Speaker 1: the future, but not you know, not stranding the customers
Speaker 1: that have invested in the technology um of the past.
Speaker 1: And and look, I mean the reality is there's not
Speaker 1: many companies like ours where the products from fifteen years
Speaker 1: ago still work. So I don't think a lot of
Speaker 1: companies get caught up in these kind of situations. UM,
Speaker 1: but it's something that, UM, you know, it's important to
Speaker 1: us to make sure we're continuing to service those customers.
Speaker 1: And so yeah, so there's some customers, it's not that
Speaker 1: many at this point, but there are some customers that
Speaker 1: will run in like an S the first version software
Speaker 1: and then the second version software. But most customers have
Speaker 1: been moving to S to the new software. Okay. And
Speaker 1: you know this came up because unlike a phone, people
Speaker 1: buy home audio or tievs that they expect it to last.
Speaker 1: It's not a fungible item that you discard. So how
Speaker 1: long do you plan to support these legacy products? Um?
Speaker 1: You know, as long as we can. And the only
Speaker 1: thing that trips us up is if something gets changed. Um.
Speaker 1: You know, if a service, for instance, isn't gonna support
Speaker 1: or it's going to change something in the architecture, um,
Speaker 1: you know, those kind of things. So we're continuing to
Speaker 1: support it. UM. I don't see any reason why we
Speaker 1: can't continue to going forward. So uh, yeah, we'll support
Speaker 1: as long as we can. And is there any trade
Speaker 1: in trade up program for there is Yeah, so there is. Um,
Speaker 1: there is a trade in program off for customers that
Speaker 1: want to move to S two products. Okay, so how
Speaker 1: long are you going to do this? Do what run? So? Nos? Oh,
Speaker 1: as long as they'll let me. Absolutely, we have the
Speaker 1: best team in the world. Uh, it is so much fun.
Speaker 1: In terms of the company, I think we have so
Speaker 1: much opportunity in front of us. We have some amazing
Speaker 1: products on the roadmap. Um. I just feel extremely blessed
Speaker 1: um to have the opportunity to do it. And uh yeah,
Speaker 1: I mean as long as you know, as long as
Speaker 1: I feel like I'm contributing and leading in the right
Speaker 1: way too, and we're heading in the right direction, Um,
Speaker 1: then you know I'm I'm in. So you have a
Speaker 1: good record as a seer. Where's it all going? M hm? Where? Yeah,
Speaker 1: it depends where it is if we're talking about Okay,
Speaker 1: let me break it down first. In terms of Sons,
Speaker 1: these are essentially home audio products also aligned with TV.
Speaker 1: Do you ever invented envisioned sons broadening their landscape in
Speaker 1: terms of their purview their products? Absolutely, Bob, I think
Speaker 1: the I think the system we've built and that the
Speaker 1: connectivity to the cloud in the systems that are there, Uh,
Speaker 1: the ideas we have around future products, the opportunity and
Speaker 1: all of audio UM, there's just so much opportunity out there.
Speaker 1: I I do see us broadening absolutely over time. And
Speaker 1: I've said I think we have an opportunity to play
Speaker 1: in all the different areas of audio. So there's no
Speaker 1: reason we can't UM over the long term. The most
Speaker 1: important thing to me is doing it in a way
Speaker 1: that brings something unique to the table. Right, So something
Speaker 1: like Rome, how is that different than other Bluetooth speakers.
Speaker 1: We've got things like sound Swap Um, there's a different
Speaker 1: way that we've integrated the voice services, those kind of things,
Speaker 1: and that it's kind of connected together, right, And so
Speaker 1: each product you're getting with so no nos makes the
Speaker 1: experience better. And this is something we watch pretty carefully,
Speaker 1: is like our Is that true? So as people get
Speaker 1: more and more products, how do they feel about the system,
Speaker 1: and they feel they get even they become even bigger
Speaker 1: advocates over time, and so I think we have a
Speaker 1: lot of opportunity right across the whole audio spectrum over time,
Speaker 1: and who knows where it goes from there to me.
Speaker 1: To me, the biggest thing is are we building a company,
Speaker 1: you know, in a team that's adaptable, uh, you know,
Speaker 1: and building something that fundamentally is going to be enduring
Speaker 1: over the long term. Let's talk about the room. When
Speaker 1: what the room is a very small unit and you
Speaker 1: set it up and turned on, you were literally shocked
Speaker 1: by the quality of the audio and most portable stuff
Speaker 1: is adequate ad best? Okay, what was the thinking and developing?
