Patrick Spence

time believing it, quite frankly. And it was incredible because our team you know, just stepped up to really be able to keep the business going UM during that period, and in fact, we kind of threw out the playbook that we had UM and we got re oriented on a few key priorities. The first was supporting our people and making sure that they were set up for success and you know, able to balance kind of the demands

of life at that point, UM. And then we got really focused on bringing the joy of Sonos to more homes. So we had a whole bunch of our retailers and distribution channels closed UM. And so what we did was say, okay, like, how can we help people through this period and maybe make life at home a little bit better. Yeah, so getting focused really um, you know at that time on

Sonos at Home is what we called it. And we launched a campaign to help people you know, for their home office and how Sonos could help make their home office a little better, make streaming at home a little better, um, you know. And so so we were really trying to just um, you know, play into kind of what was happening and play our role right and kind of get back to our mission to how we get out. Well, let's slow down a little bit on a more granular level.

Tell me about the office use in helping people in offices. Well, so you know, as everybody was going home, um, we felt like, you know, we could bring music into people's home offices, and so we I think it was the maybe the one at that point we were saying, hey, like think about putting a one in your home office

to have some background music. And we gave some sound suggestions at that point, maybe some a s mr um you know, kind of background music that could help people kind of go through the day, um and navigate their day a little bit with some um, you know, some mood music. Uh. So it wasn't quite so stressful. Okay, so you are the band new facturer. How did you

reach the people who have home offices? Well, you know, the good thing about son Nos is that we have all of our customers information from when they actually registered their system. So we reached out to all of our existing customers and then we actually so with with messages basically a tailored campaign that we created, you know, overnight as a result of Covid reaching out to them um and saying, hey, you know, think about putting a sons one in your office, um, and here's what you can

listen to, and some recommendations that we had. We reached our existing customers that way, and then we actually went out and promoted the story if you also know us at home across all of the social media channels and all the digital channels out there that we largely use for a lot of our advertising efforts these days. Okay, was there a discount for pre existing users? There was, yeah, so we so in that period we gave some discounts

um to people. We created a bundle for streaming for instance, during that period as well, so if people we knew people would be watching more video, so if they wanted at that point to get a playbar or a beam. Um. We put that together with surround sound system and after

a discount on that to people as well. UM, so we're really pivoted to try and quickly get people, um, you know and meet their needs kind of where they were at that time and kind of the changes, the dramatic changes in the way that people were spending their time at home. So how effective was that campaign? What kind of percentage results are you're looking at, you know, like direct mail one percent is what targets want a campaign like this to existing customers, Uh, what kind of

response to well, well above that? So in that quarter, Baba is the next one. You know, our director consumer sales were up year every year we had an absolutely incredible you know rise. Now, of course we had other channels, physical channels closed at that particular point in time, but we were able to kind of meet customers where they were and at that point we had all these retailers are closing, you know, the main um levels of distribretion.

At that point of our sales, we're going through, um through you know, people that weren't us, weren't our stores, weren't weren't our online session weren't weren't That wasn't our online store pre pandemic, And so quickly we're like, okay, what are we gonna do? How you know, and how do we survive this period? Right? Because I think at that point everybody thought, Okay, we're going into recession. It's gonna be a very difficult period. Are people going to

spend money? What are they gonna do? And um, So we we went hard in terms of directly to the customers both are existing and then new and sending them to Sons dot com. And we saw year of your growth in that period. We clawed our way back to I want to say, just short of the year before results in that period, and then we actually built on that afterwards and our business really took off. Okay, the references what that was in uh, I think that was our good the quarter last year where the pandemic um

you know, really first started. So that was probably our fiscal key three of last year. When you're saying relative to what the year prior, Yeah, to the year prior. Okay, we're talking about quite quarter, correct, That's okay, let's just go back when there's not a pandemic. What percentage of equipment is sold direct by Sonos via third parties. Yeah, uh so direct was about ten percent prior to the pandemic,

and what is it now? Um So through last year we reported that it was about of our total sales. Why do you think in a world that everybody is so comfortable buying on Amazon that most of your customers are buying through traditional retail channels? Um, you know, I think people if they're going to buy a TV or buy something else, you know, I think that's a time where people, um will buy through the physical channels. Right. Convenience.

We've actually done some research to look at, but why did somebody who is already a Sonos customer purchase at best Buy or Costco? And in some of those situations, they just wanted to get another product today. So there's kind of like the convenience and I want it right now. I'm not even gonna wait for you know, overnight or two day shipping. But then for our um, you know, for our home theater products, there's very much the match of I'm buying a TV, how am I going to

make it sound great? Right? And that's where Okay, there's these products from son Nos m whether you're s buy or costco that uh makes sense in terms of purchasing UM in tandem with a TV purchase. And so that's like a compelling a pretty compelling fact. And then the one thing that people underestimate is as well, the what we call our installed solutions channels, the dealers that install UM products in people's homes. And that's been an amazingly

resilient channel. You know, it's almost it's been about nine years since I've been at Sonos, and when I first came in, I thought that would be one that would be decimated by a lot of the other channels that exist out there. But I think the UM those partners continue to show their value UM. They continue to solve customer problems and they're a big part of our business as well. And they've been amazingly resilient through the pandemic too,

and so that's a big chunk of the business. So we we've got a nice distribution across a variety of the variety of the channels. And I think one of the other things, Bob, is some people may want to hear it, you know, they may want to touch it, feel it, hear it UM because because I would say we have a you know, at this point, I'm pretty surprised by the percentage willing to purchase online, you know,

site unseen as well. We launched new products in the midst of the pandemic, are five sub recently Rome and you know, so all of these products people were purchasing site unseen, Sound unheard, which is pretty impressive and says a lot about the brand. Do you know if people who already own a Sonos product are disproportionately or much

higher ordering online as opposed to new customers. Yes, we're we were able to tell if you're you know, if you've registered your product to an existing system that you already have, versus being a new what we call a new home um and so into a new home. And so as we see that, we can look at, okay, how are people doing it? And what we see is that existing customers are more likely to buy on Sonos

dot com. They've developed a relationship with the brand, um, you know, and then they want to we announce a new product, we make it really easy for them to order on sons dot com. And so that's something that we see. Okay, let's go back to COVID. Could everybody do their job from home with a manufacturing or into business. Yeah, a great question, and it's something that UM was challenging.

We ended up having UM probably at the end dozens of people in each of our Santa Barbara and Boston locations that started to come back into the office after the first wave. So immediately what happened right at the start is everybody had to UM and so uh you saw amazing like test rig setups in people's kitchens and bathrooms and basements UM in Boston and some of the pictures were it was just inspiring to see the way

people were working to still launch a product. Right we were we were in the midst of trying to launch Beam five and sub and we weren't sure, Okay, are people even gonna launch products in these times? And what's going to happen as we go through this, And the team just did everything they could to keep it on track.

And you know, having this test equipment at home, and then we created the conditions in our Santa Barbara and Boston offices where people could be distanced had ppe UM so that they could actually come in and start to use some of the test equipment, do some of the things that they needed to do. And so the reality is there's a number of jobs that you want, um in building these products, to be in the office for testing, for the manufacturing team in China, UM and our partners

there and Malaysia. We had to you know, abide by the the local laws and that was a bit of a challenge. But at the same time, the team, you know, made it work. UM. We'd usually have people from Boston and Santa Barbara on the ground in China actually with those bills and those kind of things, but they didn't via zoom. UM. They did a via pictures and FaceTime and all the other tools that are out there, and so that we just figured it out. But it was

it was hard to navigate in the early days. UM. But the power of the human spirit in it, in you know, kind of the creativity and just like figuring it out. UM, I think it's pretty incredible. And why are there two offices and what goes down in each respective offer? We actually also have one in Seattle. UM. So we started, believe it or not, in you know, to office is so simultaneously in Santa Barbara and Boston. And the thinking was trying to get the right talent right.

