Sonos CEO John MacFarlane during a first press demo of the Playbar earlier this month in the company’s development facility in Santa Barbara.

I had the chance to experience the Soundbar firsthand at a day-long press event at the company’s headquarters in Santa Barbara, California, earlier this month. I also got to see the company’s development labs and talk to its executives.

And when I left Santa Barbara 24 hours later, I realized that the story of Sonos was at its core not just about speakers and soundbars — but about the way entertainment has changed, and is changing in years to come.

The speakers for the Spotifys of this world

Here’s the thing you need to know about Sonos: it’s not a HiFi company. Not in the traditional sense, anyway. Instead, it’s a technology company that has been building hardware for the future of music. The speakers for the Spotifys of this world, if you will. “When we founded the company, we had the fundamental belief that in five years, everyone is going to stream (their music),” said co-founder Tom Cullen.

It didn’t quite happen that fast, and Sonos’ part in the home entertainment revolution almost didn’t happen at all: CEO and co-founder John MacFarlane, who had sold his previous company Software.com for close to $6.9 billion in stock in 2000, had his eyes set on revolutionizing connectivity in airplanes when he was ready to start a new company in 2002.

Check out my interview with Sonos CEO John MacFarlane, or continue reading below:

Software.com co-funder Cullen thought that was a terrible idea, and MacFarlane went back to the drawing board. When they met again some weeks later, MacFarlane was working on ways to network home stereo components with Linux. (For more on the history of the company, check out Stacey Higginbotham’s GigaOM story: How to build a consumer platform: lessons from Sonos. )

Since then, Sonos has been slowly working away on the vision of a wireless audio fabric in your home, selling a few million units to date. The company doesn’t give out exact numbers, but I’ve been told by a spokesperson that Sonos is now “streaming music in over 2 million rooms globally.” And now, it wants to add TV to the mix.

The Soundbar: Great when paired up with the rest of the family

Some five years ago, Cullen proposed that Sonos should build a soundbar. And for the past two years, a team of 100 has been working exclusively on the product. “For us, this is a breakthrough day,” said Cullen when he and his team unveiled the Playbar to journalists.

Hilmar Lehnert, Engineering Project Manager at Sonos, shows off the internal components of the playbar.

So how does this breakthrough look and what does it sound like? The Playbar is at first look a typical soundbar for your TV, combining nine individually amplified speakers for a room-filling home theater experience. It connects to your TV via optical audio, and comes without any additional remote control. Users can instead control the volume of the bar with their TV remote.

Or they just take out their mobile device and fire up the Sonos Android or iOS app, which also offers access to streaming music from Spotify, Pandora and Rhapsody, as well as music stored on a local PC.

As far as the sound goes, I’m the first one to admit that I’m probably the wrong person to judge. I subscribe to the good enough philosophy of enjoying entertainment. I’m the guy that’s happy with $50 headphones. Still, after getting an extended listening demo of the Playbar, I have to say that it is pretty good, but not mind-blowingly awesome.

That changes once you add other Sonos components into the mix, which is one of the key strengths of this product. The Playbar can easily be paired with the company’s wireless sub. And once you add two wireless Sonos Play3 speakers, you end up with great surround sound.

A company without specs in a world where good is good enough

Here’s another thing worth noting about Sonos: The company doesn’t do specs. You’ll be hard-pressed to find anything about the wattage of the Soundbar, or for that matter any of Sonos’ other speakers, on its website. Instead, it emphasizes an Apple-like “just works” approach, and doesn’t bother you with the data points and frequency curves that are so important to hardcore HiFi equipment geeks and home theater enthusiasts.

Sonos favors an Apple-like design approach over complicated specs and gatgetry.

The problem with that approach is that is quickly becoming mainstream in the home entertainment space. The whole idea of a soundbar is to not spend thousands on the perfect home theater equipment, but have something that works better than the flimsy speakers of your TV — and many much-more- affordable soundbars do that just fine. Add Bluetooth to the mix, and that cheap speaker may even be able to stream Spotify.

