How Sonos rebooted itself

23:23And I think it's going to be very, very difficult for any CEO or any leadership team to make great decisions that people who aren't bringing the ideas themselves aren't great. And so I suppose it starts with the right people in the seats. The reason I ask that question in that way is, I think maybe the decision you made that

23:41Nilay Patel:is most emblematic to me of we're going from a divisional structure with individual P &Ls to a more functional structure and thinking about the platform as a whole was the decision to kill a product that I believe was called Pinewood, which was a set-top box that was going to integrate all the streaming services. This is well reported by former Verge reporter Chris Welch, who's now Bloomberg. The thing that really struck me about that was if you had a division that was focused on soundbars, the only place that that division could go was to go compete with Roku. And all the reporting that we had before suggested that the soundbar division was growing because the attach rate for soundbars with new TVs is like 100%.

24:20Nilay Patel:Everyone knows the speakers and their TVs are bad. It's a great business. And we're for sure the best product in the category. And so if you want to grow the big thing, you're going to be like, how do we grow? And you're like, well, I got to, I got to beat Roku. And then now you're just like off doing that. And you came in and you just ended that. And I thought, oh, this is not just a decision to end a product line. This is a decision about the strategy of the company. Because if you're going to go compete with Roku, you've got to be a different company. That's my view of it. Is that how you saw it?

24:49It's like so many things, like these decisions do have more than one dimension that you evaluate. A big part of that decision, candidly, was that we were spread too thin across too many things. and I didn't believe that we could be exceptional at all of them. I wanted to return us to focus on the thing that allows us to be most differentiated in the competitive set and that's the incredible systemness of the product and the audio experience that we can deliver and attending to what at the time was a very long list of things that our customers were explicitly asking us for. If, you know, if we were actually, putatively, if we were working on a set-top box in that moment.

25:36Another thing that I might have wondered about is our desire to make this particular product, does it come from our customer or does it come from some sort of internally sourced sense of like business opportunity? I think companies get in a lot of trouble when the thing that comes first is the model and the thing that comes second is the product. I certainly feel a sense of obligation to constantly be evaluating new business opportunities for the company, new business models for the company. Sure. But I want them always to start from a place of like, what do we really see in the market from customers?

26:15And I'm not sure that they were saying we want a high-end streaming box that is sort of somehow the love child of a Apple TV and a Roku. Although that love child, I would be very worried about that love child.

26:32Nilay Patel:Like, why does this product have like 200 gigs of storage for no identifiable reason, but also show me ads at all times? We'll set that aside. We're at the turn, right? You came in, you restructured the company, you identified a new thesis for the company. Today you're here to talk about all the new news. Do you think you're through it? Do you think the existing customers have forgiven you for the app mess? Do you think the brand has been restored? As we've been saying, I think that there's the quant and there's the qual. The quant is green across the board. You know, performance, reliability, customer care interactions, social tone, NPS, these things are all restored to levels that we enjoyed before any of that happened.

27:18On the qualitative, I love the fact that I can show up on Reddit or on social media broadly and engage with our customers and have a constructive conversation about things that they're excited that we're doing and things where we're still disappointing, you know, an individual customer on some dimension. Maybe this game is like never over. You're just always trying to polish off the remaining rough edges of everything that you do. And so, you know, I have a real critic's eye when I look at the work that we do. And if I ever let that slip, A customer will remind me of where the work remains. Yes, I think in every measurable way, it's behind us.

28:00But it's a never forget kind of chapter for the company.

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31:45Nilay Patel:I want to talk to you about all the news here. The news here is a bunch of big bets. You've got Sonos 27. That is the new name of what you are calling an audio operating system that has something in it called Sonos Fabric. Boy, I know you know me. I'm ready to go on all these names and all these ideas. In there somewhere is MCP support. There's a big idea about assistance that I want to talk about. You're cashing some chips, right? You're saying, okay, here's a big new idea. Trust us. We're going to get it right this time. You're ready for it. Yeah, I feel very ready. You know, we've spent the last year building the new products that tell the story of this next chapter of the company.

32:23We're really excited, not just about their capabilities, but how we're going to share them with the world and where we're going to sort of enter a period of co-creation with our customers. We recently have done that with some of the app enhancements that we've been rolling out. We've rolled out through a mechanism that allows our customers to opt into them explicitly and talk to us about what they see in their own homes. And this has been such a delightful kind of chapter of engagement with the community that I think we really lacked for a while. So, yeah, I feel very ready to talk about it.

32:54Nilay Patel:Yeah, let's get into it. Sonos 27, Sonos Fabric. What are these things? Explain to people what's going on here. 100 % hardware, 100 % software. For 20 years, we've given all of our hardware objects names, Roam, Arc, Beam, Ace, Era, but we've never named the software platform, the thing that takes these collection of products and creates a consistent goal. And so in some ways, the big news that we're sharing right now is that the software platform has a name called Sonos 27. It has a bunch of promises that it makes to customers and it's nuts and bolts. It's an ecosystem platform that allows a huge heterogeneous world of services to come together in your home.