We we are in a very uh complex kind of space in terms of marrying the worlds of hardware and software together. UM, and we knew we probably couldn't do it um and get all the talent we needed in one particular location. So we've actually started into We added Seattle to the mix about five years ago because we needed to add even more software talent into the company. And that's about two thirds of our engineering team is on the software side, and so we actually have all

three offices. And I think Bob, this was a an advantage for us as we went into the pandemic because we've been working in a distributed fashion for years um, and so we already were using Zoom religiously. You know, we would have calls often where teams from all three offices are on Zoom together. UM. We were using Slack, we were using all the tools. We were on the leading edge of using a lot of the tools that some people only found for the first time when they

were forced to work from home them. So that transition that probably served us well, UM in that transition. And there you know, being forced to work from home is very different than working from home and choosing to work from home but nonetheless we had the tools, we had the experience to actually make that work. UM, so we kind of know how to how to handle those situations. So if softwares in Seattle, what are the strengths in Boston and Santa Barbara? There we have we have software

in all three offices. We have not we have not created, you know, an office and said this is the only place this can be. We've said, you know, talent, we need to find talent, and you can be in Seattle, UM, Boston, Santa Barbara. Uh, you know we have so, so that's kind of the way that we've approached it. And so hardware, you find a lot of hardware people in Boston because of the legacy there of audio companies and um, you know, just some amazing history uh there. And then you'll find

hardware and software people here in Santa Barbara as well. So, um in all three and now we we've got a small office in San Francisco as well as we'll find both hardware and software people there. Okay, you talked about this office oriented, home oriented plan when COVID hit. Did

you have enough inventory? Um? We did not, um. So, And and as you've probably seen, supply chain has been a huge issue over the past few months, and so immediately, I think not just us, but everybody in the industry and not just consumer electronics, anyone who builds anything immediately went to freeze. You know, let's see what's going to happen here, because our people gonna spend money, you know, job losses, everything closing up, and so everybody froze for

a moment um. We saw that great momentum in Sonos at home, so we started to kind of ramp things back up and turn it back up, um and so you know, then we started to crank the engine again, but very quickly demand really started to move up, and we saw even more demand for a products and much more than we could actually um, you know build as well.

And so we started, you know, seeing a ton of demand that we couldn't fulfill, you know, really as we got into the the you know, the September October period um of last year, and we've been trying to you know,

really catch up if you will, ever since. And so that's been, ah, that's been an interesting learning you know for me and thinking through the UH, I think we'd all kind of been thinking, all right, we know what will happen in a situation like this, and there's probably it was probably time for a recession and some of

those things. Yet the injection of all the money into the system, the ability for many of people in our target audience to continue to work from home, continue to have their job, you know, save money on entertainment, travel, all those things actually ended up benefiting us in a way.

And so UM we did not know predict that, and I think it's a good lesson in you know, really being mindful that you probably don't know what's going to happen in those situations pretty unprecedented and just having to stay agile UM if you will, through that. So that's been uh, yeah, that's been one of those things that we've learned through this. And have you been affected by

the chip shortage? Absolutely, yeah, So that's been something that our team has done a better job than most, you know, in in managing, but certainly it's something that impacts us. Impacts us UM today as well. As we've navigated through UM all of this and the container shortage. You know, the ports have had situations where the staff there UM as well caught COVID right, and so we've had all of these factors. I've never seen a year like this, Bob.

As I think back, I've been in you know, smart hardware plus software kind of for twenty three years now, and I've never seen a supply chain situation like this and as many things kind of backing up as they have. And that's why I'm so proud of our team and the way they've managed it, because we've been able to continue to grow and deliver as much as we can

to customers. But certainly we've been you know, we've still seen more demand um than we have supplied for, and we still have work to do and making sure that we're able to fulfill all of the customer demand out there. Do you believe after this crisis is over, the just in time philosophy of worldwide manufacturing supply chage chain will change or people just forget about this and we'll go

back to the other one. I think it will change based on what I'm seeing right now in the industry, UM, you know, and so I do think there'll be more thought We've we've been more thoughtful in terms of Okay, how are you building more resilience into the system. UM. There are some high hurdles to get over in terms of the capital outlays required to build the kind of facilities and suppliers that we would need in the United States for instance, or let's say North America more generally.

But I you know, I think even the government um seems interested in this area. UM, the largest companies that are in these areas are working on it. We're having lots of conversations with our partners. So I do think we have a window of time where we'll see if we can get enough momentum behind the movement of having more localized supply chains, if you will. And it will probably be some you know, combination in between, because not

everything from an affordability perspective will make it work. But I do think there are some things and I do think for products like ours, UM, I think Apple's probably in this boat too, like that there's there's probably a way to you know, make it work over time. And so that's something that we're certainly investigating and trying to come out from a variety of angles, and that there's a lot of people in the industry working on the

same thing. So I'm kind of optimistic UM that will get a little bit more you know, back more locally and I think that will benefit everybody from a resilience resiliency perspective and hopefully, you know, quite frankly, from overall society and economy perspective as well. So what is the manufacturing design process and how long does it take? Who comes up with a product? You tell me from beginning

to end? Yeah, So, um, you know, we're always thinking and working on customer insights, so trying to understand which is fancy term for behavior around customers and what's happening there and kind of what's happening in the industry. And we're trying to marry two things together. So we have a team looking at how customers are using products, and then we have a team looking at technologies and how how do those things potentially come together? And so we're

always considering where's that going? And really we spend time thinking about the next five years as we're thinking about what we want to build, and so we'll be looking at a variety of you know, opportunities out there as we think about where does the speaker go from here, where does the soundbar go from here? Where does sound

go from here? Um, you may have seen that recently we launched a picture frame that's a speaker with Ikea for instance, And so we're always thinking about what can we do with you know, different form factors and our software to create sound in different and new kind of ways. And so we'll go through and we'll do some work on that. We'll try to think about what it is that we think will fit the market at the right time.

We work through um things like all of the design and we start to get an idea on the design. We start to get an idea and we have a design team that works on that and it's looking at materials and finishes and everything that's out there and kind of what's happening in the world and what fits our design language. And then we'll be looking at that technology advanced technology team and what can we be incorporating in it? Is it voices, it ultra wide band, is it Bluetooth? Like?

What what should be in the product? And it's what should be in the product in the interests of the customer experience, right and what behaviors we wanted to we want to deliver if you will, um as we're going through that and so so so then we'll start working on what we call a product requirements document which says, here's the thing we're going to build, and we'll have an initial take on a concept with some UM, initial ideas, some designs in terms of what's there, UM, an idea

of kind of where it will fit in the market, and we think it can do UM, and we'll start to put that together and usually you know it'll be to market then. UM. In this day and age, which is forever in the in the era of like software moving UM quickly and shipping you know every day that that's usually an eighteen to thirty six month process, depending

on what we're building. And so we are we're working very hard in those situations to determine what's going to be popular, what's going to resonate with customers, you know, year and a half, three years you know from now in some cases, which it is a is a high wire act, right because that's a long time away in this day and age in terms of determining, Okay, what is it, what's going to look like, UM, what's gonna fit with people's home decor, how is it going to

sound at that particular point in time, UM, what formats

are going to be out there at that time? UM, and all of those things, and so it's really like a process UM that takes a lot upfront and then there's a lot of work, but work that we know now after almost twenty years at this we know how to go execute on and from there UM and so it becomes very clear from the product requirements document, Okay, here's what we need to do, and then it's a matter of like managing it UM from that and making sure that we can actually deliver on the vision that

we set for the product at the beginning. And we're always doing stage gates and checks and saying, okay, is this living up to the promise of the product that we had envisioned back in the you know, the first day. And so it's really a cross functional team, Bob. This

is why I think we've been successful. And what we've done so design, sound UM, Technology, Marketing in their product management UM all working together to try and create something great UM shepherded by you know, a product manager at the end of the day that's going to take the ultimate responsibility for this product and delivering it to customers. Let's just say I stamped my fingers today and there was a big revolution in this sphere, and you had

an idea today lock stock and barrel. If you had the idea, how fast could you get it out on the street. Depend depend ends exactly what it would be. You know, like there's some things that can be done through software, So we've gone back and we've increased the functionality of our products through software at times UM and that can be a six month venture, that can be a twelve month venture depending on what we're doing. If it's a new hardware kind of idea, let's say, design concept.

