It’s been a tough six months for Sonos. After the disastrous roll out of its new management app, the multi-room large has spent a lot of the previous couple of months on a reputation-saving mission—saying sorry (a bit too late), placing merchandise on maintain (briefly, at the very least), and plowing cash into an app repair that also isn’t totally completed.
A few weeks in the past, it introduced its fiscal 2024 earnings, and so they had been—maybe predictably—not too fairly. Total income was down 8 p.c year-on-year (YoY), with This fall notably dangerous, down 16 p.c YoY. Sonos tried to downplay the influence of its personal errors, blaming “softer demand resulting from difficult market situations” earlier than, in a mea culpa, admitting that “challenges ensuing from our latest app rollout” had additionally performed their half.
Nonetheless, it may very well be proper—there may very well be greater issues at play right here. That is the second yr in a row that Sonos has posted a YoY decline in income—down 5.5 p.c in 2023, regardless of two rounds of layoffs. “Difficult” was the phrase CEO Patrick Spence used to explain that yr too, and whereas retaining the momentum following two bumper years throughout Covid was by no means going to be straightforward, there could also be one thing of a sample rising.
In its FY24 earnings name, it was even remarked by buyers that Sonos had solely added a million new customers this yr—which may sound spectacular nevertheless it was mentioned to be the bottom within the final “5 to 10 years.” And whereas the general audio system per family had been really as much as 3.08 from 3.05 final yr, with a slowing new consumer base, how can Sonos proceed to earn money in what’s trying to be a saturated market?
In Good Firm
Sonos wouldn’t be the primary firm to contemplate whether or not a subscription mannequin may assist to maintain issues buoyant. Recurring income streams make lots of monetary sense—and a few enormous manufacturers use them to their benefit for that very motive.
GoPro first turned to a subscription mannequin within the face of poor gross sales in 2016, providing cloud storage for the footage from its expensive motion cams. It expanded its GoPro Plus providing additional in 2018, and has continued to take action, rising the subscriber base from 160,000 members on the time to 2.56 million as of November 2024. Whereas general income was down YoY in Q3 2024, and layoffs are taking place because of this, its subscriber income had grown 11 p.c, displaying the promise this mannequin holds when {hardware} gross sales falter.
Video games console producers have additionally discovered subscriptions to be vastly useful to their backside line. In 2021, through the Activision Blizzard acquisition, authorized paperwork confirmed Xbox’s Recreation Cross had introduced in a complete of $2.9 billion from consoles within the fiscal yr ending 2021—round 18 p.c of the whole Xbox enterprise. This might have risen to as a lot as $4 billion the next yr, it has been predicted. So with Xbox gross sales plummeting earlier this yr, it is maybe not stunning the corporate responded by mountain climbing the Recreation Cross worth by 25 p.c in the identical month.