33:42It's a system that has a deep technological layer that tunes the audio for every part of your household through a system we call TruePlay. it's a fundamentally built on a kind of fabric that brings all of the products together into a key piece of hole and architecturally it's one of the things that's like really really unique about what we're doing our products in your home really find each other on the local network and create something that is truly you know where the whole is greater than the sum of the parts it's what unlocks so much of the magical experiences that we've delivered through the years And we're about to announce some exciting new capabilities for Sonos Fabric and for pointing a vector into the future of more to come.

34:28And then finally, we have these control and engagement services, app, voice, web. You mentioned MCP, which is a new dimension that we're adding. We also have an entirely new voice assistant experience. And so we're doing all of that across the software ecosystem. And we're even giving a little bit of a preview of capability that we're calling custom agents, just like multi-tenancy inside of the platform to allow modern voice assistants to live side by side and interact with one another on the platform. So we're doing all of that. And we have some great new hardware, too. We've got a brand new, amazing soundbar and an amazing set of new headphones.

35:09Nilay Patel:The Beam Ultra is the new soundbar. And I think it's 7.1.2. This is very nerdy, but to me, it represents, oh, Atmos is totally mainstream now at this price point. Yeah, totally. That might be an entirely different home theater podcast. I can't wait for you to hear it, honestly. I mean, obviously, I'm biased. I consider the source, but it sounds amazing. People who have heard it just can't stop talking about how great this little soundbar sounds. Honestly, I should quit doing this and just do a home theater podcast. Where does my heart truly lie? It's that. It's just doing that. I'm down. Anytime.

35:41Nilay Patel:You need a co-host, we should do it. Look, I just judged the TV shootout and Sony lost. It's like a big deal. There's a lot going on in that world. Tell me about the idea of naming the operating system Sonos 27. It's obviously the middle of 2026. It obviously tracks Apple's naming scheme. This very much implies there will be a Sonos 28 one year from now in August 27. I think from the beginning, we knew that we wanted to give it a name. And we knew that we wanted the name to be able to express this idea that Sonos does evolve over time. And for many, many years, that evolution was to the great benefit of our customers.

36:17We had lossless audio for Apple. We had, you know, high fidelity audio for Spotify. We had AirPlay. We had Alexa. So we, through the years, we've just over and over and over again, expanded the capability of the products that were already in our customers' homes. We didn't have a way of talking about it at all. So we wanted to give it a name. We wanted people to understand that it improved through time. And so as we started thinking about like, well, how do you really do that? The first thing they came to is like, gosh, we already have OS, like right in the name of the company. And so to try to brand some entirely new thing felt like kind of like a self-own.

36:56And so we pretty quickly sort of reverted to this idea that like the product is 100 % hardware and 100 % software. The product is Sonos, not ARC. Like maybe the OS 2 is called Sonos. And then it's like, well, what companion moniker can we give it to drive that idea home? and obviously we talked about version numbers and any number of other things, but we did decide that we'd like to take advantage of this. Like once a year, we'll stand up in front of our audience and tell them about how the platform is evolving and using the year as a descriptor for that was a better mechanism than almost anything else we thought that was available to us.

37:41Nilay Patel:Those software cycles, yearly big releases, Apple is basically the only company that sticks to it And even they don't do it. They announce all the features and then they slowly dribble them out over the course of a year. They come into focus. Again, I have a lot of questions on the nature of software development in 2027. But the idea that there's one monolithic release once a year, the industry has gotten away from that. Is that your idea or are you going to do something different? Fortunately, the industry has gotten away from that. And our intention is to have a moment where we can tell the story of the operating system roadmap for the next six or ten months.

38:16And as you'll see, even in this moment, that the things that we're announcing, many of them will be available in what we're calling early access, which is the chance for us to put them out into the product as sort of opt-ins for our customers, do that sort of perspective collecting, real-world data collecting sort of work. And, you know, all of these products will continue to evolve through the year. I know that I'm going to get questions from customers and observers about, but what about this feature? And I think really the answer is just going to be like, we know the stuff. Like there's very little that you can say, hey, someone should do this.

38:52That's probably not on our list. And so to be able to say, look, part of what we're communicating with the 27 of it all is that this stuff will come in 27. And if it doesn't, it'll come in 28 or beyond.

39:04Nilay Patel:One of the big ideas here is obviously this is an operating system that addresses a bunch of hardware in your home. That thing mostly looks like speakers, but some of it is connected to your TVs. You've got command and control. you've got other assistants, which I want to talk about, and that operating system should gain more capabilities over time. What does the far version of that look like? Is it there's just an ambient assistant in your house that is addressing the fabric through MCP? Is it you'll interoperate with other speakers that might be in the house? What is the biggest vision of this look like?

