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March 11, 2021
Good morning, and welcome to Protocol Next Up. This week, we are taking a closer look at what's in store for Sonos and the challenges Apple may face building AR contact lenses.
And please mark your calendars: On March 18, Protocol will be hosting a live event on the state of VR in 2021, featuring Baobab Studios CEO Maureen Fan, Survios co-founder and president Nathan Burba, HP global head of virtual reality for location based entertainment Joanna Popper and Venture Reality Fund general partner Tipatat Chennavasin. Join us; RSVP here.
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The Big Story
Next up for Sonos: Cars, M&A, biz services
Smart speaker maker Sonos introduced its latest device, the $169 Sonos Roam, this week. The company also held an investor day Tuesday, outlining its financials for the rest of 2021 and beyond. Sonos doesn't usually share details about upcoming products and initiatives until it is ready to launch them, but remarks made by executives this week, including a conversation I had with Sonos CEO Patrick Spence, give us a good idea of what's next for the company.
- Automotive partnerships. Sonos has long been in talks with carmakers to take its sound on the road. On Tuesday, Audi spilled the beans: Sonos will power in-car hi-fi for the 2022 Q4 e-tron. Confirming the deal, Spence called it "our first partnership bringing our sound experience to automobiles" during the investor event Q&A. I wouldn't be too surprised to see additional automotive partnerships announced in the future.
- Business services. Sonos has sold speakers to businesses for some time. Now, the company is looking to launch dedicated services for businesses as well, Sonos SVP Ted Dworkin revealed Tuesday. "We think the business space holds just as much future opportunity for Sonos as we have in the consumer space," Dworkin said. The company didn't share a lot of details, but one could imagine that a curated, ad-free music service like Sonos Radio HD could work well in retail and hospitality environments.
- IP licensing deals. Sonos has been aggressively defending its patent portfolio, and is currently battling Google in court over alleged patent infringement. Chief legal officer Eddie Lazarus said Tuesday that lawsuits are a last resort for Sonos, but also wouldn't rule out suing other companies. Some of the big ones in Sonos's sight include Apple and Amazon; Sonos would like to get paid a cut every time these companies sell an Echo or HomePod speaker. Lazarus pointed to long-term IP licensing deals as the ultimate goal, saying: "We don't think about this process as involving one-time payments."
- New retail partnerships. During the pandemic, Sonos has seen a lot of growth for its direct-to-consumer business, selling speakers and accessories via its own website. That will continue to be a big focus, but Sonos is also striking new retail partnerships to promote products like the Roam to different audiences. "You may see us showing up in some surprising places, more oriented to the outdoors," Spence told me.
- M&A. Sonos has around $650 million of cash in the bank, and CFO Brittany Bagley said Tuesday that the company plans to use some of it for acquisitions. "Examples of these would be companies that accelerate our product roadmap, support our new initiatives or further differentiate our customer experience," she said. In the past, Sonos has acquired startups to help build a voice assistant (still in development) and integrate music handover features (launching first on the Sonos Roam). Next up: an audio services play?
- Headphones. We know from patent filings that Sonos has been working on its own pair of over-ear headphones. Spence didn't want to confirm or deny anything when I talked to him, but he did reveal that the company decided to postpone the launch of a new product to be able to release the Roam in time for pandemic restrictions to loosen. He also made it clear that Sonos over time wants to compete in the entire $90 billion audio market — which, I might add, also includes headphones.
- Other types of audio. Sonos has long focused on music and has catered first and foremost to music fans. However, in our conversation, Spence spent a surprising amount of time talking about Clubhouse, audiobooks, podcasts and other non-music content. The impression I got is that the company may be in the early stages of trying to figure out how it can address those trends. That makes sense when you consider that TVs and movies have been a huge growth driver for Sonos, with consumers snapping up sound bars to re-create the theater experience at home.
"Ultimately, health concerns and mask policies will disappear, but the longer they last, the more consumers will become accustomed to watching movies at home at little to no incremental cost." —Lightshed Partners issued a drastic 12-month price target of $0.01 for AMC Theatres' stock this week.
"Lockdowns and other safety measures may have helped galvanize the End of Ownership." —Subscription SaaS company Zuora, which admittedly has a vested interest in a transition from ownership-focused to subscription business models, in its nonetheless noteworthy End of Ownership report.
Section 230 of the Communications Decency Act is the most-discussed and least-understood law governing the modern internet. This event will delve into the future of Section 230 and how to change the law without compromising the internet as we know it. Join Protocol's Emily Birnbaum and Issie Lapowsky in conversation with Senator Mark Warner. This event is presented by Internet Association.
Here's how Apple's AR contact lenses could work
Earlier this week, TF International Securities analyst Ming-Chi Kuo predicted that Apple may introduce AR contact lenses in the 2030s. Obviously, any prediction for what Apple may do a decade from now should be taken with more than just a grain of salt.