If it's something that is known quite known, you might be out in eighteen months. But if it's something revolutionary that's going to take new technology, and even though you know the use case that you want to create UM and what kind of experience you want to deliver for customers, if it's taking UM invention right and creating new technologies or implementing them in different ways that UM that have never been done before, that could take you know, thirty

six months UM in terms of doing that. So it just depends on how much you're trying to accomplish in the product that you're doing. Because and we have both right, we'll have revolutionary products are bringing out like ARC which is completely different and then we'll do things at times like bring out the one s L which is the

one without a microphone. And so in a situation like that, that'll only take us twelve months because we just need to pull the microphone out and we need to make sure that it all works, and we can do that much more quickly now. Legendarily, when Steve Jobs came back to Apple, he thinned the product line. You wanted to make it very obvious, not confusing to the customer. You know, there's thoughts that I've been in retail a long time ago. If you show somebody to products will buy when you

show them five, Sometimes they're overwhelmed. They'll leave the store. Needless to say, that is not the philosophy of Apple today, but it's so nos you have varying niches. Do you ever think, well, God, we're putting out too much, we should limit the product line. What are your thoughts there? Yeah, And you know, having come from you know, and growing up inside a mobile phone company, um BlackBerry, you know, really inventing the smartphone, I think there was there's a

different mentality, you know there. And one of the things that I think we've been good at and one of the things that I actually manned add UM was around to at least two new products per year. I felt like that was the right cadence. So this is purely like an instinctual call, but I felt like, given the capability of the organization at the time and then the opportunities in front of us and creating things, that was the right thing to do. And you'll notice we don't

this is very different than most and consumer electronics. We don't have a TikTok where like every year we refresh our entire product line. That is a classic thing to do from a lot of the tech companies that are out there, and they'll come about the new version of product X, Y or Z, they'll do it every year

or every couple of years. We instead focus on building, you know, a few great products and you will see some that we do UM where we'll do a refresh like we did with five, which is a build on the play five UM and the sub last year build on the the original sub right, and so those are things that we'll do, but we'll do those on a five to seven year cadence, and then we'll bring something completely new out like an arc or um a beam when it came out or Rome for instance, and so

those products, UM, you know, we we also will bring in the mix. But I think bob the right thing for us and the capabilities we have the customers were selling to. Thinking about sustainability, thinking about building products that last for a while and something you don't have to upgrade every year. UM. You know, I like the cadence of two per year. It gives us the right balance

of being able to tell our story. Again, so there's two times a year you'll see s be pretty loud in media and then as well with our advertising, which is when we're telling the story around our new product. But it's all part of the system, right and so so NOS is usually told in a broader way at that time. UM, And it's I think our approach is quite unique compared to UM any other hardware company I can think of. Okay, let's talk about home audio. I want your take on the state of home audio. Just

going through a little history. If you go back forty odd years ago, it was really about everyone getting a large home stereo to get closer to the sound. Then we went to the boom box, then we went to the your bud needle. Let's just say, that's not a market you're in. You're in the home audio sphere. What is going on there? You know, I think people it's

been interesting. One of the things that that we've seen through this period is I think so I'll go back right to the beginning, and at the beginning, I think really one of the biggest things with son nos was making it easy for people to listen to audio in their home and digital formats, right so at that point downloads you know, eventually would get to streaming, and we kind of democratized that to some degree because it was a it was a much more difficult for people to

be really enjoying good home audio in the early days, and so we tried to make that easier than it was. Uh And I think that was the magic through the first phase. Interestingly, you know, as the big tech companies jumped into the space, um then there were these poks, these you know, the small products Bucks or whatever it was, and all of a sudden, those are being given away for free when you subscribe to the New York Times, for instance, are all these other things or they're you know,

there's cheap bluetooth products. And I think it brought sound into the home in a different way. And what we tried to do was tell our story on top of that. So if people got a taste of you know, the the Google products or the Amazon products at those those cheap levels, we want to show them there's something better

there and something more premium for the longer term. And I feel like we've been successful at that if you look at our growth um kind of over the period that those companies have entered the space, and and I feel good about the fact that we're doing that because

we're bringing a better experience. We're bringing open experience right supports all of the different services that there, so you're not trapped in one ecosystem UM and we're bringing better sounding audio um as the way the artist intended it into people's homes in that way, and we're still making it easy versus kind of the traditional audio solutions that were much more niche for people and had to you know, take a bit of a degree to figure out how

to use. And so I feel like we're at a point where people are, you know, being thoughtful about the products that they're putting in their home. UM. They're thinking about the longevity, the premium, nous, the openness UM, and I think all of that has benefited us. Now, I would say the thing we push on is, Okay, what you know, what's the future hold as we think about UM, as we think about audio in the home, and one of these things that we've been pushing with Ikea UM

and as well with our true play technology. You know that really UM shape sound in the room is UM. You know, do we need to be constrained by the speaker form factor? UM? So this picture frame for instance making sound is a great example, or the lamp that we've done UM with Ikea in terms of making the sound. Because I'm not sure that the future is necessarily dedicated

products in the way that they are today. The sound can be integrated into other household products, and certainly there'll be people that that want audio UM in such quality and fidelity they want a dedicated product. But I think for a lot of people, if you can find a way to ring UM great audio into the home and do it in some of the form factors or make it disappear to some degree UM, I think that's going to be even more compelling to millions more people. Okay,

let's talk specifically about quality audio. So there's nowhere near the press nor the consumption of this stuff. But there are tweaks will spend a hundred thousand dollars on their stereo, no problem. Uh, there's magazines dedicated to that niche. There's not a mainstream audio magazine anymore. There's sound in video, which is an amalgamation of previous things. So how much will people pay for good sound? And where does Sonos fit in this? We've tried to democratize it as much

as possible. So we've tried to say, hey, can we bring let's say, you know, probably with arc or soundbar eight dollars for instance. Uh, you know, are be hitting the point where most people would have to pay or people in the industry would expect to pay fifteen dollars, right Like, we're trying to bring it into um, you know, a lower price point to some degree, but we're still building premium products. And so we want that great sound,

kind of want to have it all. We want that great sound, but we want to democratize it um a little bit. There's no doubt of you can still go out and spend tens of thousands of dollars right on creating like an epic home sound system. You could do the Dolby at most in sealing you know, seven dot one dot for um in terms of like a full set up if you wanted, and create just an incredible experience. But that's not where we play. We play very much at how are we helping what we call culture seekers

like really fill their homes with music? Do it in an easy way, but not compromise on audio and certainly, I mean, you know, you're getting, um what you pay for, but we want to make sure that it's surprising sound at whatever price point that we're at, so that when people hear a one five and arc, they're like, wow, that sounds great for that price. Your your top of the line really music product is the five correct? Yes, that's correct, Okay, in the present retail price of that

is uh four four nine nine. Who are your competitors in that sphere? If anybody? Yeah, you know. The interesting thing is Google took a run at that space with the home Max a couple of years ago, but they discontinued that. Apple took a run at it with home Pod, and um they recently discontinued that. Um, there's there's not a lot of people playing in that space. Bows has a couple of products in that space. UM, but you

know five dominates uh really in that space. And I'd say the other interesting thing Bob on that is we've also seen over time, you know, where five would have been maybe the speaker in the living room. I think what we've done with arc and beam are soundbars have actually kind of changed that a little it where maybe instead what you're going to do is have an art or have a play bar that or a beam now under your TV. And now because you can use that as your SONO speaker, do you really need to add

another speaker into the room. Um? Is it interesting question? And so I do think we're seeing a little bit of that and that convergence um to some degree, because why not play your music on a beam or arc? It sounds fantastic. Your product mix, how does it breakdown in terms of sales? How much is television, how much is audio, etcetera. Yeah, we we don't break it out.

