Last week Sonos CEO, Patrick Spence ducked and dived during a conference call, as he was questioned about their latest app debacle the A45M cost associated with cleaning the mess that has some customers threatening a class action against the business also bought into question is the ‘reputational damage’ being caused to the Sonos brand.
Of particular concern was the impact on future earning with Spence admitting that the failure by Sonos to deliver a workable app was set to impact revenues in the future and in the short term.
In several markets and on Amazon Sonos has already started discounting out their new Ace headphones which have not been able to deliver capabilities outlined in their market.
According to retail sources the headphone which entered the premium headphone market with a premium price sticker despite Sonos having no previous products in the headphone category is already being discounted out between 10 and 20%.
Spence who has been at the Company for 12 years during which time there has been several disastrous marketing decisions with the struggling CEO admitting that tens of thousands of their customers “Have been let down” under his watch.
US publication The Verge wrote ‘This software debacle has been a major debacle. That shouldn’t be downplayed”.
Some of the fallout can be measured.
Spence said the company is spending between US$20 million and US$30 million(A$45M) to rectify things, analysts have questioned the impact of this expenditure.
Details on what that actually means were a little unclear during his conference call.
Is that $A45 million or more being spent on software engineers and everything else it takes to build a platform? Or is it something else? they asked.
Sonos management admitted that one of the reasons for building a new app after previous Sono’s speakers were nobbled and turned into paper weights, “Was to address the performance and reliability issues” associated with Sono’s speakers.
He admitted that the problems were “Negatively affecting our customers’ experience” and as a result the business has chosen to put on hold future product releases.
The latest problems follow a decision to rearchitect the app which was previously designed using what is now ‘archaic code’ instead of modern programming languages.
The old app was struggling to deliver simple connectivity over a network.
He said that the redesign of the app will allow Sonos “To enter into new categories” with insiders tipping a streaming box in the future.
He also admitted that their latest botched app project was in essence a total redesign of the entire system, “not only the app but also the player side of our system as well as our cloud infrastructure” he said.
Among the problems he revealed was existing speakers not able to be connected Sono’s systems, while others saw latency issues or errors while setting up new products.
The design of the new app which was released alongside their new Ace headphones in May 2024, has already resulted in 9 new software updates to date that address a multitude of issues.
“We expect the app will get better every 2 weeks with each subsequent release” he said.
“We have identified the key bugs and have a plan to fix them and are improving our processes and staffing to ensure we successfully execute our action plan” he said.
He then started to spruik their new Ace headphones claiming that they are “off to a good start”.
He admitted that “headphones is a very exciting category” for Sonos.
In what appears to be a move away from networked speakers, he said “Our goal of participating in more and more categories and to diversify our revenue streams, and headphones are a great opportunity to do just that” he said.
Because of the problems associated with the new app roll out Spence admitted the business has had to revise their expectations for the fourth quarter due to the botched roll out of the new app.
Year-to-date revenue at Sonos was US
$1,262.7 million, down 6.5% year-over-year.
Taking questions from analysts Spence said that the new products were set to be shipped in Q4.
Despite the delays he said that Sonos “Remain confident that over the long term, we can take more and more of that $100 billion audio market”.
“We’re only 2% — less than 2% of it today. And definitely, the work that we’ve done on the app was the right work as we position ourselves for the future” he said.
Steven Frankel an Analyst said ” When we look at the magnitude of the revenue reduction in Q4….how much is the app issues causing a significant slowdown in sell-through? And to the extent that’s the case, where are channel inventories relative to where you want them to be for Q4”.
Spence admitted that Sonos was overall struggling, with all their categories coming under pressure during the last 2 years.
Analyst Erik Woodring raised the issue of reputational and brand damage caused to Sonos due to the multitude of failures under Spence’s watch.
Spence said “I think the key is to address the pain points that we have right now and those customers that are having issues with the new app for sure. But remember, we’re not standing still on the innovation front. We have 2 major new products that we’re pushing out again to get — make sure that we’re in a position where the app issues are behind us”.
“As we do that and as we launch those, we will launch other products” he said.