And the competition isn’t sleeping: Sonos may have figured out how to make wireless audio in the house work, but others are quickly catching up. Apple’s got AirPlay. Google showed how interested it is in the home audio space when it released its ill-fated Nexus Q last year. And Qualcomm recently teamed up with ODM speaker manufacturer Tymphany to add its DLNA-powered Skifta audio module to soundbars and other stereo components.

Another challenge is that the future of home entertainment may depend as much on the home as on the entertainment. As houses get smarter and devices become networked, there is a real need to tie all of this together, have your fridge message your TV and your personal assistant talk to you through your speakers. MacFarlane told me that the company doesn’t plan to venture into the smart home space. Instead, it wants to provide APIs to get other services to talk to Sonos devices. But will that be enough?

Rooting for the good guys

Sonos doesn’t use off-the-shelf components – but is too modest to talk specs.

What Sonos has going for it is its attention to detail combined with its desire to make things simple. That has led to a company heavily invested in engineering and design. A company that develops almost everything in-house. And we are not just talking about the audio components. “We design all our antennas,” Cullen said.

Sonos is a company that’s incredibly proud of its technical achievements but that’s also too modest to talk tech specs. A company that has developers on both coasts as well as in Europe to get the best people for the job. A company that even gives its support staff stock options. It’s the good guys. You want to root for them, but you’re not sure if they’re really going to come out on top.

Check out the gallery below for more behind-the-scenes pictures of the making of the Playbar:

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Essentially cell phone economics have invaded the internet of things while open standards pushed by the web community at large are ensuring that the platforms are, if not exactly open, at least accessible via APIs or software. This means others can easily develop on a platform if it should succeed. And because everything can be controlled from a smartphone someone already carries in their pocket, the developers of these internet of things devices don’t have to imbue their goods with much intelligence or fiddle around with expensive remotes. They also understand the parameters of the top two smartphone platforms well enough that they can limit their design decisions.

The internet of things is an old idea

As far back as 2003 I was touring connected homes and seeing labs showing how I would transfer a music playlist to my car in the morning, or when I set my medicines on my kitchen counter how a scanner would read it and tell me if there were reactions with my other medicines. And of course, in these smart home tours my lights, security cameras and appliances would be controlled via a touchscreen in my networked home.

The internet of things was a well-understood concept at least a decade ago, but today it is moving from being a hoped-for vision in a lab owned by IBM, Netgear or some other giant company to a reality created by startups on Kickstarter or pulled into consumer devices such as cars by user demand. While the old visions of the internet of things were expensive, required standards and needed a bunch of large players to work together, the version that is blossoming now has a basic platform to work with and can launch without having the support of multiple multinational corporations.

Smartphones are the glue pulling cheap tech together

For example, LG is launching its smart appliances using the Android platform as its operating system and in-home Wi-Fi as the connection back to the internet. This lowers the costs on an already-expensive home purchase by using existing and cheap Wi-Fi radios as well as the existing brains inside a smartphone. LG hopes to add new features, such as giving users the opportunity to shop from their fridge, by adding new partners over time. But thanks to apps, LG’s connected fridge already has value even without partners.

Other example are Kickstarter projects like the LIFX smart light bulb and the SmartThings system which is a hub that allows you to control objects from your smartphone. Outside of Kickstarter, as I build a new house, I have seen a few systems already that let me control my window coverings or my homes automation system via my smartphone. Vendors pitch the systems, usually based on Wi-Fi (and sometimes ZigBee) as similar to the high end luxury automation systems, only offered for less. Much like Sonos, the wireless in-home audio system learned when it built a remote app for smartphones, the market for your products can double when you lower the cost associated with getting it into people’s homes.

If that requires trading in a custom remote or proprietary OS and hardware that costs more money, for an existing smartphone (or avoiding having to build a custom remote at all) it seems clear that the catalyst for many of the democratization of the internet of things is probably sporting iOS or Android.