I mean it's pretty even um across the board. But um, you know we also don't forget like amp and port as well, and those are those products which power in ceiling in well speakers, UM, other company speakers as well home theater systems, and so we've got a really good mix across uh, you know, really are three now four with portables, aduct lines and um, you know so and and it's it's for us, it's about the system, right and people you know, people have a mix and match

of all of those different products as well. And that's kind of what we're always thinking about, is how do we help customers with what they need next as they think about sound in the home. And that's why we got into home theater, so why we got into portables after as well as good people saw that need. Uh, And so we're always thinking about, Okay, what other categories

do we want to get into? Okay, in terms of the traditional audio companies, is that really a completely different vertical at five hundred and it's a completely different customer or is there a competition? What's going on there? You know? I really think for traditional audio companies, many have tried to bring out Sono's killers over the years, and I think the biggest miss at the end of the day is on the software side. And we started, uh, you know,

with a team and software and hardware. UM. I've often said that, um, you know, boring Mark Andresen's turn. I think I see son No says software eats audio because it is the difference. It is where we're born from, and we've married the two, and I just don't. I haven't seen any traditional audio company, you know, really get serious about the software investment to create the kind of experience that we do at Sonos. And so that's why I think we could were the leader in home audio

UM and why we've been so successful. Now, does someone go into a store and say, hmm, there's a Keef speaker, here's the son speaker I'm comparing or is it really two different customers? Yeah, I think there's UM. I think there are some people that would be looking for a speaker um, if you will, in those situations, and that's where uh, maybe they're getting help from a blue shirt of s buy and kind of navigating through the different

trade offs, if you will. But I also think that there are people that are going to look, let's say, like above, you know, a thousand dollars and above that are very serious into audio UM that you know, maybe would use and purport to power at the products that they purchased, but they'll be looking at speakers from other companies you know potentially there, but I you know that that's not a huge market from what we see today.

What percentage of the marketplace do you have in television Beames and subs UM, we're the leader in the you know that we we play primarily in uh seven countries today, you know, so in Western Europe and then North America plus Australia. UM, and we're the leader by dollar share. So when you add up the dollars of ARC and you know Beam together where the leader, UM, we take the revenue of the leadership position and revenue share UM. But overall I haven't looked at it on the category recently.

Overall in home audio, we are about nine percent of the annual spend in premium audio today. And who else is in that neighborhood? Uh, you know Bowes would be you know there, UM, J yell a bit because there's some Bluetooth in there. Um, the Samsung with some of their sound bars that they sell with TVs Panasonic a little bit over in Asia and Europe, and then it kind of goes into Europe a little bit. So there's really no one dominant player. Now, explain to my audience

why the technology for sons is superior to competitors. It gets back to the software that we've built. So we from the beginning connected the system to the cloud UM. So there's really a few different layers. So there's the connection of the cloud, where we connect you to all the services that are out there, whichever music services that you want to use. UM. We also created obviously the app UM that allows you to control that, and then we created all the software that runs on the products

that ties into your WiFi network. And it's the marriage of all of those things. And we took a very complicated situation which you could have put together yourself, like you could do certain things and bring certain l mints together by buying a certain set of speakers, setting up WiFi writer in a certain way, trying to tie into

different services, or maybe using proprietary protocols. But we really sweat the details to bring it all together and just make it easy, Bob, so that when you set it up, you can be easily listening to whatever streaming music it is or your music library. And that that is fundamentally different than the way anybody else has really approached the space.

And then there's been a number of companies that have come in seeing what we've done, started to copy what we do obviously, and in some of those cases we've had to um enforced the fact that they've copied what we've done. But that is the key at the end of the day, is is sweating the details of creating that experience in the system so that you can add these products on um over time and just make it

really easy for customers. So there's a lot of complexity under the covers that we try to abstract from the customer, and that's the secret to success. Actually in any part of the consumer electronics. I would say Bluetooth was a technology that I had a long ramp before it was adopted by the public, and now things have really moved in that direction. A lot of people have no idea that Bluetooth is inherently the president standard, inherently not great audio.

So in your particular case, originally Sonos created its own separate wireless network in the home, Hey, how does it do it? Now? Still the same way? And can anybody else equal the sound? There's no equal when it comes to combining the wireless the way that we've created Sonos Net. The wireless network that you talked about which you still get if you use our boost products. So you can still create Sonos net in your home, and some homes,

bigger homes actually require that. There's also UM you know straight I P. So if you plug one speaker in you don't have those products, you can actually run on the WiFi network. Today. We still do the work to make sure that that is reliable and the quality, the quality of the sound coming out of the speaker obviously is related to the WiFi network and everything in that. So we we work to make sure that's a really

good UM and reliable connection. And I think you'll find that even though we're not perfect, the reliability UM and the consistency of the wireless connection delivers an ongoing quality experience that still UM leads the way you know M versus anybody else out there today. Okay, when you first introduce your products, certainly the play products, you know, they were moderately priced, but when Saunos entered the TV sphere, these were premium products. A sub it essentially eight hundred

dollars you know a soundbar and the same price. You know, yamah, there are some companies that's still manufactures something in excess of a thousand dollars for either part of that component. But all day long, most people know a flat screen today comes with inferior speakers, So everyone buys a sound bar. Based on my casual observation, incredible number of people buying something in the hundred and fifty to two hundred dollar range. Okay,

are you leaving money on the table? Well, and just apply, you know, appealing to a premium customer. Would so nos ever make it less expensive product? You know, I think the um you know, if you look at what we've done on the speaker side, right, we've and we came in with play five back in the day. We started at the it was actually four hundred when it first came out price point, you know, and then we brought out a three and a one. Uh. We started with

playbar in home theater when we came out. We've replaced that with Arc because Delbian, Host and a number of other things felt we felt really compelled to create the top end experience there. But we did bring out a more moderate product in beam Um. So I certainly think there's a lot of opportunity there. Um. We're always watching and trying to figure out, Okay, what's the thing to

do and where's the right balance in this. I feel like we get a lot of people that were looking at you know, two hundred two fifty two fifty dollar products to step up a little bit to beam um being at three ninety nine right now, and so um it's something we're always looking at. Bob is like where you know, where does the price experience you know fit and where's the market um in terms of what's there and so um stay tuned in terms of the you know,

the next products you'll see from us. Okay, let's talk about you. Originally you grew up in Canada where I was born in Waterloo, Okay, outside of Toronto. And what was your experience growing up? Were you a tech nerd? Were you into electronics? I was so uh in second grade, second grade, third grade? It was second or third grade. Uh. My elementary school was fortunate enough to get a Commodore pet computer. Uh. And I was lucky enough, I think because my math grades were good and there was some

qualifying thing. There were four of us that got to actually use it and created a math program. Was my first programming assignment. And then I distinctly remember as well creating a rocket shooting rocket that would go up the screen back with the displays that were just green and off green. UH. And I thought it was the most amazing thing ever. And so I was smitten by that. UM. You know, I grew up in a home we're making. The purchase for a computer was a big big deal.

But my parents did it when I was in the fifth or sixth grade. UH ran my own bulletin board system. UM as well back in the days with the slow modems. Did a hockey like I've basically a fantasy hockey UH set up before it became a thing UM, and it was a bit of a nightmare. I had to go input scores like from the paper into that and keep a scoreboard and it was ended up being a lot more work that I thought it was going to be. But UM was I guess on the early edges of

