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Sonos eyes hardware subscriptions to broaden customer base
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By Janko Roettgers |
Sonos is giving hardware subscriptions another look, at least if a new job listing is any indication. Based on the details of that listing, the company appears to be on the cusp of expanding its Flex subscription program, which lets people rent Sonos speakers for a fixed monthly fee. Expanding the program could not only help broaden the company’s customer base, but help continue to grow it even as consumers cut back on spending due to inflation.
Sonos first launched Flex in late 2019 in the Netherlands, where it has since been offering a small number of customers three rental packages starting at €15 ($15.50) a month for a pair of entry-level speakers and as much as €50/month for a full-blown surround sound home theater package. As a Sonos spokesperson told me this week when asked about the job listing, “We've learned a lot about customer interests through this program and are continuing to explore how subscription models can bring added flexibility to listeners." |
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— The Sonos Ray sound bar costs less than many other Sonos devices. Image courtesy of Sonos. |
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Sonos began looking for an accounting analyst for Flex a week ago. “The role stretches over multiple accounting teams and is based preferrable (sic) on the East Coast in the US,” the job listing states, suggesting that Sonos is eyeing multiple markets for Flex. Sonos currently generates around 60% of its revenue in the Americas, and a little over 30% in the EMEA region.
“Sonos Flex customers will be able to enjoy the Sonos experience at home, without having to invest in buying our speakers,” the listing continues. Customers will be able to choose from one of three Flex packages, and get access to product updates, with the job listing promising that the company “will always listen to the latest" of its products.
The company’s Flex trial in the Netherlands was limited to 500 homes. Sonos appears to have paused new sign-ups for Flex in late 2020, and has since been telling visitors to its website that Flex is “currently full.”
Reactions to the trial were mixed. The Verge called it a “weird flex” and Tien Tzuo, founder and CEO of the subscription monetization startup Zuora, confessed that he was underwhelmed. “This isn’t a very compelling subscription service,” Tzuo wrote, adding that he would have preferred that the company include additional service features on top of device rentals. As he put it, “Automatic equipment upgrades just don’t cut it anymore."
Not everyone is so skeptical about the potential of a Sonos hardware subscription program, however. “Expanding this rental model to other regions helps grow a more stable revenue base, thanks to the addition of recurring monthly subscription revenues,” said Erickson Strategy & Insights analyst Paul Erickson via email. “I honestly would be surprised if they didn't eventually roll it out to their top 3-5 markets in order to grow the total available Sonos customer base via a more affordable option.”
Like many consumer electronics companies, Sonos has for some time explored ways to diversify its revenue streams with subscriptions and services. The company launched an ad-supported music streaming service in early 2020 and added a paid, ad-free tier later that year. It’s unclear whether Sonos plans to combine Flex with access to its paid streaming product, but such a move would not be unprecedented: Apple, which has had its own hardware upgrade program for years, is reportedly looking to combine it with its Apple One services plan.
Service subscription plans are also increasingly becoming a part of consumer IoT. Indeed, transitioning from device ownership to rental plans could actually improve the consumer experience, and perhaps even ensure that obsolete devices are being recycled.
For Sonos, Flex could also be a hedge against economic uncertainties. Other hardware makers have responded to increasing component costs and inflationary pressures with lower-powered gadgets sold at or below cost. The speaker maker has less room to do so if it doesn’t want to compromise on sound quality, and its services revenue is too small thus far to make up for hardware losses.
Giving consumers a way to get Sonos products without massive upfront costs could be another way to grow the company’s installed base, which reached 14 million households at the end of the most recent quarter. “Sonos' product line is viewed as premium-priced,” Erickson said. “In order to sustain customer growth and growth in household penetration during this period of growing inflation and consumer price sensitivity, Flex is a more affordable alternative to many who would not otherwise be willing or able to purchase Sonos hardware.”
