With Tech Giants Moving in on Its Turf, Sonos Embraces Pricey Media Buys
Early in its history, Sonos made smart bets that continue to pay dividends. When the speaker maker formed, thirteen years ago, in Santa Barbara, Calif., it made twin bets on the future: that both WiFi and music streaming would be ubiquitous. It paid off. In the years to come, the private company carved out a comfortable niche as the market's premium brand, selling its fleet of nine audio products largely to audiophiles with money to spare.
Then, mobile handsets exploded, giving millions of people personal remote controls for streaming music into their homes. A 2005 review dubbed Sonos "the Lexus of the category." A decade later, thanks to technology shifts, everyone wants a Lexus.
And more brands want a piece of the pie. In the last year, the largest mobile firms -- including Apple, Samsung and LG -- have entered the market. That has prompted Sonos to compete on a bigger media stage, as it works to become a household name. The brand ran its first Super Bowl ad in 2014, a spot produced by hip-hop mogul Rick Rubin. Two weeks ago during the Grammys, the brand unveiled a series of 51 art pieces revolving around nominated musicians and artists, in addition to throwing a lavish party in Los Angeles.
"We've been on a more overt, broader marketing effort for the last three and four years," said Chris Kyle, VP-global brand experience. "We're still introducing ourselves to a lot of people."
According to Kantar Media, Sonos spent $19.3 million on measured media in 2013. Two years prior, it spent less than $1 million. Since then, its marketing budget has expanded more than twenty-fold, with vivid broadcast ads on prime-time broadcast events like the Grammys and this weekend's Academy Awards.
This year the company expects to achieve $1 billion in sales, nearly double its total from 2013. In the overall wireless speaker market, it sits comfortably in second place with a 16% dollar share, trailing only Bose, which has a 22% share, according to the NPD Group. The gap in ad spend is far wider -- although Bose sells more products, including its signature headphones -- with Bose outspending Sonos ten to one in 2013.
Despite its growing media budget, Sonos is a relatively quiet company, choosing to fly under the radar as much as possible. "Our job is to help tell the story, not be the story," said Mr. Kyle. Representatives from 72andSunny and Bruce Mau declined to comment.
In 2011, the company recruited Greg Perlot, a former Publicis group VP and founder of 72andSunny, as its chief brand officer. He tapped his former agency for the brand's creative work. Vizeum handles media for the brand. To lead digital marketing, Sonos brought in Aaron Foreman, a former marketing executive at Interscope, Geffen Records and MCA.
Its products have remained pricey, with one exception. In 2013, Sonos released Play:1, a boxy rectangular speaker, for a discounted $199. Rather than dent its margins, the device has helped Sonos get a foothold on more consumers, said Ben Arnold, an NPD analyst. The Sonos brand "lends itself to a premium feel," he wrote in an email. "But they've made it more affordable for consumers now to get into their ecosystem of speakers."
The Playbar, the thin speaker strip advertised during the Oscars, and its subwoofer each retails for $699. The brand's recent work with design firm Bruce Mau -- a vibrant digital logo -- went viral and reflects the sort of haute couture for which its marketing aims. "It's a premium product, so it's a premium conversation," explained Mr. Kyle.
Sonos may be a giant in the wireless speaker market, but bigger names are joining the fray -- and for good reason. In 2012, Futuresource estimated five million wireless speakers were shipped globally; last year, the total climbed past 30 million units. "There's huge growth here," said Jack Wetherill, an analyst with Futuresource Consulting. "Definitely, wireless speakers is a good place to be."
JBL, the speaker brand from Harman Kardon, ranks third in the market, per NPD Group, and is accelerating its media investment. So is Beats, which ranks fourth and is now part of Apple's fold. Mega-marketers Samsung and LG have put out wireless speakers recently. Analysts expect Sony, which is spinning off its audio and video division, to introduce a new multi-room product soon.
That would infringe on Sonos' specialty. When it comes to speakers designed for multiple rooms in the home, Sonos is dominant. Futuresource estimates the brand commands nearly two-thirds of the multi-room market, by volume; NPD Group says it nets 90%.
Despite the rush of newcomers to the field, Sonos position in the market, thus far, is unthreatened. "It's not like Sonos appears to be suffering," said Mr. Wetherill. "These other brands are looking very hard to see what the secret to their success is."
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CORRECTION: An earlier version of this story claimed that Sonos sells nine speaker products; instead its product portfolio includes wireless speakers and components. Also, an earlier version incorrectly labeled the price for the Sonos subwoofer. We regret the errors.