UM what was the precursor to the internet. UM. And so that was pretty formative for me. I'd say there's two formative things that I often look at. One was the technology, and I was very interested in computers and tech and where all of that was going. And then

the other thing for me was team sports. So I played every team sport there was growing up and just I feel today that's like a huge part of what I put into practice every single day at work is everything I learned from team sports and personalities and how to manage different personalities, um to try and you know, get us to a victory if you will, or just to get people to work together. Um. So I think those are the two kind of most formative things, uh

in my life. Okay, And what is your college experience? I went to college I'm sure you've never heard of, called Western in London, Ontario, and I took business there. Okay, so you graduate from college, what's your first job? Yeah, so, um, I've done an internship. I needed the money to finish my last year at university, so I did an internship at IBM in Toronto, works on the think pad, so the very first laptop team that was there, and it

was incredible, had incredible experience. I thought I would probably go back um to IBM and worked there for five years and then start my own company. But I saw an opportunity with this company called rim back in Waterloo where I was born, and they had this They had this idea of this mobile product, a pager kind of thing. At that point, and I saw connecting to wireless networks and I thought, huh, like, I've really seen with the

laptop the future of mobile computing. And we started to put wireless uh we started put wireless modems into the laptops, and I thought, this is the future. This is gonna be huge, big part of it. But this idea that this company uh in Waterloo of at that point hured and fifty people had, I thought was really interesting and it was massive. So this product at this this time

was this huge called the Hamburger product. And you flipped it up and you saw like two lines basically at that point of the screen and had these bubble keyboard keypads. You still tried to hold it like this, but it was something else. And I thought, huh, this is pretty interesting because I've seen that mobile computing angle. This is wireless coming into it, um and so uh, this is interesting. And I went and met Mike and Jim, the two co c e o's uh down there, and I was like, wow,

this is uh something something special it's happening here. I just got that feeling. Um. I think my mom thought I was crazy. All of my classmates thought it was crazy. Most of them were going off to you know, big established companies, to investment banks, to those kind of things. Um. And my dad who worked at the the hydro electric company in the province. We were in Ontario for thirty one years. UM, he was my biggest supporter and saying go for it, like you know, this may not work

out or whatever the case is. There You've got this gut feel on this company and the people there. And I was really, um just felt go out to be part of it. Um, And so I jumped to join this company called rim Um that nobody had heard of, and uh we brought out. So it was after it was about a year after I joined. Year what year was that I joined? Ninety eight? And so really you early, yeah, really early, hundred fifty people and you do you get stock? Yes?

I did? Did you ride it up and write it down? Well? So I wrote it. My friend told a very funny story at our wedding, you know, when our stock was up to you know, we went public at five what our stock was up to about fifteen? Um, you know he called me and I was like, it's getting kind of high. You know. It turns of where it ended up running up Bob to like a hundred eighty two hundred dollars. It turns where it was. UM. But you know, like so I I I did you know again better

than I ever expected. UM. I feel very fortunate in terms of what's there. But I certainly didn't get out on top, that's for sure. So you live and learn through that stuff. Did you make enough money at RIM that the aically you wouldn't need a job again? No? No, okay, it wasn't that fortunate. Go back to and what you're doing there. So when I joined UM, I was our

first product manager UM. There were a couple of people that they had brought in UM at a senior level VP level, and I was starting to sell the precursor to BlackBerry, pitching it, trying to get the story down with the precursor to what's a T and T wireless today? UM, it was Bell South wireless date at the time, this is a this is a long time ago now, as I tell it, UM and tried to we were really trying.

They had this will show you the difference, right. So, what we started to believe at RIM was we needed to tie it to email systems, and specifically to Microsoft's email system because it was you know, that was the future and there's going to be a lot more email users. UM Bell South precursor to a T and T at that point, was like, no, paging is the future, and it's all about paging and you guys, you know, we

need to be able to do uh. They had this future which was text to voice for instance, and so it would call you and it would sound like Freddy Krueger was calling you. Was just like there was some it was fun, but it was it was not, you know, something that you could see really taking off, and so they wanted to go down that path to give us a big contract to do that. I helped them in terms of trying to market and sell UM and understand

the products and train up their sales team. And then but in the background, you know, we were doing our

own thing, and so we made it. We we took a huge chance for a startup in purchasing airtime from Bell South in the United States and Rogers in Canada so that we could put together a package and say, for at that point thirty nine dollars a month, you can get the hardware and the service that allows you to connect to your work email right and receive it on this product, UM, and so that was like that was the bet and that was the BlackBerry, which came

out like a year after I had started. And what I started doing BOB during that period, as I said, it was, I was just it was crazy, like I was so young. UM didn't know what I was doing at all. But they gave me the chance to start working with the banks and brokerage is UH in New York City in particularly, kind of got in there with UM some of the people that we were selling with, and I started to seed all of the senior people there with blackberries. So I gave them succeeding give giving

them basically blackberries to start using. And I would give one to uh, you know, like an influential executive, but I also give one to their administrator, their secretary, if you will, And so they could communicate back and forth

and they absolutely loved it. And then the secretaries would say, oh, you need to get you know, you need to give this one one and need to give this one one and like and all of a sudden, we created this ground swell at all the banks of brokerages in New York City of having to have a BlackBerry and UH. It was absolutely incredible to see the kind of viral nature um of that as well, and so uh it was incredible. I did our first, um big corporate deal.

So our first big one was with mary lynch uh for and it was for a thousand blackberries, which now sounds like so small in the grand scheme of things, but it was so massive for us as a company. Our stock price went up like on the day we announced that deal, even though I mean financial materiality, it wasn't that material um, but it was such an exciting time in terms of, you know, just watching the technology really take off and people being so excited to use

at people being so passionate about it. Um. I just feel so fortunate to you know, have played a role in two different you know, technology companies that have built products that people actually absolutely loved and you know use religiously and have raved about the needless say, there was an evolution at BlackBerry, and seemingly from the street it appeared that the Palm Trio was ahead of BlackBerry with a phone. How did we ultimately get a phone in

our Blackberries? Yeah? I think the technolog as you start to evolve in that way, and it made sense and the wireless network. So it was the next generational wireless networks Bob, that was super important to that. Right. We were writing on a data only network early on UH, and then as we got to the two point five G networks UM, we were able to actually put voice into there, and at that point is just another app that you can put in there. Another radio became pretty

easy to do that UM. And I think people miss the fact that we integrated it all very well. We tied into the back end of people's Microsoft Exchange or I think at that point Lotus notes in terms of the email services they were using companies like Palm and other companies. They didn't do the software work often on the back end to tie into those systems and think

about the encryption and do all of that. And so in a way, it's not dissimilar to sons where you would find that you know here at Sonos, you look at some of those traditional audio companies, they don't have the software that ties it into what's important to day to customers. Some of those hardware companies that were there earlier than us, like a Poem for instance, didn't do the work and didn't have the expertise to tie it

into what mattered to users at that particular point in time. UM. And so you know, we were able to um out went over them. We were able. We were told we could never be successful. And I think this is part particularly of you know, being small town in Canada as well. People thought we were crazy that we were going to take on you know, Motorola and Glennair and these other

paging companies in the early days. And then as we started incorporate phone, they said there's no way you could take on Motorola, Nokia, Sony Erics and some of those companies at that point. Um. But we did, and you know, obviously became very successful. What was the feeling inside the building when the iPhone launched two thousand seven, Yeah, so

there was UM. I think that I think the public and there's a great book that I contributed to called Losing the Signal by um Sean Silkoff and Jackie McNish that goes through you know, all of this and and I think it's probably the best you know, history of BlackBerry lesson, if you will. But there was a perception that we you know, we were arrogant about it or

not concerned about it. But we absolutely were so we saw it for what it was in terms of a threat and some of those things, and saw the innovation that was there. Um. Yeah, I think it's fair to say that we were all Apple fans, and many of us were Apple users as well. You know, at that point in terms of looking at it, um they you know, we one of the one of the biggest mistakes and one of the things I try to counsel others on and even you know, I think we've put into action.