However, Erickson also cautioned that the success of a Flex-like service depends on a company being good at, well, service. As he said: “The long-term growth of Flex's subscribership ultimately will come down to how adept Sonos is at pricing based on each individual market, and on how well they provide the service side of the equation — installation, repair/support, and timely upgrades,"
This story was written by Janko Roettgers, who can be found at www.lowpass.cc |
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PTC will acquire ServiceMax for $1.46B |
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PTC has agreed to acquire ServiceMax in an all-cash deal valued at $1.46 billion. The deal combines PTC's earlier efforts in digital manufacturing with software that can dispense service technicians to solve problems that get detected. So if a predictive maintenance algorithm detects a problem in a piece of manufacturing equipment, it can use ServiceMax's software to send a technician to solve the issue and ensure the manufacturing job gets done.
Likewise, if the maker of a piece of equipment notes a bunch of service calls associated with a particular machine or multiple machines from the same batch, they can use ServiceMax data to ID the problem. Jim Heppleman, CEO of PTC, noted that this acquisition helps the company's "closed-loop [product lifecycle management] strategy." |
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— PTC revenue growth since 2018 taken from Google Finance. |
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There are very real reasons that this deal makes sense. PTC, which started out as CAD software for manufacturers, has spent the last decade making acquisitions to transform itself into a source of cloud-based tools for digital transformation. It has purchased ThingWorx, Kepware, and Vuforia as part of a cluster of acquisitions to digitize manufacturing and use augmented reality to share digital factory information with workers.
It has also bought a variety of other companies, including one in the service industry — Servigistics — back in 2012. As acquirers go, PTC's corporate development team is "pretty dialed in," according to Rick Bullotta, the co-founder of ThingWorx, which PTC bought back in 2013.
PTC has been a partner of ServiceMax's since 2015. It has also danced with an acquisition of the company before. Last year, it contributed money to a special purpose acquisition company (SPAC) designed to acquire ServiceMax and take it public. That deal was scuttled in December 2021. Prior to that, in 2019, ServiceMax had been sold to SilverLake by GE Digital (remember GE Digital?) for an undisclosed sum. GE had acquired ServiceMax in 2016 for $915 million as part of a big bet on digital transformation.
So ServiceMax was shuffled around for a number of years before ending up with this deal. And to be sure, PTC isn't a bad place for it to land. PTC has a clear vision for the IoT and has been executing on it for the past decade. It may have been a little early on technologies like ThingWorx and Vuforia, but it is still seeing considerable revenue growth as it moves deeper into digital manufacturing.
That said, PTC may struggle to integrate ServiceMax, which is built on the Salesforce.com platform. But PTC is very experienced with such integrations, given its history. And with ServiceMax, it also expands into new lines of business as ServiceMax customers run a large gamut outside of manufacturing. PTC has said that it expects the deal to be accretive in 2023.
PTC will fund the purchase in two stages, paying $808 million at closing in January 2023 and $650 million in October 2023. The transaction will be funded with cash on hand, borrowings under PTC's existing credit facility, and a new $500 million committed term loan.
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Episode 398: Bluetooth bets on 6 GHz & TP-Link tries Wi-Fi 7 |
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Amazon has started laying off workers, including some working on Alexa and in Amazon’s devices business. We discuss this as well as IBM following in Google’s footsteps and shutting down its IoT cloud business. We move from bad news to innovation with the news that the Bluetooth Special Interest Group is investing in new Bluetooth capabilities using the recently available 6 GHz spectrum. We also discuss the latest in Wi-Fi and TP-Link getting the jump on the next generation of Wi-Fi with its new Wi-Fi 7 mesh routers. Also out with new routers is Wyze, which appears to be giving Eero a run for its money. In acquisition news, semiconductor firm Nexperia has acquired energy harvesting chip company Nowi, while energy harvesting device maker EnOcean plans to go public via a Special Purpose Acquisition Company (SPAC). We then discuss the radios inside upcoming Nest speakers, HomeKit locks that won’t get Matter upgrades, and a new Matter-certified smart plug from Meross that won’t be available until next year. Kevin also shares his thoughts on the latest Apple TV 4K and its use in a smart home.
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— The Meross outlets won’t ship until January, but you can order them today. Image courtesy of Meross. |
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Our guest this week is Michele Pelino, a principal analyst at Forrester. She’s on the show to share four predictions about the IoT, edge computing, and connectivity in the coming year. We discuss the technologies that will entice city planners and lead to more municipal deployments in the hopes of bringing people back to cities. She also shares some bad news about future IoT device failures and the creation of millions of IoT bricks. We also hear predictions and advice on securing the internet of things with a focus on confidential computing and zero-trust security. Finally, she shares her thoughts on the connectivity company to watch in 2023 as satellite wins over companies looking for connectivity in rural and thinly populated areas. Enjoy the show. |
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This week on the IoT Podcast Hotline, we answer a listener question about keeping Matter devices certified.