39:32Yeah, I mean, I think in some ways you'll have to stay tuned to see where we take this. But I do think, I'll start with this. I think that every home deserves this infrastructure. Like I think sound is, it's an incredible sort of mood stabilizer, if you like. I mean, take the audio track out of your favorite movie or television show and so much of the life comes out of it. And I think having an out loud audio experience in your home is something that everybody should enjoy. And so part of the big picture is we want to spread this far and wide and make it accessible to everyone. And, you know, it's sort of a running joke about the first generation of assistants, they've ended up sort of being for timers.

40:15I think you really do when you're building out this next generation of voice-centric experiences, like you do really have to look at like, not what can the technology do, but what does the customer want? And, you know, So one of the new capabilities in Sonos 27 is our new voice assistant. And our voice assistant, yes, is built on modern generative technology. But it's really inspired by what people tell us that they like to see in the home. And I'll tell you, the killer app of the assistant is they just want to be able to talk to it like a normal person. Well, stop. Like the first generation of systems, you just had to guess what to say every time.

40:58And even then, maybe it took two or three attempts to get there. It's such a game changer to be able to say, play that album I loved in college. The one with the Cocteau Twins singer, I think the song ended up like as the theme song for that show. It was on Fox. It was called The Curmudgeonly Docked House. And just had the thing, it's teardroped by Massive Attack.

41:19Nilay Patel:I know. They took it off the streaming. It's a real, it's a real, it's sad. It is. It is. So that's kind of job one, if you like. and the first generation assistants didn't do it at all. Sona's voice in the new OS is exceptional at this. That's the kind of meet the customer where they are. What else did they say? Well, they say a little bit about like what I would call mood and ambiance. So lighting, let's bring lighting into the environment so that you can express a scene through both sound and light. And then they do say, my wife and I are constantly like settling little bets in the kitchen.

41:53What was this thing called? Who is that actor? They do want comprehensive role knowledge. I want to get an answer to the kid's homework assignment or whatever. These agents do need to be able to hand off to comprehensive frontier models to get perspectives on the world. And in some instances, those perspectives allow them to use the frontier model to manipulate the audio environment, to play some music that people are talking about on TikTok, pick some stuff that sounds like the shoegaze music that I liked when I was in college. like we can leverage the power of a frontier model to understand what's being talked about on TikTok to sort that against my musical preferences and deliver it.

42:33And then, I guess while we're numerating what I think a modern voice assistant has to do, it has to be fast, it has to be reliable and it has to be kind of responsible and affordable to run. I mean, I do think that customers want this as a fundamental capability of a product like Sonos and we built an architecture that allows us to deliver it to every one of our customers.

42:55Nilay Patel:There's a lot of big decoder, big verge ideas in all of there, all the way down to where does the compute live, right? Like where is the computer in your house supposed to be? You're describing a lot of command and control. There's integration with smart home stuff. I think it's a Lutron partnership you have now. But there's an infinite number of smart light switches that might help you control your lighting. Your company is part of the Matter standard, but you don't actually enable Matter on Sonospeakers. And I think our reporting from the wonderful Jen Tuohy, our smart home reporter, has suggested you don't think it's ready.

43:25Nilay Patel:This is a lot of stacked problems. And I'm just going to read your press release to you. It says, Sonos 27 MCP allows you to connect any outside AI system or agent to your system, including ChatGPT. Well, I'm a customer, and I'll tell you, the one that I want to use is Gemini for Home, Google's assistant. And that's been broken on Sonos for ages because of an ongoing lawsuit. Is that fixed? Is Google in your list? Because there's a lot of competitive dimension here. You know, in many ways, we have a strong relationship with Google to this day, despite the lawsuit. YouTube Music is one of the most listened to music services on the platform.

44:05We do have a long history of a first-generation Google Assistant, you know, on many of our products. We'd love to continue to work with them on all of these things, and those conversations continue.

44:16Nilay Patel:I guess I'm just going to push on this. connect any AI assistant or agent. There's two big ones, right? There's Alexa and there's Google. You might be in third place. Siri exists. Those are the ones, right? Maybe there's going to be this ChatGPT product in the future. I want to tease apart two different things. Let's talk about command and control of the Sonos system through external agentic interfaces, to just use every buzzword. What I really mean is we think there's a lot of utility in showing up inside of ChatGPT on the web, on your phone, on the desktop, in the same way that Slack or your calendar shows up in those environments.