Speaker 1: And also but the price. A lot of the reviews
Speaker 1: will say the price is significant, you know, and they're
Speaker 1: how hard to sell is it? Is this a portable item?
Speaker 1: Is there people buying on sound quality? They're just buying
Speaker 1: on price point they you know, for us, anytime we're
Speaker 1: gonna do something has to have that different experience. So
Speaker 1: it is different in this sound um, the build quality,
Speaker 1: the functionality as well that we have and it's hard
Speaker 1: to make it sound that good in that form factor.
Speaker 1: But uh, you know, Giles, Chris and the team do
Speaker 1: an incredible job at doing that. And I hope that
Speaker 1: every product we have, as people turn it on and
Speaker 1: listen to it, um, they'll be surprised by the sound
Speaker 1: that comes out of it. Whether it's Ark or whether
Speaker 1: it's Rome. Uh So there's a lot of debate. To Bob,
Speaker 1: you may remember, you know, Bluetooth was a sacred cow.
Speaker 1: It's us for a long time, long time, and so
Speaker 1: putting Bluetooth in a product and being able to do
Speaker 1: that and still live up to our quality standards was
Speaker 1: a big deal. UM. So we worked through that and
Speaker 1: figured out how we could do it and how we
Speaker 1: could do it better, um, which we're proud of. And
Speaker 1: I don't get too caught up. Like from a price perspective,
Speaker 1: it's very it's a very good deal for what you get,
Speaker 1: and we feel good about that. And there's some people
Speaker 1: that will want, you know, that twenty nine dollar product
Speaker 1: um from Google or Amazon, and maybe that's sufficient for
Speaker 1: what they need. But um, as you probably can tell
Speaker 1: from how long it takes to get one these days. UM,
Speaker 1: there's a lot of people that are very, very happy
Speaker 1: with Rome, and it kind of arrived. You know, we
Speaker 1: did do some last year at this time. We did
Speaker 1: do a little bit of tuning of our roadmap and
Speaker 1: moving things around, and so Rome was one of those
Speaker 1: things is that we tried to accelerate. UM and I
Speaker 1: think it's arrived at a really good time as the
Speaker 1: world starts to reopen. Okay, let's talk about audio. Used
Speaker 1: to buy a stereo, Now people buy television audio, okay,
Speaker 1: and audio is ubiquitous in general. Where is the audio
Speaker 1: landscape going? Do you mean from a format perspective or
Speaker 1: how do you think about it? I mean everything? You know,
Speaker 1: if we look at streaming services, the story today is lossless,
Speaker 1: and then even Dolby atmost and then there's another issue,
Speaker 1: the highest standard of Amazon and Apple services won't play
Speaker 1: on so go on. So so I think we we
Speaker 1: start with the customer and what do they what do
Speaker 1: they value? Right? We've not been that company that tries
Speaker 1: to put every logo or new standard on the box,
Speaker 1: if you will. Um, you see companies like that, and
Speaker 1: you see their boxes with just like the gobbling gup
Speaker 1: of every logo andvery new standard, and so you know,
Speaker 1: sometimes we've been accused of being a little slow on
Speaker 1: that front and looking at it, but we're thoughtful about
Speaker 1: what's happening in each space. And so even going back
Speaker 1: with soundbars, you know where Dolby was really the precursor
Speaker 1: to atmost was really taking off from streaming services, and
Speaker 1: we said, that's where we're going to focus as opposed
Speaker 1: to delivering DTS right because DTS was very much about
Speaker 1: the old school blue rays right that would have that technology,
Speaker 1: and so UM, we try to stay focused on what
Speaker 1: customers are doing. We we obviously support Dolmie Atmost with
Speaker 1: our arc product, and there's a lot of people that
Speaker 1: would tell you that the best way to listen to
Speaker 1: Delby Atmost out loud with one product would be arc Um.
