It’s been a rough six months for Sonos. After the disastrous roll out of its new management app, the multi-room big has spent a lot of the previous few 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, they usually have been—maybe predictably—not too fairly. General income was down 8 p.c year-on-year (YoY), with This fall notably unhealthy, down 16 p.c YoY. Sonos tried to downplay the influence of its personal errors, blaming “softer demand on account of difficult market circumstances” earlier than, in a mea culpa, admitting that “challenges ensuing from our current app rollout” had additionally performed their half.
Nevertheless, it could possibly be proper—there could possibly be larger issues at play right here. That is the second 12 months 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 12 months too, and whereas holding 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 call, it was even remarked by traders that Sonos had solely added a million new customers this 12 months—which may sound spectacular however it was stated to be the bottom within the final “5 to 10 years.” And whereas the general audio system per family have been really as much as 3.08 from 3.05 final 12 months, with a slowing new person base, how can Sonos proceed to earn cash in what’s seeking 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 a whole lot of monetary sense—and a few large manufacturers use them to their benefit for that very motive.
GoPro first turned to a subscription mannequin within the face of poor sales in 2016, providing cloud storage for the footage from its dear action 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 total income was down YoY in Q3 2024, and layoffs are occurring in consequence, its subscriber income had grown 11 p.c, exhibiting the promise this mannequin holds when {hardware} gross sales falter.
Video games console producers have additionally discovered subscriptions to be massively helpful to their backside line. In 2021, throughout the Activision Blizzard acquisition, authorized paperwork confirmed Xbox’s Sport Go had introduced in a total of $2.9 billion from consoles within the fiscal 12 months ending 2021—round 18 p.c of the full Xbox enterprise. This might have risen to as a lot as $4 billion the next 12 months, it has been predicted. So with Xbox gross sales plummeting earlier this 12 months, it is maybe not shocking the corporate responded by hiking the Game Pass price by 25 p.c in the identical month.