44:55So with Sonos 27 MCP, we'll show up in the directory of connectable services in all of those environments, in Gemini, in Cloud, in ChatGPT, in Brock. So, and by connecting that tool into your experience, however you access it, you'll be able to summon Sonos. Maybe you're working along on something and you want some music to play. You just tell Claude to make it play or just tell Gemini to make it play from the desktop or mobile surface that you're sitting in front of. That's a pretty powerful building block. You know, as we see these kind of, you know, open claw style, agentic, proactive, asynchronous kind of agents evolve.

45:37Now they have access to Sonos in a supportable way. It's been a bunch of sort of hack MCPs and CLIs for Sonos around. And many, you know, a lot of reporting about how they're among the most, you know, utilized sort of examples for these things or excited to officially support such a thing. As much as fun it is to see the mainstream use cases, very excited to see what hobbyists are going to do with Sonos MCP. So let's now talk about like on device though, on our devices. So we've been working closely with Amazon for some time to bring Alexa Plus to our platform. That work continues. I'm excited about it.

46:14Don't have anything to announce today, but we've had a long and no successful relationship with Amazon through the years. Panos was on the board with me for many of our years at Sonos.

46:27Nilay Patel:Just so people know, that's Panos Panay, who now runs hardware and Alexa at Amazon. That's right. That's right. Friend of the show. Yes. Yeah. Panos and I are buds too. Yep. We're going to demonstrate something we call Sonos Custom Agents, which lets you take any of these inference engines, the Anthropic Engine, the OpenAI Engine, Gemini Engine, the Grok Engine, and invoke it from Sonos. And you'll be able to give it a unique voice, you'll be able to give it a name, and you'll be able to give it a context that has it show up in a particular way. Imagine that you'd like to have a personality that lives inside of Sonos.

47:10That's the John Cusack character from High Fidelity. Kind of opinionated record store geek who is interested in kind of subtly shading your perspectives in music, but also making recommendations. You can, you'll be able to go in, set up a custom agent in Sonos that says, you know, let's use OpenAI inference. Let's use this voice I pick. And let's give it this personality and let's have it live alongside an agent that's powered by Anthropic inference. that's going to give me advice on cooking. And let's do another one that is only interested in connecting me with opportunities to see live music.

47:59And all of these tools will be able to show up inside of Sonos, invoked by the name you give it, Tay Sonos, connect me to the curator, and talk to you only about that topic, have a point of view, and be able to access the Sonos context so that they can sort of hand off from one to the other.

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51:35Nilay Patel:Let me bring some of these together. There's the idea that there's external command and control, right? I have an Echo Dot and I say, turn on the Sonos and it just does that. Then there's the idea that there's the assistant that lives on your device that is either the Sonos voice assistant or maybe you're going to keep working with Amazon and Alexa Plus being there. And then we're going to make new custom ones out of building blocks that are in lots of different ways. When I asked, where is the computer? This is like, to me, like the big question in where does all this ambient agentic AI actually live?

52:10Nilay Patel:Where does it have control? Is it going to happen locally? Are we sending everything to the cloud? somewhere in your home, if you're going to control lights and music and everything else, there needs to be some logic happening in your home. There's a lot of standards to do that. Some of them are good. Some of them are bad. Some of them have names that connect directly to the word fabric, like thread. There's like a lot going on here in terms of just the names and schemes of what could happen. Where do you see this view? Who is your competition here? Is it that Apple is going to launch a new HomePod with an AI-enabled Siri, and they already have a HomeKit, which is a pretty well-built and pretty popular smart home platform.

52:53Nilay Patel:Is it, well, OpenAI is going to have a hardware device, and maybe their first one's going to be in a home, and you need to stave that off and make sure people are talking directly to you and you have the customer relationship. That seems not only undeveloped, but even the foundations of how you build the products, like Matter and Smart Home Standards, are they're messy, right? They're political in like very specific ways. So how do you see the competition and victory there and success there? And then how do you solve just like the capability gap that every other company has run into? I think that we, as an industry, there are these kind of platform shifts that unlock opportunity for companies who get lucky on timing.

53:38You know, so for example, the original dot-com era was like really powered by Oracle and Sun Solaris boxes and, you know, data centers that you owned and operated yourself. And then we went through a chapter where the infrastructure became, you know, Linux and open source for your data tier. And then, of course, we've had this huge long run of cloud infrastructure. And I think, you know, if you're a company that builds their stack on Solaris and Oracle, there's an opportunity for a company to come along and build a stack on Linux and Postgres in that moment and suddenly find efficiencies that are very, very hard for you to claim.

54:19I think something very similar is happening in voice assistants. You know, when I hear you on the show talk about your experience with voice assistants that are going through the transition of first generation to second generation, it feels to me like so much of the challenge there is about how do we drag along all of the committed relationships that we have for the internet connected toaster and back massager and all of the things that are connected into those existing historical ecosystems. And honestly, even in the world of AI, just how much has changed in the last couple of years underneath the companies as they're building out their answers here.