Here was one of the steps that we took, which was Verizon came to us. You'll recall that the first iPhone UM was an a T and T exclusive and a T and T and Apple had worked on that. So Verizon came to us and said, hey, we need a response, and you know, like let's do something together to do that. And yeah, they waved a big check in terms of building a product called the Storm, and you know, we went and we created our first touch

screen product. We didn't build on our strengths. Instead, we were responding to what Apple had done and we brought a Storm and pretty much overnight when we brought that product out, Um, we threw away. You know, at that point, twelve years of hard work in building the brand and reliability, and people could count on their BlackBerry UM as a response, you know, and and you know, in the interests of UM, you know, really trying, I would say at that point

the financials right and the money that was there. So to me, that wasn't the right response. UM. It would have been like us responding at Sonos to Google and Amazon launching pucks by launching our own twenty nine dollar puck. That's not what we do, that's not where our strengths lie. But that's what we did. And that was you know, that was that was to me one of those things

that sent us down the wrong path at RIM. But we were concerned about the iPhone, UM impressed by you know what they've been able to UM, you know, to

pull off UM. You may recall that too, is about two to three years post iPhone, BlackBerry continue to grow like crazy, right, And so there was also through their some period I would say from some people of denial and of like, oh, the touch screen will never catch on, right, So there was some of that in the organization, but I think much more was like no, no, the touch

screens makes sense and it will happen over time. Um, but we uh we obviously um, you know, didn't make our pivot and the way we needed to um and UM. The rest is history. One of the two owners were the two founders of your company, went on and said, well, Blackberries had a very thin data profile and they dismissed the iPhone saying, you know, they're gonna hog so much data it will never play out. Now, factually that happened, but ultimately shifted people to WiFi and then uh networks

became more robust. Was there you know, any wake up during that transition period? Not not really that that was one thing so you hit on it, and that was Mike Lazaridi's who is the father of BlackBerry. And you know, one of the things that Mike was so good at was understanding physics and understanding the fact that really in the early days that airtime we bought from Bell South and Rogers, nobody was using that for anything. They didn't think it could be used for anything. So we got

it cheap, um. And but it was nationwide and Mike had realized, hey, we could actually do an email service over this narrow band wireless network. And so you know that that was a strength in that situation. But then when it came to three G and saying, hey, there's gonna be video, there's gonna be radio streaming all of the things that we're seeing today. You know, we're now

five g um. You know, Mike almost couldn't get it, you know, couldn't get there in terms of this is going to work from a physics perspective and what it would mean to battery life and a bunch of the trade offs that people would have and the displays and

those kind of things. And so we spent time trying to convince or Mike did in particular, trying to convince um any T and T for instance, like that that three G wasn't the future and instead we should focus on to an f G. And like, here's why in the late the physics case, which after the CEO of A T and T has spent twenty billion dollars in Spectrum doesn't really want to hear because they need to make that work. They've they've just met their career on

making three G work. What they want to hear is, here's the three G phone you know you could sell in your network. And so even though you know Mike had like great physics argument. The business reality of what a needed at that time was completely different, and so, um so we missed it. How long did you ride the wave at BlackBerry? When were you done? Um? So? How long did it? Was? Fourteen years? I wrote it, And I mean, you know, if you would have cut me,

I would have led BlackBerry. Um. I started our business in Asia Pacific. Um So, I started our offices there and through those countries and built the team there. Came back I lead our our relationships with all the carriers and our sales teams in North America and then eventually going went over to Europe, Middle East, Africa, ran that out of England, and then I ran our global sales

and marketing team. And so I mean I was I was in um you know, and I grew up with Jim and Mike right uh and and everybody there, and I knew most of the people there and so and as a Canadian, I was incredibly proud right of what we had built. But um it got to a point where it was the It was early twelve where Jim and Mike handed um the reins to a new CEO who was one of my colleagues to to that point, and we just disagreed on what needed to happen at

the company at that particular point in time. And I think that to me was like a moment where, um, where I just said, okay, like, if I'm not aligned to where we're going and what we're trying to do, I think it's probably time for a change. Um. And ironically,

like you know, and the world works in mysterious ways. Um, I got a call from John McFarland, the founder of Sons at that time, and we had Sons in our house in England, and Bob I must have sold you know, dozens and dozens of other people on so nos to that point. And when I when I had set it up in our house in England, I had I had said to myself, Wow, that was so easy. And it reminds me so much of the magic of BlackBerry in

the early days, and so um, you know. So, so John had reached out and even when I was at BlackBerry, Steve Jobs through an executive recruiter, like they had their own executive recruiting team, had reached out and said I want to talk to you about iPhone sales whatever. And I said no, I said no, I'm you know, loyal to BlackBerry into rim and you know, this company and those kind of things. So I wouldn't talk. But you know, and part of it is probably being naive and just

having grown up inside the company. But I wouldn't talk to people and John, you know, but John called John was It was different with John because I also just wanted to talk to a founder who had built something special that I used and loved and was selling to other people. So I agreed to talk to John, and um we were on vacation um in France, was with my family, and I said, Okay, this is gonna be you know, an hour That ended up being two hours.

The next day, we we flew back to Lendon that night and the next day I spent another two three hour talking to John. And we were just so aligned on because he had a company prior that had really you know, risen and done to some amazing things and

then didn't have a good end. And you know, I obviously at BlackBerry we were having challenging times, and I think he and I were both so aligned on building a company for the long term and not you know, cutting the corners, not doing the kind of things that we had seen sometimes that um, you know, I think, uh it was kind of the downfall, right and some

of those things. And so I was just uh, I was super interested, um in terms of the conversation, and it was happening right at the time that I was having a disagreement on strategy with the new CEO at m Okay, what was the pitch? Was the pitch come in at this level and you have a potential of being CEO. That's exactly it. It was, you know, come come in, you know, joined the team now, um and uh, you know me be my right hand person and have

a chance. You know, John was very clear, if I don't see myself as CEO forever UM in this and so you know, come and join the group. And we sat we sat together in the same office, you know, for the first was that like probably two three years.

Then we actually moved offices, but um, so we sat in the same office and spent so much time together going through it and just you know, really the debating, um, trying to figure out, you know, where to go, how to maneuver everything going on in the industry, and how to build a company the right way and putting the effort into culture and the effort into the people and the recruiting and some of those things, which UM, yeah, I learned so much from John, and I think he

learned so much from he's just a sponge from other people and other founders, but as well from what he went through in UM software dot com and everything they did the first time around UM that we had a really really tight relationship and a really shared view of trying to build something that would outlast both of us. So how did the decision to make the handoff transpire? And when it transpired did John disconnect? Where did you continue to give input? Does he still give input these days?

So this is this is the incredible thing, you know. UM. So John's wife, Patty UM, you know, came down with cancer UM and so he obviously was you know that that was a big focus for him. And she's fine, UM today she's battled that thankfully. And so that was

you know, distracting a little bit. But I'll tell you the number one thing was UM that I had seen and I had rung the bell around voice and said, John, like this voice thing, there's something to this and we need to be on top of voice and be figuring out, you know, how voice interacts with our speakers and what the strategy is here, and John was like, Nope, not

gonna happen, not gonna happen. And you know, so eventually I had the conversation with him of like, now you know, now you're you're kind of like some of the people at RIM of like the it said no, no, the iPhone isn't going to be a big threat, right, you know, and and some of that, and I said, like, you know, we need to be thinking about how this plays out. And so to John, that was one of the most

important things. To John, one of the most important things that anybody could have is a sense of where things are going and what the future looks like. And do you see that? And he said, you see it better than I do. And so I think now is the time, um, to hand the reins to you. And Bob. This is the most incredible thing and the most important thing, and probably the most unique thing is that I said to John, stay stay on the board. You know, you own a

big chunk of the company. Stay on the board, um, you know, and why you'd be part of it because I think it will be a shock to the organization for you to just step away. And he said, Patrick he said, if I'm going to hand the reins to you, I'm going to hand the reins to you. I've seen this go badly so many times, and there's going to be things that you want to change that I will disagree with, and like it'll just be bad for both

of us, uh in going through this. And John literally stepped away, Bob, like he just he left one day and if anybody would contact him, he'd say, talk to Patrick. And at the same time time you know today, you know, more than four years later, like four and a half years later. If I called him right now because I needed something, I needed his advice or help or something like that, he would answer like that, um, and he

would be willing to help me. Um. And I mean it is just having talked to a lot of people that have gone through these kind of transitions, it was the most incredible gift that um, you know, he could give me to set really me, but all of sons up for success because we didn't need to change some things, and we did need to move on certain things and do things differently. And he was so right because you know, Um, we made the transition in January and at the February

board meeting. There are a bunch of things I was doing that I know would have been a huge debate between John and I. Uh so, uh, he was absolutely right, and I can't you know, I can't thank him enough for like making that decision and making the transition the right way. You know. The perception was that SOS was behind on voice and it might be the death of the company, that you were late to market. How did you catch up there? Yeah? So, um, this was you

know from my rim experience. Like one of the things again that I don't think that I think too many companies do is respond in some way. So there was a faction of people that would say, we need to go do our own voice system, we need to make our own Alexa Google assistant. I said, no, like that is not Amazon has ten thousand people Alexa. We are a at that point company, Like this is not gonna work. And so, you know, so I said, we need to co opt what these companies are doing and they have

a strategy around why they're doing these things. Let's go talk to Amazon, let's go talk to Google, and we can just like with streaming services, we can be Switzerland in this and we can offer all of the voice services that are out there, there'll be more. You know, It's not gonna be one that's going to satisfy everybody,

