Sonos and the Digital Era Music Customer

Sonos recently announced its Play1 wifi speaker, a product that could be a great asset for the music industry if it is utilized properly.  Sonos have been pioneering the multi-room digital audio market for years now and continue to have a fairly clear run at things with neither Apple nor Google showing any truly concerted intent, nor any of the traditional CE companies sufficiently upping their games.  But for all its innovation excellence Sonos has predominately remained the domain of the higher spending tech enthusiast (though significantly below the audiophile segment).  With the Play 1 priced at $199/£169 Sonos is making a play for a much more mainstream flavor of customer and in doing so could help the music industry create a revenue beachhead among a new generation of music customers.

The Digital Era Consumer

We sit on the cusp of what will be a crucial five years, a period that will determine whether consumer music revenues will return to long term growth or instead migrate downwards to create a smaller market concentrated around high spending enthusiasts.  The first wave of digital music revenue growth was all about monetizing the highly engaged early adopters.  Revenues still shrank because, among many other reasons – not least piracy, these consumers were shifting their spending from albums to tracks. But at least it was a clear transition path.  Now streaming subscriptions are doing a solid job of migrating many of those same consumers back up to higher spending.  What they are not doing such a great job of is bringing new buyers into the fold.

Consumer recorded music revenues are facing a demographic pincer movement with older customers falling out of the habit of buying music (and not going digital) while many younger digital natives simply never acquired the habit of buying music.  Subscription services can, and should, be the natural entry point for these consumers but 9.99 remains a key stumbling block.  Now a new opportunity is emerging as these customers age, their lifestyles change and their disposable income increases.  The first cohort of Digital Era Consumers (i.e. those born since the late 1980’s who have had digital experiences since their teens) are now in their mid twenties and beginning to settle down with steady jobs, move in with partners, get their first apartment etc.  All of which most typically corresponds with spending less time out and more time at home.  Enter the opportunity for subscription services and devices like the Play1.

While older consumers have been abandoning the living room hi-fi in favour of spending ever more money on the TV and various boxes below it, Digital Era Consumer have less entrenched relationships with the TV and linear programmed viewing.  Get the timing, product mix and pricing right and there is a fantastic opportunity to persuade these consumers to start investing in next generation home hi-fi.  The sweet spot for music spending is the intersection of two lines: music engagement on average declines with age while spending power increases.  Digital Era Consumers represent that point where the two lines meet.  This is the time to ensure some of that spending is diverted from home TV technology to home music technology, thus establishing the foundations for future music spending.

The Play1 is such a good fit for this strategy because it delivers  a genuinely high quality experience (especially when used in a sensibly positioned stereo pair) for an eminently affordable price.  Bundle that device with 3 or 6 months worth of a free trial of a music subscription and suddenly you have a highly compelling holistic music solution for the home.  Of course this is not just a Sonos opportunity, bundling music subscriptions with affordable digital home audio equipment simply has to be the next step of digital music product strategy.  (And it doesn’t take a rocket scientist to deduce that Beats will most likely bundle their service with headphone sales).

Just Press Play…

The simplicity of user journey will be key though.  Relying on a consumer to buy a device, then go home and register for a subscription and then to hook that service up to the device just won’t cut it.  Retailers will need to be given allocations of subscription accounts that will be auto associated with a device at point of sale, where the consumer will also give their email address.  The subscription service will have to be natively integrated into the controller app (though not necessarily the circuitry of the hardware as Spotify has been doing as this limits future consumer choice). When the consumer gets home and hooks the device up to power and wi-fi the music service starts automatically.  The experience really should be as simple as ‘play’.

For CE retailers this is an opportunity to drive a new era of music hi-fi sales (particularly as the docking station segment seems to be struggling).  For music retailers – those that are left – it is a chance to create a new relationship with consumers.  Take the example of HMV in the UK who are currently locked in a Quixotic battle with Apple.  Trying to compete as a download store is fighting yesterday’s battle.  The traditional retailers lost that fight and reopening hostilities now is only going to serve to expend scarce resources. But a bundled hardware-subscription offering could bring in swathes of new Christmas / Holiday season customers, baked into a long term relationship not a one-off transaction.

It is time for the record labels and music services to invest in retailer partnerships to ensure that devices like Sonos’ Play1 deliver exactly that proposition to Digital Era Consumers: Play. For a device to be able to play unlimited music out of the box is a compelling proposition and a genuine opportunity to drive subscriptions out of the early adopter niche they currently occupy.