Speaker 1: So we're watching, you know, carefully, pretty interested around what's
Speaker 1: happening with Dolbie Atmost music. You know, with lossless, the
Speaker 1: reality is, from what we've seen, is that a lot
Speaker 1: of customers just can't tell the difference or don't you know,
Speaker 1: aren't that into it in terms of what's there. And
Speaker 1: so the real question with Delbie Altmost music will be
Speaker 1: is it what people want at the end of the
Speaker 1: day and is it filling some need that they they
Speaker 1: are feeling they're missing today. I definitely see it and
Speaker 1: enjoy it when we're watching um, you know, watching streaming
Speaker 1: Netflix or videos or whatever the case may be. And
Speaker 1: there's a real place for that and I think the
Speaker 1: you know, I think we're starting to see it certainly
Speaker 1: seems like the industry is getting behind Delobie atmost music
Speaker 1: in a way that is going to make it um
Speaker 1: the next standard. But at this point, a lot of
Speaker 1: it's the industry talking to itself, and I want to
Speaker 1: see what consumers do. Okay, So depending on how you
Speaker 1: call it, they call him the thing stocks or the
Speaker 1: big five. You know, we have Facebook, Apple, Microsoft, etcetera.
Speaker 1: You intersect with these companies, Hey, do you ultimately believe
Speaker 1: since you went to Washington there will be effective government
Speaker 1: relations or in also government uh changes here? And you
Speaker 1: also believe that the sphere is more abu or can
Speaker 1: an interloper come up in triumph? Uh? The So I
Speaker 1: do believe that the government is going to take action.
Speaker 1: I think it's the probably the only bipartisan issue we
Speaker 1: see right now that's out there. And both sides, for
Speaker 1: for different reasons, are seeing the what the results are of,
Speaker 1: you know, having too much power into few hands fundamentally,
Speaker 1: and so I do expect to see more. Lena Khan
Speaker 1: being you know, chairperson of the FTC is a big move,
Speaker 1: and you know, I think that it's a whole new era.
Speaker 1: Tim Wu at the White House, So you're getting people
Speaker 1: that have been talking and writing about these things for
Speaker 1: a long time into positions of power to actually affect change.
Speaker 1: And I think it'll be good for society, quite frankly.
Speaker 1: And there's a lot of people that talk about the
Speaker 1: fact that even maybe some of these companies spinning out
Speaker 1: certain businesses may actually be better for everybody involved, right,
Speaker 1: and maybe foster more innovation. There's always the danger of
Speaker 1: like regulatory capture and um situations where the rules are
Speaker 1: put in favor of the incumbents it and they can
Speaker 1: actually solidify their positions. So we have just have to
Speaker 1: make sure that you know, that doesn't come to pass.
Speaker 1: But um, I'm encouraged by what I'm seeing, uh, fundamentally
Speaker 1: on that front. And then also on the flip side, Bob,
Speaker 1: you know, like we're continuing to innovate, We're continuing to
Speaker 1: do everything that we can right and that you know,
Speaker 1: as I said, that's super critical to us being successful
Speaker 1: in the future. Um, certainly I hope that there'll be
Speaker 1: other companies that challenge the ones that are out there today.
Speaker 1: I think, you know, again, it's it's a short period
Speaker 1: of time, a grand scheme of things. But I've been
Speaker 1: in technology for twenty three years. I will tell you
Speaker 1: the dominant position and the way that the companies that
Speaker 1: are there today act and how quickly they move to
Speaker 1: jump into any new potential threat is unprecedented. Right. So
Speaker 1: last year, you know, Google basically doing everything they could
Speaker 1: to jump in front of Zoom, right with the video
Speaker 1: solutions or another great example we saw last year, you know,
Speaker 1: Google Photos went from being free to starting to charge
Speaker 1: after they've driven all the photo products that you have
Speaker 1: to pay for out of the market, right, And so
Speaker 1: they went and did that, and those are those are
Speaker 1: things that um, we didn't see as much in the past.
Speaker 1: And so those kind of things I worry about in
Speaker 1: terms of driving you know, the up and comers out
Speaker 1: of the market. That so there's something there. But I also,
Speaker 1: you know, fundamentally believe that there will be some sort
Speaker 1: of change in the system. Is it Ai, is it blockchain?
Speaker 1: Is it you know, something we don't even see today
Speaker 1: that also helps hopefully you know, another company or a
Speaker 1: new set of companies emerge. Well, Patrick, I think we've
Speaker 1: covered it. We've come to the end of the feeling
Speaker 1: we've known. I think we have a great overview of
Speaker 1: Sons and its place in the market. Thanks so much
Speaker 1: for taking the time. Thanks Bob, I've enjoyed it until
Speaker 1: next time. This is Bob left set