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Ecosystem: Is the connected device a platform or part of a platform I’m currently using? For the scale example, the Aria scale talks to Fitbit, which talks to LoseIt, which is where I track my calories and weight loss goals (if I have them). I’ve built a platform for tracking my food and activities information and the scale seamlessly integrates into that. Another example is the Sonos music system, which I have, or the Nest thermostat, which I’m also evaluating for purchase.

The Sonos system eliminates wires, and integrates a variety of music sources.

My Sonos, which has myriad streaming services and connects to my music server is an awesome platform and makes use of its connectivity to bring in multiple other services like Pandora or Spotify. The Nest thermostat on the other hand, is still mostly a closed system and it’s unclear if it plans to integrate with a lot of other smart devices. It does have a Zigbee and Wi-Fi radio and will likely eventually connect to smart meters. I think here a key element is how open the ecosystem is or how many people have bought into it.

Convenience: How much value the connected device offers ties into its ecosystem, but is also its own issue because the connectivity needs to allow you to do things you couldn’t previously do without connectivity. Adding connectivity to devices should make them smart but also make them easier to use. So Sonos can deliver great sound without boring holes in my walls to run wires, but the user interface on the controller also allows me to play music from a variety of sources in one place.

The Cambridge Temperature Concepts DuoFertility monitoring device.

In the health sector, a connected sensor on the body can communicate to a doctor’s dashboard without the patient getting tangled in wires, but it can also create a simpler or more convenient experience for patients. For example, Cambridge Temperature Concepts makes a connected sensor that measures various signals from the body and then helps accurately determine fertility. When patients use the system, the company reports that it is 80 percent as effective as using IVF, which can require many doctor visits, medications and inconvenient injections.

Data: This may be less relevant on my Sonos, but for medicine, energy tracking or even weight management, I like getting a stream of data sent to a site where I can review it, correlate it and establish goals. The biggest value connected data-gathering devices can offer is the ability to grab far more data than a human could and deliver this data in real-time. If a device has the intelligence to act on that data, then the connectivity is even more worth the expense.

The Nest thermostat.

The Nest is a good example of this. Even though the ecosystem is mostly closed, the thermostat is constantly collecting data and learning how you heat and cool your home. Then it implements programs based on that data to help save you energy as a consumer. Ideally it opens this up so other devices can send information to it, or it can control other devices, but for a relatively new product Nest has the data angle down.

Obviously, it depends on the device and the use case as to how to weigh these different categories. If you buy the DuoFertility system you probably don’t care if it has a great ecosystem, since the only ecosystem that matters are the doctors monitoring the device on the other end. But in general these three things are pretty good metrics to ponder when faced with a connected scale, thermostat or even a toothbrush at ten times the cost of its dumber siblings.

As for me, I decided that the scale wasn’t worth it. The ecosystem was too small, the convenience of avoiding entering my weight on the web once a week was marginal and the data wasn’t hard to get, nor was it so overwhelming in scope that I couldn’t parse it without a computer. Plus, I’m kind of cheap.

Disclosure: Fitbit is backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.

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Show notes for this episode:

• The Nexus Q can be bought exclusively through the Google Play web store.
• More information about the device can be found on the Nexus Q website.
• The Nexus Q is based on Android, just like Google TV. Check out all of our Google TV coverage.
• To learn more about Google TV and other smart TV platforms, make sure to also check out our new e-book Cut the Cord: All You Need to Know to Drop Cable, which is now available on Amazon, Barnes & Noble and iTunes.

How do you listen to music from the cloud? Are you using a Sonos, or any smart TV platform to stream Pandora and other services? Please share your experiences in the comments, get in touch with us on Twitter (@cordcutters) or email us at cordcutters @ gigaom.com.

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The company also executed $90 million in secondary financing. The secondary financing allows existing investor BV Capital and other shareholders such as employees, founders and angel investors to cash in their chips. BV Capital has come to the end of its association with Sonos and as a result, Andreas Von Blottnitz from BVCapital is going to leave the board.