55:01It really feels to me like we are stepping into a moment where agentic tool use powered by protocols like MCP are going to disintermediate a lot of that stuff that you're sort of talking about. In the immediate term, we're really excited about what we can do in the use cases that our customers are telling us they care about. Give me mood and audio in the home. We have great solutions for that today. And I think we can take advantage of this shift to a truly next generation architecture without the baggage of a decade of internet connected light switches from 17 different protocols with 17 different, you know, hubs in the closet.

55:42Nilay Patel:Well, I mean, part of the opportunity there is you don't have the big voice assistant. I don't think the current Sonos voice assistant is not at the scale of Alexa or Google or SysTenit, right? I'm just guessing. They do have that problem. Like the light switches in my house, they're in the walls. They're going to be there. That Lutron hub is there. It's not great. Although Lutron is the best one, but it's still, there's a box in my house and there's a lot of those little weird little boxes like in my house because I have a smart home. All of those dependencies exist for those platforms for reasons.

56:14Nilay Patel:And if you show up and say, use my voice assistant instead, and it can't operate all of the lights, well, I'm just going to fall back to Amazon or I'm going to fall back to Google. And they know it and they know they can't break those things. Spanos and I've talked about it a lot, actually, in the context of Alexa Plus. The promise of AI, at least from my very abstract vantage point, is, boy, I should not care about any of this, right? There's a network in my house. There's lots of devices on that network. They have some access points on that network. Maybe they're API-driven access points. Maybe they're MCP-driven.

56:45Nilay Patel:It should not matter. There's just a bunch of devices on my network that you can control somehow. And this all-seeing robot that is going to replace every job in America should be able to traverse my network and turn on the lights without any help. That's what it should do. And some of the very first big vibe coding shockwaves were like AI researchers, like bleeding edge AI researchers being like, I figured out how to control my shades. It walked through my network and the shades can go up and down now, right? We're not there at the consumer level. The promise is not there. I'm still here talking to you about Matter and Thread and HomeKit and whether or not Google Assistant can control my Sonos amp which by the way it can't and that is my one ticket to you that I don't submit on Threads like that's the promise but the gap to that seems really really huge are you able to close it is that the opportunity?

57:43I think we're just still like in the Apple two days of the home automation space and so while there is, as you point out, this like incredible, wild, you know, heterogeneous world of different light switch controllers. I think when you talk to kind of, you know, mainstream consumers about their homes, they're not there yet. And so I do think that because of the sort of profound technological sort of step function of agentic control of these kinds of services and things like tool use, that as the consumer catches up with the industry's ambition to solve these problems, that new technological solutions will emerge.

58:21And I'm really excited about how I think how we're positioned to ride that transition and not be encumbered by the decade of early adopter internet-connected light switches. What are you going to do about the light switches that are already in the walls? I just don't think that there's enough of them to matter in the final answer.

58:43Nilay Patel:And of course, Lutron is a great partner and they do a great job with this. They do. I mean, we have them. We got all kinds of light switches. We mostly have Lutron ones. But that's kind of my question is the first natural customer for something like what you're describing is somebody who is already using these products in some way. If you show up to my house and there's no matter support or whatever, I'm like, well, I can't use it. Is it, though, or is it more like the difference between the people that were adopting, you know, Creative Labs MV3 players before the iPod came along? Was the iPod really for those people or was it for people that had that problem but were nowhere near the people that had been early adopters?

59:21Or, you know, the iPhone for people that were using Windows CE or was it for people that were using flip phones who were ready for the transition?

59:28Nilay Patel:Is that the idea here? iPhone for smart home control or iPhone for audio in a home? That's right. The turn there that I think is really interesting is, who are you going to talk to? Where is the computer? What is the computer? And you're kind of describing, if you want music, you're going to talk to Sonos. But you also have a general purpose assistant like Claude or ChatGPT, and they can talk to Sonos too. And it's unclear to me, and maybe one of the most fascinating questions in this moment in tech, of where the interface goes. Are we all going to have one chatbot that does everything, and all the demand is aggregated there, and OpenAI becomes more powerful than ever?

1:00:04Nilay Patel:or are we going to have lots and lots of assistance that we address in lots and lots of different ways? And it seems like your bet is Sonos will have a personality in your home, maybe multiple personalities in your home, and customers will address that and all the other stuff will go somewhere else. For 20 years, we've found a lot of success around the idea of embracing sort of every dimension of the problem. You know, yes, there's an app, but you're welcome to engage with us through AirPlay or Spotify Connect. Yes, we have a voice assistant, but it lives side by side with Alexa. Yes, we have proprietary mesh, but it integrates with Bluetooth and even line in.