So how do we go and do that? And kudos to our product team that very quickly came up with a way to basically retrofit and figure out how to put voice on microphones in a son nos Play one right, which we rebranded as one and got out very quickly, so that Bob was like a twelve to sixteen months development cycle, which was our fastest on record. Nobody thought was possible. Um our team did an incredible job to

do that. It meant a lot of hard engineering work both on our side and Amazons to actually make it work, but it wasn't you know. I think it's really important that we looked at it in a way of partnering with these companies as opposed to building our own and trying to you know, outdo Amazon or Google, um at something like that. And so that was that was the strategy. It's kind of taking the momentum of those services and

bringing them into the Sons ecosystem. Okay, perception from the outside was that you were essentially the first licensee when you approach these two companies, Amazon and Google, were they willing to license their technology and what was their perception

and status? Yeah, thankfully we um. Dave Limp at Amazon absolutely fantastic in terms of thinking about this and his his respect for Sonos, and I think Bob at Google to like so many of the people that were involved in the executives all had and loved son Nos and saw the fit. And so I think we were in

a unique position. We've been working with these companies before on music services, you know, cloud, a variety of different things, and so we had good relationships with the companies and they you know, my my impression was their goal was to get their voice services out in as many products as possible, as many places as possible, and and that was right, like, that's what they wanted to do, and so um, we just gave them a path to be

able to do that. And having you know, some of the most important and affluent homes out there, Um, it seemed like a golden opportunity. And so it worked. Okay, let's talk about the lawsuits. Tell me the thinking and play out what happened. So um, you know, we we obviously have nineteen years at this point of hard work, blood, sweat and tears that people have poured into building the experience that you see today on so noes inventing a whole bunch of things that we've patented, and and again

that's a that's a lesson. John and I both had equally learned from our first go round. Right So at RIM you I'm not sure if you'll remember, but there was a massive lawsuit where basically twenty three lawyers in Chicago had a patent and sued RAM basically tried to shut RIM down UM and it did shake us down

for six d and twelve million dollars UM. When you know that that was a lot of money for us UM at that particular point of time, because we hadn't patented and hadn't like kind of ticked and tide things, And so I never wanted to be in like that position, even from a defensive side of it. And so early on, you know, John had made the decision to start patenting,

and I was a huge advocate of that. So we were patenting all of the inventions that we had because we knew this was going to be a big category someday and we would get giants jumping into it. And so UM you know, and so one of the things that transpired was we tried with Google to be able to say, hey, look like you are you are copying what we do, like you can see it, you can see it and experience the marketing all of these things. We put our patents out there, Bob. That was the

other thing that we did. It was around the same time Tesla. Did I think we were like maybe two or three months ahead, is just putting our patents out on our website saying here's where they are. You know, innovation is fine, but don't copy um what we're doing. And so we're just making people aware. And so it got to a point with Google where I didn't feel like they were taking it seriously, that they were infringing

on our intellectual property. And so UM we decided that we needed to take the next step, which UM, I think, which you know, we're actually now close. It's been a it was what January of last year, August thirteen, will actually hear from the I T C on this UM is are they infringing you know the patents that UM we had there and did they copy what we invented?

And I felt it was important. I felt it was important for all of the people at Sonos that have put um all that work into the products and inventing these things. I thought it was important for standing up for smaller companies, you know, in the face of what has been called efficient infringement, where these big tech companies just copy what smaller companies do and drive them out

of business. UM. And we were in the position where we could afford to do it from you know, we had the dollars because we've gone public, and you know, we had a strong intellectual property, you know, portfolio, and so I felt a duty in that way to our people. But as well to this notion that you've got to stand up to these big tech players and UM, you know you're not. You can't let them trample all over the inventions that you've made. And so um, you know,

we're full steam ahead on that. UM. I testified at Congress as well around the antitrust and dominant platforms as well, because, like I was saying, I've been in this the whole technology space for twenty three years, and I remember the days of Microsoft and Intel and the dominance that they had. Microsoft and Qualcom actually created a company called Wireless Knowledge

to basically destroy rim and UM. But it was very different at that point, Like, you know, it wasn't something where they were willing to undercut price and you know sell you know, give things away, right to to basically

undermine other companies and those kind of things. And so it was important to me to testify at Congress and share our experience with the dominant platforms and the way that they're um, you know, using their muscle if you will, because I think it's important for the country and for the future of innovation and entrepreneurship that we make sure that there's not a situation where it's you know, it's too much power in too few hands. Okay, how much

does it cost to sue Google? Um should be available in our public records, but it's yeah, it's tens of millions of dollars. Okay, let's just say hypothetically you lose and they can continue to do with their away. Would that affect the future of sons? No? Um. The other thing I would say is one, just like on a more technical note, you know, we've you can only sue on five patents. We have a hundred and five that

they are violating. So um, there's a lot more to go in this battle until you know where we are. We're confident about where we are. But also the other thing, Bob is that it wasn't and this was very important to me, is that it's a very small group of people that are involved in this matter. So it takes a certain amount of my time and I try to be disciplined about that. Eddie or chief general counsel obviously him and a few of our inn electoral property people

very focused on it. And then outside Ferns that's why we pay the money UH in terms of going through it. But I also said to the company, we cannot let this take away from us continuing to drive innovation and bring at least two new products out every year and drive the business and get into more homes. And so we've successfully been able to do both UM and so I am not by no means like would I rely on that as the only way forward for so nos like we have to continue to compete and win UM

and we've shown we can do that too. Okay, let's talk about the big software issue where it came out and it appeared to customers that you were not going to support old products with new software, and then ultimately to the point where like, I have a lot of stuff on son Nos one, but for the room I have to download Sonos two. Ye, So walk us through

all that. Yeah. So, after by that point sixteen years of shipping products UM and then looking at what we wanted to deliver for the new products as well, we came to basically a point where we couldn't support the processor and memory and the limitations that we had on those early products three early products UM that were was required to do things like Debbiamo's music, Debbie atmos UM and some of the other things that we have planned and coming that we we UM that we're using with

ARC and new five, New sub and now as well roam and so it was hard and we had lots of you know, we spent so much time trying to figure out the right way to work through these kind of things, and we thought we did the right thing and trying to get out in front of it. We flubbed the messaging in a in a big, big way. UM. But we're trying to alert people of like, hey, this is coming and give people a chance to get their system to S two if that was the right thing. UM.

So that was tough. We you know, um, it was a communications issue. It was a it's a technology issue, and what a technology life cycle issue? You would say that we have to walk people through and thankfully, um, a lot of our customers you know, continue to stick with us through that. But we certainly flubbed the communications up front where we said, okay, like we almost gave the impression. I got a lot of emails, um, people my emails on our customer support site so people can

email me directly. And I got a lot of emails from people who thought that meant their products for stopping, you know, in May of last year when we communicated it in the end of January, which is not the case and never been a plan to be the case.

