By Janko Roettgers
Sonos is giving hardware subscriptions another look, at least if a new job listing is any indication. Based on the details of that listing, the company appears to be on the cusp of expanding its Flex subscription program, which lets people rent Sonos speakers for a fixed monthly fee. Expanding the program could not only help broaden the company’s customer base, but help continue to grow it even as consumers cut back on spending due to inflation.
Sonos first launched Flex in late 2019 in the Netherlands, where it has since been offering a small number of customers three rental packages starting at €15 ($15.50) a month for a pair of entry-level speakers and as much as €50/month for a full-blown surround sound home theater package. As a Sonos spokesperson told me this week when asked about the job listing, “We’ve learned a lot about customer interests through this program and are continuing to explore how subscription models can bring added flexibility to listeners.”
Sonos began looking for an accounting analyst for Flex a week ago. “The role stretches over multiple accounting teams and is based preferrable (sic) on the East Coast in the US,” the job listing states, suggesting that Sonos is eyeing multiple markets for Flex. Sonos currently generates around 60% of its revenue in the Americas, and a little over 30% in the EMEA region.
“Sonos Flex customers will be able to enjoy the Sonos experience at home, without having to invest in buying our speakers,” the listing continues. Customers will be able to choose from one of three Flex packages, and get access to product updates, with the job listing promising that the company “will always listen to the latest” of its products.
The company’s Flex trial in the Netherlands was limited to 500 homes. Sonos appears to have paused new sign-ups for Flex in late 2020, and has since been telling visitors to its website that Flex is “currently full.”
Reactions to the trial were mixed. The Verge called it a “weird flex” and Tien Tzuo, founder and CEO of the subscription monetization startup Zuora, confessed that he was underwhelmed. “This isn’t a very compelling subscription service,” Tzuo wrote, adding that he would have preferred that the company include additional service features on top of device rentals. As he put it, “Automatic equipment upgrades just don’t cut it anymore.”
Not everyone is so skeptical about the potential of a Sonos hardware subscription program, however. “Expanding this rental model to other regions helps grow a more stable revenue base, thanks to the addition of recurring monthly subscription revenues,” said Erickson Strategy & Insights analyst Paul Erickson via email. “I honestly would be surprised if they didn’t eventually roll it out to their top 3-5 markets in order to grow the total available Sonos customer base via a more affordable option.”
Like many consumer electronics companies, Sonos has for some time explored ways to diversify its revenue streams with subscriptions and services. The company launched an ad-supported music streaming service in early 2020 and added a paid, ad-free tier later that year. It’s unclear whether Sonos plans to combine Flex with access to its paid streaming product, but such a move would not be unprecedented: Apple, which has had its own hardware upgrade program for years, is reportedly looking to combine it with its Apple One services plan.
Service subscription plans are also increasingly becoming a part of consumer IoT. Indeed, transitioning from device ownership to rental plans could actually improve the consumer experience, and perhaps even ensure that obsolete devices are being recycled.
For Sonos, Flex could also be a hedge against economic uncertainties. Other hardware makers have responded to increasing component costs and inflationary pressures with lower-powered gadgets sold at or below cost. The speaker maker has less room to do so if it doesn’t want to compromise on sound quality, and its services revenue is too small thus far to make up for hardware losses.
Giving consumers a way to get Sonos products without massive upfront costs could be another way to grow the company’s installed base, which reached 14 million households at the end of the most recent quarter. “Sonos’ product line is viewed as premium-priced,” Erickson said. “In order to sustain customer growth and growth in household penetration during this period of growing inflation and consumer price sensitivity, Flex is a more affordable alternative to many who would not otherwise be willing or able to purchase Sonos hardware.”
However, Erickson also cautioned that the success of a Flex-like service depends on a company being good at, well, service. As he said: “The long-term growth of Flex’s subscribership ultimately will come down to how adept Sonos is at pricing based on each individual market, and on how well they provide the service side of the equation — installation, repair/support, and timely upgrades,”
This story was written by Janko Roettgers, who can be found at www.lowpass.cc