1:00:41And I think our bet is that we're going to, you know, we're about a size and scale that allows us to both be nimble and react to these changes, but also have enough horsepower to sort of keep up technologically with the best in the category you're doing. So, you know, I think some of this just plays out on the field. Just one last idea, since he said it a couple of times, this question about where does the compute live? I think one incredibly powerful opportunity for Sonos is that we do place compute in millions and millions of homes. People don't think of them as computers often, but they are.

1:01:16They create a seamless experience that is really the integration of a set of cloud services and local services in a way that looks like just one surface area to the customer. And I think that the answer to your question about does this live in the cloud, does this live in the home, does this live in a box, I think the answer is yes. And I think we're pretty uniquely situated to take advantage of an architecture where it's not cloud only, it's not home only, but it's a sort of integrated system that combines all of that together. And at the end of the day, that is what Sonos 27 is.

1:01:52Nilay Patel:Just to make that really reductive, when I say where is the computer in the home context, what I mean is maybe in the 90s, early 2000s, there was a vision that we would all have home servers in our basements. And they would do all the logic of our home. They would have all the storage and Microsoft would sell you a Windows home server in the basement and a Windows media center in the living room. And you and I probably both watched all of those Bill Gates keynotes at CES. And none of that really ever came to pass, right? Instead, we put a lot of cheap computers near all the TVs, and they connected to cloud services, and they're basically just running web browsers, as you well know.

1:02:29Nilay Patel:That is a very different version of what needed to happen and how the market played out. In the smart home, you know, I've got a bunch of, I don't know, automations in my house. The garage is open, the lights turn on, and other stuff happens at night. You know, the doors all lock if they're not locked. That logic has to live somewhere. And I, you know, my perspective on it is it should live in my house. like if the internet goes down, the lights should still turn off. Yeah. This is not anything to do with like big AI integrations or, you know, the new MCP way to address the Sonos system, right?

1:03:02Nilay Patel:Those are big ideas. And I'm just like insistently dragging you back down into the dirt of like, if the internet goes out, are the lights still going to turn on? Yeah, you don't want to be the partner that put in the internet connected light switches that don't work when the internet is down. But it's not just the internet connected light switches. It's the logic of making it all work together. Yeah, there. For 40 years now, we've been talking about technology for the home. And starting with the personal computer, which is supposed to be the center of the technological household. But we didn't really get that.

1:03:40We got laptops that people, you know, you mostly use at work and use a bit at the home. And then we got mobile. Mobile is supposed to be the thing that you engage with when you leave your house on your way to work. And of course, the fundamental, the media of mobile is so addicting that it's all consuming. We use it at work. We use it at home. We use it all the time. But my observation about our use of it in the home is like, nobody loves it. Nobody, no spouse has ever said, I wish my husband was on his phone more. I wish my kid used their iPad more. And so we're looking for ways to get beyond that.

1:04:21And to your point, the other compute that's in the home, like I said, that's a box is largely just sort of a web browser to a bunch of services that lives in the cloud. I think it's pretty interesting, actually, that in 17 million homes, Because Sonos is like an actual mesh of compute in your house with real horsepower, real memory, real CPU, real capability, real operating system, just waiting to be the container for some of the kinds of things you're talking about. So super interesting. We'll figure it out over time.

1:04:52Nilay Patel:I feel like you're this close to being like, and then the Teslas will be a data center. Like there's something there that is like maybe the line. I actually want to push on that a little bit. The initial Sonos innovation 100 years ago, when a company started, was, oh, we can build a mesh network. We can do wireless audio at scale. We can synchronize the latency of all the speakers so it sounds like the same music playing at the same time. This was a lot of big engineering back in the day. And now you're saying, okay. Still. I mean, candidly, still. A lot of what our software team does day in and day out is extend and maintain that infrastructure.

1:05:31Sure.

1:05:31Nilay Patel:There's features you're announcing here as part of Fabric that I think are interesting, right? If you have surrounds, you can just place them and they'll figure out that they're surrounds and immediately start being the surround speakers in a home theater. There's just a lot of potential, as you're describing, in the notion that, oh, there's a big network of small computers in my house that can come together and do things you would not expect. Is your focus that they will always do audio things, or is it the focus that they will have many more capabilities? I think any thoughtful product leader is going to tell you the focus is an important part of success.

1:06:05And we are. I do feel like there's so much interesting work for us to do around creating an audio system that sets the mood for your home that I don't want us to take our eye off of that opportunity. And we are doing some really exciting things in Sonos Fabric and Sonos 27 that we should talk about. They get to some of the work that you're describing. But certainly in the moments where you allow yourself to think about what's the company in five years, what's the company in 10 years, you can't help it. But interrogate what the opportunity is for, you know, a mesh, a fabric of compute that lives in the home.