So yeah, so it's um, it's really about trying to how you balance I guess I would say from a you know, from a company perspective, is how do you make sure you are inventing the future and do everything you need to do to create great new experiences in the future, but not you know, not stranding the customers that have invested in the technology um of the past. And and look, I mean the reality is there's not many companies like ours where the products from fifteen years

ago still work. So I don't think a lot of companies get caught up in these kind of situations. UM, but it's something that, UM, you know, it's important to us to make sure we're continuing to service those customers. And so yeah, so there's some customers, it's not that many at this point, but there are some customers that will run in like an S the first version software and then the second version software. But most customers have

been moving to S to the new software. Okay. And you know this came up because unlike a phone, people buy home audio or tievs that they expect it to last. It's not a fungible item that you discard. So how long do you plan to support these legacy products? Um? You know, as long as we can. And the only thing that trips us up is if something gets changed. Um. You know, if a service, for instance, isn't gonna support or it's going to change something in the architecture, um,

you know, those kind of things. So we're continuing to support it. UM. I don't see any reason why we can't continue to going forward. So uh, yeah, we'll support as long as we can. And is there any trade in trade up program for there is Yeah, so there is. Um, there is a trade in program off for customers that want to move to S two products. Okay, so how long are you going to do this? Do what run? So? Nos? Oh, as long as they'll let me. Absolutely, we have the

best team in the world. Uh, it is so much fun. In terms of the company, I think we have so much opportunity in front of us. We have some amazing products on the roadmap. Um. I just feel extremely blessed um to have the opportunity to do it. And uh yeah, I mean as long as you know, as long as I feel like I'm contributing and leading in the right way too, and we're heading in the right direction, Um, then you know I'm I'm in. So you have a

good record as a seer. Where's it all going? M hm? Where? Yeah, it depends where it is if we're talking about Okay, let me break it down first. In terms of Sons, these are essentially home audio products also aligned with TV. Do you ever invented envisioned sons broadening their landscape in

terms of their purview their products? Absolutely, Bob, I think the I think the system we've built and that the connectivity to the cloud in the systems that are there, Uh, the ideas we have around future products, the opportunity and all of audio UM, there's just so much opportunity out there. I I do see us broadening absolutely over time. And I've said I think we have an opportunity to play in all the different areas of audio. So there's no

reason we can't UM over the long term. The most important thing to me is doing it in a way that brings something unique to the table. Right, So something like Rome, how is that different than other Bluetooth speakers. We've got things like sound Swap Um, there's a different way that we've integrated the voice services, those kind of things, and that it's kind of connected together, right, And so each product you're getting with so no nos makes the

experience better. And this is something we watch pretty carefully, is like our Is that true? So as people get more and more products, how do they feel about the system, and they feel they get even they become even bigger advocates over time, and so I think we have a lot of opportunity right across the whole audio spectrum over time, and who knows where it goes from there to me.

To me, the biggest thing is are we building a company, you know, in a team that's adaptable, uh, you know, and building something that fundamentally is going to be enduring over the long term. Let's talk about the room. When what the room is a very small unit and you set it up and turned on, you were literally shocked by the quality of the audio and most portable stuff is adequate ad best? Okay, what was the thinking and developing?

And also but the price. A lot of the reviews will say the price is significant, you know, and they're how hard to sell is it? Is this a portable item? Is there people buying on sound quality? They're just buying on price point they you know, for us, anytime we're gonna do something has to have that different experience. So it is different in this sound um, the build quality, the functionality as well that we have and it's hard to make it sound that good in that form factor.

But uh, you know, Giles, Chris and the team do an incredible job at doing that. And I hope that every product we have, as people turn it on and listen to it, um, they'll be surprised by the sound that comes out of it. Whether it's Ark or whether it's Rome. Uh So there's a lot of debate. To Bob, you may remember, you know, Bluetooth was a sacred cow. It's us for a long time, long time, and so putting Bluetooth in a product and being able to do that and still live up to our quality standards was

a big deal. UM. So we worked through that and figured out how we could do it and how we could do it better, um, which we're proud of. And I don't get too caught up. Like from a price perspective, it's very it's a very good deal for what you get, and we feel good about that. And there's some people that will want, you know, that twenty nine dollar product um from Google or Amazon, and maybe that's sufficient for what they need. But um, as you probably can tell

from how long it takes to get one these days. UM, there's a lot of people that are very, very happy with Rome, and it kind of arrived. You know, we did do some last year at this time. We did do a little bit of tuning of our roadmap and moving things around, and so Rome was one of those things is that we tried to accelerate. UM and I think it's arrived at a really good time as the world starts to reopen. Okay, let's talk about audio. Used to buy a stereo, Now people buy television audio, okay,

and audio is ubiquitous in general. Where is the audio landscape going? Do you mean from a format perspective or how do you think about it? I mean everything? You know, if we look at streaming services, the story today is lossless, and then even Dolby atmost and then there's another issue, the highest standard of Amazon and Apple services won't play on so go on. So so I think we we start with the customer and what do they what do

they value? Right? We've not been that company that tries to put every logo or new standard on the box, if you will. Um, you see companies like that, and you see their boxes with just like the gobbling gup of every logo andvery new standard, and so you know, sometimes we've been accused of being a little slow on that front and looking at it, but we're thoughtful about

what's happening in each space. And so even going back with soundbars, you know where Dolby was really the precursor to atmost was really taking off from streaming services, and we said, that's where we're going to focus as opposed to delivering DTS right because DTS was very much about the old school blue rays right that would have that technology, and so UM, we try to stay focused on what

customers are doing. We we obviously support Dolmie Atmost with our arc product, and there's a lot of people that would tell you that the best way to listen to Delby Atmost out loud with one product would be arc Um. So we're watching, you know, carefully, pretty interested around what's happening with Dolbie Atmost music. You know, with lossless, the reality is, from what we've seen, is that a lot of customers just can't tell the difference or don't you know,

aren't that into it in terms of what's there. And so the real question with Delbie Altmost music will be is it what people want at the end of the day and is it filling some need that they they are feeling they're missing today. I definitely see it and enjoy it when we're watching um, you know, watching streaming

Netflix or videos or whatever the case may be. And there's a real place for that and I think the you know, I think we're starting to see it certainly seems like the industry is getting behind Delobie atmost music in a way that is going to make it um the next standard. But at this point, a lot of it's the industry talking to itself, and I want to see what consumers do. Okay, So depending on how you call it, they call him the thing stocks or the

big five. You know, we have Facebook, Apple, Microsoft, etcetera. You intersect with these companies, Hey, do you ultimately believe since you went to Washington there will be effective government relations or in also government uh changes here? And you also believe that the sphere is more abu or can an interloper come up in triumph? Uh? The So I do believe that the government is going to take action. I think it's the probably the only bipartisan issue we

see right now that's out there. And both sides, for for different reasons, are seeing the what the results are of, you know, having too much power into few hands fundamentally, and so I do expect to see more. Lena Khan being you know, chairperson of the FTC is a big move, and you know, I think that it's a whole new era. Tim Wu at the White House, So you're getting people that have been talking and writing about these things for a long time into positions of power to actually affect change.

And I think it'll be good for society, quite frankly. And there's a lot of people that talk about the fact that even maybe some of these companies spinning out certain businesses may actually be better for everybody involved, right, and maybe foster more innovation. There's always the danger of like regulatory capture and um situations where the rules are put in favor of the incumbents it and they can

actually solidify their positions. So we have just have to make sure that you know, that doesn't come to pass. But um, I'm encouraged by what I'm seeing, uh, fundamentally on that front. And then also on the flip side, Bob, you know, like we're continuing to innovate, We're continuing to do everything that we can right and that you know, as I said, that's super critical to us being successful

in the future. Um, certainly I hope that there'll be other companies that challenge the ones that are out there today. I think, you know, again, it's it's a short period of time, a grand scheme of things. But I've been in technology for twenty three years. I will tell you the dominant position and the way that the companies that are there today act and how quickly they move to

jump into any new potential threat is unprecedented. Right. So last year, you know, Google basically doing everything they could to jump in front of Zoom, right with the video solutions or another great example we saw last year, you know, Google Photos went from being free to starting to charge after they've driven all the photo products that you have to pay for out of the market, right, And so they went and did that, and those are those are things that um, we didn't see as much in the past.

And so those kind of things I worry about in terms of driving you know, the up and comers out of the market. That so there's something there. But I also, you know, fundamentally believe that there will be some sort of change in the system. Is it Ai, is it blockchain? Is it you know, something we don't even see today that also helps hopefully you know, another company or a new set of companies emerge. Well, Patrick, I think we've covered it. We've come to the end of the feeling

we've known. I think we have a great overview of Sons and its place in the market. Thanks so much for taking the time. Thanks Bob, I've enjoyed it until next time. This is Bob left set