Sonos is adding a few new people to its board. KKR will be represented by David Kerko along with Elevation’s Fred Anderson (and former Apple CFO) and John Maeda, president of the Rhode Island School of Design. I think addition of Maeda is a pretty big deal for the nearly ten-year-old company that started out making an expensive wireless music player but has since expanded into a series of more affordable speakers that can stream music directly from services such as Spotify and also from music libraries stored on our hard drives.

When they started talking up their product in 2004, I was highly skeptical (and downright dismissive) of their chances, for I have seen a lot of consumer electronics startups in Silicon Valley fail. Boy, have they proved me wrong or what. They have steadily improved their products, made them simpler and have turned into a player in the hi-end audio business. They are in more than a million rooms now!

My colleague Stacey Higginbotham wrote this piece – How to build a consumer platform: lessons from Sonos – that captures Sonos’ history and strategy very well.

This story was updated at 12:39p.m. to clarify that Redpoint Ventures is a new investor in Sonos.

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Amazing, because I just finished a post about Google’s me-too-ism affliction. Amazing, because as MG Siegler points out, the Mountain View, Calif.–based Internet giant will make hardware.

Amazing, because Google thinks that it will actually be able to crack the consumer electronics marketplace. Amazing to think that this company will build a supply chain and manage relationships with retailers and get people to buy it. (Or it can sell directly over the web, much like it did with its Nexus phones — pun intended.) Amazing, considering that the company’s track record on products beyond its core offerings — search, advertising and communication-oriented software — is spotty at best.

Amazing, to see one of smartest companies show such lack of discipline and self awareness. Amazing!

P.S.: By the way, this is the mystery Google device that Stacey Higginbotham reported last week.

Raditaz launched on Thursday with more than 14 million songs, which can be used to build Pandora-like radio stations. The service allows users unlimited skips of songs they don’t like, and at least initially, Raditaz is completely ad-free. The service also allows advanced tagging of stations, so you can build your very own workout stations. Combined with the location feature, others at your gym will be able to find and listen to them as well.

Raditaz founder and CEO Tom Brophy hopes that this kind of information will also help sell ads at premium prices once the company starts to introduce advertising. He told me during a phone conversation on Wednesday that Raditaz also eventually wants to launch a premium offering. But for now, the company is concentrating squarely on growing its user base.

Comparisons to Pandora are inevitable for a noninteractive radio service like Raditaz, but there is another interesting difference between the two services, aside from the location and tagging features: Raditaz was built by a team of just seven people. “We have a completely different operating model,” Brophy said, explaining that the company has outsourced both its music catalog as well as parts of its recommendations engine to a third-party provider. This has made it possible to concentrate on working on the service’s more unique features. “It’s taken a lot of time and effort and thought,” Brophy told me.

So what’s next for Raditaz? The company is about to roll out an update to its iOS app this week, and it will update its Android app next. It is also working on a native iPad app and wants to eventually launch a tablet-optimized experience for Android as well. Devices like Sonos and car stereo implementations are also on the road map, and Raditaz will roll out an upgrade to its recommendations engine within the next 30 days.

Raditaz is based in Connecticut and has raised a total of $3 million from angel investors.

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After watching big companies aim products at the home consumer and talking to venture firms trying to see which business models might have the most success, the question seems to boil down to whether applications or hardware are better way to deliver connected home services? Fundamentally, every entrepreneur should realize that in a broadband world, what they will deliver is a service, and the rest is just the wrapping.

Hardware makes consumers happy

The Nest thermostat (in cooling mode).

Earlier this week, we saw the launch of Nest, a smart, connected thermostat, which is both beautiful and simple to use. All its complexity is hidden in the simplistic touch wheel design, but it aims to control the heating and cooling in your home in a manner that will save consumers up to 30 percent of their energy consumption. At $250, this isn’t a cheap thermostat, but what people are buying here is the intelligence that rests in the service (and a pretty thermostat).

