Weekly Update

Will Sonos Ever Be the Next Big Thing?

With tens of millions of consumers storing music on their hard drives, and many millions more using wireless home networks, it makes sense that many of these consumers will look to free that music by streaming it around the home, right?

Yamaha, Cisco and Sonos sure think so. But as the big names in both home networks and home stereos have converged on the space, the early returns on their investments haven’t proved as explosive as they probably would like.  While many tech-savvy consumers have heard of Sonos (and those that buy the products rave about them), home network-powered multiroom music is by no means a mass market product category.  And its not just the startups that are struggling. Cisco’s deep pockets and brand awareness haven’t translated to consumer adoption, either, if Amazon sales rankings of its Premier wireless audio bundle are any indication.

What’s the problem here?  With early users of the systems responding positively and the dual trends of digital music and rising home network ownership on their side, why aren’t these vendors seeing mass-market adoption?

Two big reasons: economy and alternatives. First, overall consumer electronics spending is suffering in the harsh recession, and newer product categories with price tags nearing a $1,000 unsurprisingly aren’t doing well. Second, while we in the tech industry think the network may be the perfect medium to play music files, it turns out most consumers pick cheap and easy over elegance. Because of this, music docks – the modern equivalent of sneakernet – are doing a mean business, while networked audio products are selling in much smaller numbers.

But while networked audio products haven’t hit the fat part of the bell-curve just yet, there are some positive signs the category is growing despite a gloomy economy. Sonos, considered by many the pioneer of this space, saw 25 percent growth in music-zones sold in May 2009 compared to the same time a year. The company attributes much of its sales momentum this year to its iPhone software remote application released last year, an application that makes an iPhone or iPod touch into a controller for the Sonos.

While if at first it seems a bit of a stretch to connect higher-sales with a new remote app, Sonos points to the growing awareness iPhone has brought them.  The company’s initial customers were predominately upper-income audiophiles, but the iPhone brings with it a broader — and yet still very attractive — demographic.

And that’s how the network audio market will grow: Much like the DVR before it, networked home audio is a seeing (or hearing)-is-believing type of product, and as Sonos and others build awareness through innovation and market education, they will continue to eat away at the quick-and-dirty appeal of basic docking stations. Add in the additional category awareness created by bigger players in Cisco and Yamaha, and networked audio could be the sleeper consumer category hit of 2009.

Question of the week

Do you think wireless music streaming around the home will replace CDs and speaker docks in the future?