Sonos is betting big on a post-pandemic future, and tougher antitrust policies to boot

Are you ready for the pandemic to be over? So is Sonos.

The smart speaker maker weathered COVID-19 unexpectedly well, with consumers snapping up sound bars and speakers to make those long days at home a little more bearable, which turned the 2020 holiday quarter into the best quarter in the company's 18-year history. "It's been a very strange, but very successful year for us," said Sonos CEO Patrick Spence.

Now, Sonos is ready for things to change. The company introduced a new small and portable speaker Tuesday, called the Roam, that seems made for our post-pandemic future. And with the Biden administration appointing antitrust experts like Tim Wu, Spence believes there may be a chance for a policy reset. In an interview with Protocol, Spence talked about his hopes for new antitrust policies, the company's plans for the coming years and why Sonos decided to fast-track the Roam speaker in the face of the pandemic.

One of the surprise winners of the lockdown was the Sonos Move, a portable $400 speaker the size of a small space heater. "That became a big product for people because they're going out to their yard or patio, I suspect," Spence said. With the Roam, Sonos is now betting that its customers are itching to venture a little further. Priced at $169, the Sonos Roam is the company's first fully portable Bluetooth speaker that doubles as a full-fledged member of the Sonos smart speaker family when within reach of a home Wi-Fi network.

"We actually prioritized [it] over other products on our roadmap when we hit the pandemic last summer," Spence said. "We couldn't have seen when things would be reopening. But with Roam, we did say: 'OK, let's get it out a little sooner.' And we were willing to push something else out that we thought would be less suited for the moment."

With the Roam, Sonos also has the potential to grow its audience. "It gives us the opportunity to speak to a new customer," said Ryan Richards, Sonos Global's product marketing director. Traditionally, the company has targeted wealthier households; Spence is scheduled to reveal at an investor event Tuesday that it is currently in 9% of the affluent homes in its existing markets. With the exception of cheaper Sonos-powered speakers made by Ikea, the Roam is the first Sonos speaker selling for less than $200.

"$169 isn't cheap," Spence said. "But in a world of thousand-dollar iPhones, it is something that is accessible for people." That also means Sonos can more easily target students and others who may not have wanted to spend hundreds of dollars on a home hi-fi system just yet. "It will appeal to a younger demographic," Spence said, adding: "We want to quadruple the number of people actually using our products and services."

Sonos has long relied on its existing customers to drive a significant chunk of its sales, with consumers adding to their home hi-fi system over time. With Move and now Roam, the company expects that trend to continue. Right now, the 11 million existing Sonos households own close to three of the company's speakers on average. In the coming years, Sonos wants that number to be more like four or six, which will allow the company to reach $2.25 billion in revenue in fiscal year 2024.

Part of that number will also be a modest but growing contribution from the company's still nascent services business. Sonos Radio, the company's ad-supported radio service that launched last April, has become the third most-listened-to music service on Sonos speakers. Its paid HD tier, launched in November, has seen "good traction," according to Spence, who laid out plans to reach 500,000 Sonos Radio HD subscribers, without specifying when exactly that may be.

Succeeding with those ambitious goals depends on Sonos beating its competition, which now includes everyone from traditional hi-fi brands to Bluetooth speaker makers to tech giants like Google and Amazon. The company has publicly feuded with the latter two, alleging anti-competitive behavior, and currently is in court against Google over alleged patent infringements.

That might be why Sonos has a very different take on the new administration's anticipated stance toward Big Tech than some of its industry compatriots. In our conversation, Spence expressed optimism about the recent appointment of Tim Wu to the National Economic Council, saying it signaled a "different perspective" on antitrust issues than the one held by the previous administration.

He also had high praise for Rep. David Cicilline, who chairs the Subcommittee on Antitrust, Commercial and Administrative Law, in front of which Spence testified in January 2020; he said that it was key for the administration to take steps against anti-competitive behavior. He pointed to tech companies blocking Sonos from using multiple voice assistants on their products, and pricing their speakers below cost, which Spence in the past called out as illegal predatory pricing.

Spence also argued that tech giants use what he called "efficient infringement" to steamroll smaller competitors that may not have the resources to fight patent infringement lawsuits, or simply didn't patent all the technologies they developed. "It's principles that we've had in the system. We just haven't enforced them as a country," he said, adding that there may also be a need for additional safeguards. "Hopefully we'll come up with some new ones to just make sure that we are spurring more companies, competition and entrepreneurship."

Ultimately, he said, creating an equal playing field requires a different mindset from everyone, consumers included — a mindset that isn't just focused on the cheapest possible sticker price. "Consumers are also citizens who need jobs," Spence said. "We're all part of the same system. My hope is that people think through the system and understand that it has to work for us as citizens, not just as consumers. A lower price doesn't necessarily mean that the whole system is going to be healthy and that it's going to work for everybody."