As Sonos stock changed hands on NASDAQ Thursday, during its first day as a public company, I spoke with the company’s vice president of product management, Chris Kallai, about where the company is headed. Kallai oversees the entire product development process at the speaker manufacturer, working in conjunction with its software engineers and lead designers, as well as Sonos Sound Experience Leader and record producer Giles Martin (son of the late George Martin, the famed Beatles producer).
We eased into the interview with a question about Sonos’ latest product, the Sonos Beam. “It really hit our goals that we were trying to develop,” Kallai said. He was especially pleased about the level of user enthusiasm for the new product. “Everyone got the three-speakers-in-one angle," he said. "It’s a voice assistant, it’s an awesome soundbar for your TV, and it’s a great music speaker.”
Because many of the new smart speakers are incorporating displays—the Amazon Echo Show and Echo Spot on the Alexa front, and the Lenovo Smart Display and the coming-soon JBL LinkView on the Google Assistant side—I asked if Sonos had anything like that in the works. “We’re always working on cool new products,” Kallai said. “I’m not going to dive into the details of what’s going to be our next product, but I can tell you that we’re on a cadence of launching two products per year, and we have a lot of cool products coming down the pipeline.”
“How about an outdoor speaker?” I asked. “I think I’ve asked that question at every product launch.”
Kallai laughed and said, “I was waiting for that one! I’ll give you the same answer. But we’re totally in tune with what our customers want. There’s lots of opportunity for us in the home right now, and you’re definitely highlighting areas that are opportunities. Our team is always looking to knock off the next cool experience for our customers. So you’ll definitely see more products coming out over the coming years that you’ll like.”
I often see Sonos characterized as an audiophile speaker manufacturer, even though none of its products support high-resolution audio, typically defined as higher-than-CD quality. Where many Sonos competitors support 24-bit resolution and sampling rates of 96kHz and higher, Sonos has since the beginning capped its support at 16-bit resolution and a 48kHz sampling rate.
When I told Kallai I found the audiophile characterization curious, he responded “Yeah, I’ve been with Sonos for 10 years, and we’ve been in the business for 16. One of the things that we’ve always had a challenge with is prioritizing all the cool things we can work on. That [high-resolution audio] is one of things on our to-do list, it’s just that we would prefer to launch a Sonos Beam, or come out with Apple Music [support], or launch Google Assistant support by the end of this year.... But I totally hear you on the high bit-rate comment.”
Kallai also acknowledged that adding support for high-res audio would break compatibility with some existing Sonos products. But that precedent has already been set with the launch of the Sonos One, the Sonos Beam, and the new support for AirPlay 2. “Yeah, that’s the beauty of our software platform,” Kallai said. “We do about six to eight updates a year currently, on the entire Sonos system. As we find more features and more experiences that we want to deliver to our 6.9 million homes and our 19 million products, we can get the software development team on that, write the code for whatever experience we’re envisioning, and then deliver that via software update. You’ll continue to see over the coming years more and more cool features delivered via software into the hardware products we have seeded and all the hardware products we’ve got coming.”
If Sonos does add support for high-resolution audio down the road, not every existing Sonos product will be able to support it because not every DAC (digital-to-analog converter) in the line can decode tracks higher than 16-bit/48kHz. “It will all depend on the product,” Kallai said, “and we’ll be ultra-transparent about which products can support what. Kind of a great example is AirPlay 2. We were very clear about which products will support AirPlay 2 and which ones won’t. Some of our products definitely won’t, and we made that very clear up front even before we shipped AirPlay 2 [support via firmware update].”
Kallai said Sonos is “focused on being a premium audio company." He listed the products that reinforced that mission: "After we launched the Play:5 at $499, we launched the Playbase, which is a $699 product. Then we brought out the Sonos One, our first voice-enabled speaker, at $199, and then we launched Beam at $399. So of our last four launches, two of them have been $500 to $700 products."
Kallai noted the challenges of evolving a premium product line, noting, "93 percent of our players that we’ve ever shipped are still in use. So we definitely have challenges that are a little bit different from the competition, where they’re building—I’ll call them throwaway, disposable electronic gadgets—that you might buy, use for a year, and then get a new one." Sonos users, Kallai said, are more committed. "Our customers kind of view our speakers as furniture that stays in the home for many years," he explained.
I asked whether the desire to be viewed as a premium audio company meant that future living-room products would support some of the high-performance home-theater codecs the Sonos doesn’t support today, such as Dolby Atmos and DTS:X. “That goes back to your earlier question,” Kallai responded. “We’ve got a big to-do list and we want to knock off the experiences we want to deliver and the hardware we want to deliver and keep cranking on the platform we want to build. And with that will come software updates that we can do over time. So I would say stay tuned.”
My final question was related to the more than $200 million in cash Sonos raised during its IPO. Will some of that be directed to R&D and new product development? “We’re definitely going to put some of that back into Sonos,” Kallai said.