Then again, Kuo has a pretty good track record for predicting future Apple products, and we do know that Apple has been working on AR glasses. So it's conceivable that the company may also be looking to shrink down the technology powering these glasses a lot further for future iterations, and eventually release a product that promises what Kuo called "invisible computing."
This made me wonder: How would Apple's AR contact lenses actually work? What would be the biggest challenges, and what are some ways to deal with them? Luckily, we don't have to resort to science fiction for answers. I recently talked to Mojo Vision product and marketing SVP Steve Sinclair, whose company is building exactly what Apple is supposedly aiming for.
Mojo Vision has been working on AR contact lenses since 2015. "The first 3.5 years was really a science project," Sinclair said. Things have gotten more serious since: Mojo Vision has raised around $160 million, with funders including HP, LG, Dolby and Google's Gradient Ventures.
The tech is actually working — sort of. Mojo Vision has built a simple prototype capable of displaying monochrome images, and has shown it off to select industry insiders. Sinclair told me that he is among the 15 or so people in the world who has actually worn it. Others have only been able to see Mojo's custom display mounted atop a lens without putting it into their eye.
The idea behind these lenses is intriguing. The Mojo Lens, as the startup calls its product-in-progress, makes use of a 0.48mm microLED display. That's super tiny, but since it is so close to your eye, it equals a much bigger screen — just like a phone screen can compete with a TV if you hold it close enough to your face.
Given that it's right in the center of your eye, the image would always be in your field of view, and the display would still work even with eyelids shut. "You can close your eyes and basically go into VR," Sinclair said. And being so tiny, the screen would need a lot less power than AR glasses.
Even so, AR contact lenses still need batteries, which would have to be integrated into the lens itself. There's also a need for special antennas to provide connectivity, either to your phone or a dedicated companion device, and a bunch of other chips. All of this would be super tiny, and be in your eye.
Batteries in your eye: Is that safe? Good question, and one that Mojo Vision, and possibly Apple, will have to have a good answer for. Contact lenses are considered medical devices, so any such AR product would have to be approved by the FDA.
It may take years before we get there — if it works at all. Mojo Vision has not shared a target date for its first product yet, and Sinclair was pretty open about the fact that the whole tech could still fail altogether. Even if we do see AR lenses from Mojo or Apple within the next decade or so, they may look less like something Hollywood may imagine, and more like Google Glass or North's Focals. Think assistive, not immersive.
AR will be a thing, one way or another. The tech constraints could also mean that AR glasses will actually offer a better experience, at least for the foreseeable future. Sinclair didn't seem too worried about competition from other headgear, arguing that in today's analog eyewear world, both glasses and contacts exist as complementary solutions.
Plus, tech that's being developed for AR glasses could ultimately benefit AR contact lenses, and greater acceptance of AR in general may help lift all boats. "It only helps us if the glasses side of things tasks off," he said. For a company like Apple, this could also mean that it may as well invest into R&D for AR contacts, even if they're more complicated to make than AR glasses. To stick with the tides and boats metaphor: If you believe the future platform war will happen on waters, you might as well build an armada.
- Facebook bans cloud VR from Oculus headsets. Services that stream PC VR games and apps directly from the cloud won't be allowed on the Quest.
- On Protocol: Why Square bought Tidal. Sure, having famous rappers as friends is cool, but have you tried monetizing the long tail?
- VR headset maker Pico raises $37 million. The Chinese startup plans to release a new standalone headset this year.
- Also on Protocol: Roblox CBO Craig Donato on his company's public listing. Nine months ago, Donato told me Roblox wasn't ready to go public. Here's what changed.
- Why Oprah's Meghan Markle and Prince Harry interview isn't on Paramount+. Who needs streaming rights when you're launching (*checks notes*) a streaming service?
- Google TV is getting kids profiles. Systemwide user profiles are the next big thing for smart TV platforms, and parental control is a pretty good use case.
- WarnerMedia CEO Jason Kilar thinks ads could help make HBO Max more affordable. Kilar's latest idea sounds like Hulu all over again, which may not be a bad thing.
- Comcast's Peacock lost $914 million in 2020. Building a new streaming service isn't cheap, as a new regulatory filing reveals.
- Sketchfab launches transfer tool for Poly users. Google is about to shut down its 3D repository Poly, so Sketchfab is helping artists and others to preserve their work.
- Mark Zuckerberg talks about Facebook's plans for AR and VR. The company is already working on a Quest 3 and Quest 4, among other things.
A quick update on my latest pandemic hobby, which involves setting up a Raspberry Pi to stream music from my record player to my Sonos speakers. I got the Pi and a special USB audio preamp, and I even managed to find an extra keyboard and mouse hidden away in some drawer. The one thing that's missing is luck, or perhaps a better understanding of Linux audio issues, because I can't get this thing to work. Anyone interested in trading a gently-used mini computer for a sourdough starter?
Thanks for reading — see you next week!