A similar example is the Sonos system, which is awesome-sounding hardware that acts as a music delivery service. Again, the Sonos system isn’t cheap, but it does offer consumers aesthetically pleasing (in terms of sound, the boxes aren’t all that attractive) hardware with the true purpose of delivering music services from the web. The box is also easy to set up and manages to mask any problems with the quality of a user’s home Wi-Fi network, so the consumer doesn’t need to worry about allocating bandwidth to the box.

The list goes on with devices such as the Roku, which, like Sonos, is easy to set up and helps ensure a solid experience. And I can’t avoid mentioning Apple, which might be the king of building out hardware that hides its complexity and is heading toward becoming a means of delivering services such as iTunes, iCloud and MobileMe. It’s not quite there on the services side, yet, but I have no doubts it will get there.

The app-ortunity is unclear

Comcast's Xfinity app

While the app economy is huge on mobile devices, its ability to deliver services designed to be consumed at home are unclear. So far, apps designed to help consumers manage network-based services inside the home have faltered. On the energy management side, Google’s PowerMeter and Microsoft’s Hohm products were shuttered after low adoption. That may be a lack of interest in home energy monitoring, so we’ll have to see if Nest makes an impact where these services failed.

The television industry hopes to build apps for its screen, and pay TV providers are offering apps in the form of TV Anywhere products that might count as an example of success. But it’s hard to pinpoint specific apps that provide a connected experience tied to the home or gadgets residing in the home. I wonder if services such as security and TV apps might be the best way to hide a service in the form of an application.

With TVs and TV content, an app strategy makes sens,e because the content will come via IP to a multitude of devices from different manufacturers, (although for traditional TVs, a set-top box might work too). For security, which would require a professional installation of equipment (or people are more willing to buy professionally installed equipment) an app strategy may also work.

The other area where I’d love to see some sort of user-centric app or device is for managing the network. Right now, I don’t have the ability to easily allocate bandwidth to certain areas of my home or to certain applications. I think as more devices compete for limited Wi-Fi, such services make more sense. It could be built into a router or perhaps managed through the web via an ISP-provided app.

Either way, consumers are beginning to get frustrated with the toll of maintaining, updating, troubleshooting and having mediocre experiences on their connected devices. Instead of bringing the glitchy-PC experience to homes, let’s get it right this time around with something that looks more like electricity. I don’t care if it’s hardware or an app; I just want to be able to flip a switch and have it work.

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It’s an even bigger deal when you consider that half of those million rooms were added in the last year. Tom Cullen, VP of sales and marketing and a co-founder of Sonos, attributes the success to all-in-one devices such as the Sonos S5 (now called the Play:5), released in late 2009, as well as a shift back to listening to music out loud in the home as opposed to over headphones on an MP3 player. He’s also not shy about predicting that Sonos will sell its next million devices in the next year, pointing out that retailers are now giving Sonos space in stores and online. Just last week, Sonos gear began appearing at Target.com.

The company, which expects to make about $250 million in sales this year, may never achieve the growth rates that an online service might, but it’s a pretty exceptional success story when you consider that devices it sold in 2005 can today be controlled by a handset operating system that didn’t even exist at the time. Given how quickly most hardware becomes obsolete today, that’s pretty amazing and speaks to some of the lessons the Sonos crew can teach entrepreneurs.

Sonos has also managed to hang around to create a product that seems like a perfect fit for the streaming future of music. It boasts on its website that with Sonos, you can “stream all the music on earth,” a feat made possible by the web, digital music and Sonos’s efforts to become a platform.

As the Santa Barbara, Calif.-based company looks to the future with its latest Play:3 all-in-one system, it’s planning to make speakers smarter. For example, the Play:3 has sensors in it that determine the orientation of the unit, so it adjusts its sound based on whether it’s horizontal or vertical. Cullen says Sonos wants to add this level of intelligence to speakers everywhere. Sonos already has digital tuning technologies that make adjusting the speakers as easy as changing an algorithm at the factory as opposed to a manual process. What appears to be a simple consumer device actually has some pretty innovative stuff inside.

As Sonos grows, we’re likely to see those innovations occur in more and more places, effectively letting us listen to the web and whatever else we want.

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