1:06:45Nilay Patel:I want to end by talking about headphones really quickly. We just had the CEO of Boson. She and I are pretty searching conversation about what happens to the headphone market in the time of AI wearables. And, you know, my fear, my anxiety about audio always is that consumers will always pick convenience over quality. It's just the history of, I've got a set of AirPods on this desk, and they don't sound great, but boy, are they convenient. And that's just the way it goes. It has always been what the market has demanded, convenience over quality. We're going to enter a time when Apple puts cameras on AirPods and you can talk to them with Siri.

1:07:24Nilay Patel:When Google and Samsung ship very similar products, there's undoubtedly going to be a flood of AI hardware startups that want to put something in your ears or in your body in some way. You are in the headphone market. You're talking a lot about AI. You're talking a lot about fabric. That seems like a cataclysm coming for headphones. The same way that the removal of the headphone jack was a cataclysm in the headphone market, this seems like the next one. How are you preparing for that? Do you think there's going to be a range of voice assistants on headphones, or do you think what you would call the first-party vendors are going to just grab more and more of that share?

1:07:57Before we jump to the hypotheticals about where headphones is going to go, can I tell you a little bit about the new headphones? Yeah, of course. All right. You know, one of the things that you get from entering a new market is the opportunity to build something, put it out in customers' homes and learn a lot about what matters and what doesn't matter. So we launched Sonos Ace two years ago. I think measured against any of the other premium, over-ear, noise-canceling headphones in the market, they're a great product. They've got great reviews. They have great noise-canceling. They're super comfortable.

1:08:32They look great. Really proud of the product. They weren't thoughtfully integrated into the Sonos ecosystem. I mean, at launch, you could swap to one of our soundbars, not even all of our soundbars. I think it was the most visible expression of the missed opportunity of that moment for the company to just always remember that the products that we make are part of the Sonos system, not individual offerings. And so we ended up with a great pair of headphones, but honestly, and you would do them all the time, there are lots of great headphones. When we set out to take all the lessons that we learned from Ace to design Ace Ultra, at the very top of that list is like, we have to do the hard thing.

1:09:15These headphones have to be able to show up in your home as a part of the system. And the model through which you invoke your headphones has to be completely seamless. and delightful. And so we built an entirely new hardware platform for Ace Ultra called Headphone Engine 2, and it unlocks this capability at the hardware level. And then in Sonos OS 27, we built virtualization so that any one of the speakers in your home can deliver the audio platform to that speaker, but can also act as a proxy for your headphone, which doesn't have the the horsepower to run the full stack would kill battery life, et cetera.

1:09:59And so now with Ace Ultra, you'll be able to link your headphones to your Sonos system, walk up to a speaker that's playing, press a button in your headphones, and the music will jump from the speaker into your headphone. No Bluetooth, no phone. You'll be able to walk around your whole house, enjoy the music, come to another speaker, press the button again, and it will jump to that speaker using some BLA location sensing stuff that we've developed. Super magical. It's the one job that we had and didn't deliver on with Ace. We're really excited to get it out into the market. Analogous to that on the home theater side is, as you mentioned, we're making all of our portable speakers, Sonos Play, Sonos Move, capable of being rear channels for home theater.

1:10:45And that sounds really easy. Maybe people will be like, why wasn't that always possible? But to your point about the deep technology of it, the way that we achieve high fidelity, low latency surround experiences in the living room is by directly bonding our rear channel speakers and subwoofer to the soundbar on a proprietary network, not through your access point. And so for a speaker to seamlessly hop between being part of your Sonos system as a music node and part of your Sonos system as a surround channel means that you have to do now a real-time reconfiguration of that networking stack. And you have to know when to do it.

1:11:27So we're using accelerometers in the product to actually know that you've picked it up and set it down in a new location. And we're using Sonos positioning system, which uses ultrasonic signaling to broadcast the room. hey, is there a soundbar here? Ultrasonic comes back saying, I'm here. They negotiate position, left, right, distance, so that they can optimize the surround sound experience. You pick it up again, you take it back to the kitchen and it's regular speaker again. All happens magically, no use of the app. It's pretty cool.

1:11:57Nilay Patel:To answer my question on headphones, though, this is my big worry, right? You've got really cool headphones. They have a feature that no one else can ship. And Apple's going to say, look, our new AirPods have Siri, and you can just say, show me what I'm looking at, and a picture will be taken automatically and something will happen. Yeah. We'll all get over the privacy implication of that. But like, that's a collapse of the headphone market. Maybe. Headphones come in all kinds of form factors today over your in-ear cuffs, wireless, wired. It's a market where people choose different form factors for different chat tasks.

1:12:26You know, we're really focused on this, you know, personal in the home listening. What do you do when the baby's asleep? What do you do when you want to move the party from the kitchen to the den while you relax for the evening? And we think that there's a bunch of really interesting use cases there that other people aren't paying attention to. I think broadly over the course of the next couple of years, we're going to get all kinds of adventurous wackadoodle consumer electronics that are connected to this new emerging AI universe. Most of them will be a swing and a miss. Of course, we've already seen some of those.

1:13:04It's a little hard to speculate about, I think, about which of these things, if any, is going to have its kind of iPod moment or its iPhone moment or whatever. What do you think is going to happen?

1:13:12Nilay Patel:I think we're going to see a replay of what happened when the headphone jack got taken away. The headphone jack was an open interconnect. There was a really vibrant market for all kinds of headphones. And a bunch of those companies don't exist anymore. Right? The sort of like high end wired headphones, for phones anyway, have mostly gone away. And you have a bunch of sort of medium Bluetooth competitors. But the phone makers have largely taken that with first party products. and then you have your products at the high end competing with really high-end noise-canceling products from Bose and Sony and whoever, and that is like the airplane set.

1:13:46Nilay Patel:And the lack of the open interconnect has really killed sort of the vibrancy of the low and middle end of the market. Okay, well, there's one big thing they can do to make sure the high-end belongs to them, and it's integrate AI, right, in like very specific ways directly into their operating system. We'll see how that plays out, right? There's also a thing that's different this time is there's a vastly more energized European regulatory environment. Who knows how this will play? I can't tell you, but all that stuff is a swirl, and you're a headphone maker, and it seems like different headphone makers are taking different approaches to this.

1:14:20The only counter that I might offer is that there's a lot of talk about the walled garden of the Bluetooth advantages that the platform companies have, but I would say even without the European regulators, It's sort of notable that something like the metaglasses can have a reasonable, I think, commercially viable set of experiences that are principally powered by compute that lives on your phone and still deliver conversational AI that is mediated by a Bluetooth connection, admittedly, behind some of the obstacles that you're describing. But those obstacles aren't so profound that clever companies aren't figuring out how to work within those constraints.

1:15:01Nilay Patel:No, I'm very curious to see how that plays out. It doesn't seem like it's in focus. Again, probably because, like you say, none of the products are in focus. No one knows what a hit product here looks like. So you might as well let a thousand flowers bloom and then radically constrict the market. That seems like what everyone is doing. But something there is going to be a turn that happens here. Tom, I've burned just a ton of your time. I think you can tell I could talk to you for ages and ages about all kinds of things. Super fun. Tell us what's next for Sonos. When does all this stuff ship? I think by the time this airs, we'll have announced all of this in the world.

1:15:35We're having a big event in New York to share Sonos OS 27 and Sonos Voice 27 and Ace Ultra and Beam Ultra. Can't wait to get this stuff out into the world and begin to hear what our customers do with all these exciting new products. Many of the software features are going to be available in early access, which will mean our customers will opt into them, be able to give us feedback. and we'll be able to observe the telemobody that comes back from their home and make sure that we're delivering exactly the experience that we want. We're excited about the sort of moment of co-creation that's around the corner for us.

1:16:08And then as we talked about at the top of the hour, Sonos 27 is absolutely a nod to the fact that we intend to keep doing this until the sun burns out. There'll be a Sonos 28 and 29 and 30 and beyond.

1:16:20Nilay Patel:That's great. All right, I got to ask you at the end, I have ceiling speakers in my kitchen that are connected to a Sonos amp. There's a Google Home Hub right there, and it's broken. I can't ask it to play music in the kitchen. When are you going to fix that for me? I'm ending on tech support. All right. I don't know the answer, but I'd love to figure it out. I'd love to figure it out for you. I know the right folks to call, so let's get you connected. Yeah, we're going to have a Dakota Roundtable. If your listeners have similar kinds of problems, we've got great people to help them, and we always like to hear from you.

1:16:55You can find me on social pretty easily.

1:16:59Nilay Patel:Usually I end by inviting people back, but I'm saying we got to fix it. And then we're going to talk about what it took to fix it. That's the plan. Tom, this was great. Thank you so much, man. Super fun. Thank you. I'd like to thank Tom for taking the time to join Decoder and thank you for listening. I hope you enjoyed it. If you'd like to let us know what you thought about this episode or really anything else at all, drop us a line. You can email us at decoderatheverge.com. We really do read all the emails or you can hit me up directly on Threads or Blue Sky. We're also on YouTube. You can watch full episodes at DakotaPod.

1:17:26Nilay Patel:And we have a TikTok and an Instagram. Same handle, at DakotaPod. They're a lot of fun. If you like Dakota, please share it with your friends and subscribe wherever you get your podcasts. Dakota is a production version, part of the Boxing and Podcast Network. Shows producers are Greg Ott, Kay Cox, and Nick Statt. This episode was edited by Ursa Wright. Our editorial director is Kevin McShane. The Dakota music is by Breakmaster Sona. We'll see you next time. Fall is the perfect time to refresh and reorganize your space. At the Home Depot, find power tools and tool sets starting at$50 to help tackle DIY projects, home updates, and more.

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