The IoT Podcast Hotline is brought to you by Silicon Labs. Silicon Labs is a leader in secure, intelligent wireless technology for a more connected world. Learn more about their integrated hardware, software and development tools at silabs.com. |
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The Apple TV 4K is a speedy streaming box for HomeKit fans |
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— Kevin reviewed the latest Apple TV 4K streaming box (on the right) and in doing so, made a surprise discovery: The device costs less than prior versions and performs better. But if you want to use it as a smart home hub, make sure you get the correct one. To find out more, read his review. Image courtesy of Kevin Tofel. |
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News of the Week |
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Twilio launches asset tracking service as part of IoT platform expansion: Twilio, which put a toehold into the IoT with its acquisition of Electric Imp back in July 2020, and the creation of a new IoT platform two months later, has finally launched another IoT product. This week, it introduced a customizable asset tracker that provides customers with the device, software, and cloud backend necessary to offer asset tracking. The device can connect to up to 400 cellular networks around the world and is aimed at a variety of industries, from logistics to equipment management in construction and mining. It's nice to see that Twilio hasn't completely forgotten about the IoT. (Twilio)
Have opinions for the FTC on surveillance tech? If you want a chance to opine on the Federal Trade Commission's advance notice of proposed rulemaking (ANPR) on commercial surveillance and data security, then sharpen your pencils, because Monday is the deadline for comments. I reported on the creation of the ANPR after its release in August. Government agencies release these documents before they set out to create regulations around certain issues. They signal the direction the agency is leaning and ask for comments. In the case of surveillance tech, the FTC is asking how companies surveil customers, what harms may accrue from that surveillance, how aware consumers are when it comes to that surveillance, and more. Go read the document to get a sense of how important this issue is today and how important it will continue to be going forward. (FTC)
All I want for Christmas is surveillance tech: Speaking of surveillance tech, Mozilla is back with its "Privacy Not Included" list of holiday gift ideas. Every year, the Mozilla Foundation creates a list of connected products and analyzes their privacy and data practices to see which ones are worrisome and which ones pass muster. So if you'd like to see if you should get your loved ones a video doorbell for the holidays, but they're active members of the Electronic Frontier Foundation, then this is the list to shop. (Mozilla)
This induction cooktop startup is worth watching: Y'all know that, as we move toward more electrification of homes and cars while also dealing with the existing limits of home wiring and variances in renewable electricity generation, I am keen on combining smart homes and energy management systems to help manage a finite electricity supply. That's why I was excited to see a startup called Impulse attaching a battery and software to an induction cooktop to help mitigate the immense power an induction stove can draw from a home's electric panel. Impulse is also considering using that battery as a source of energy storage inside the home, a role I also expect electric vehicles and water heaters to play going forward. The stoves themselves won't be out until next year, but I love the thinking behind this and can't wait to see more innovation on the appliance side. (TechCrunch)
Renesas launches combo NB-IoT and Cat M module: Chip maker Renesas has added a combo NB-IoT and LTE Cat-1 M module to its stable of connectivity options and this particular module can hang out in sleep mode consuming a mere 1 microamp of power. That's pretty sweet, and the combo nature of this setup should lower the costs associated with using either of the connectivity standards in end devices. (IoT Business News)
Hey Google, feed the dog: Aqara has a connected pet feeder that can dispense food based on a voice command, a schedule, or even a tap on the bowl from your animal. I don't think I'd give my dog the ability to tap the bowl to get food, but maybe other animals have more discipline. The feeder is $100 and might solve a complicated question that arises every morning and most nights at our house: Did anyone feed the dog? It would be nice if Google or Siri could say "yes." (The Verge)
IBM will kill its Watson IoT Cloud: A few months back Google said it would kill off its IoT cloud platform and now IBM is following in its footsteps. Big Blue sent out a note to Watson IoT Platform users that their cloud access would die as of Dec. 1, 2023. However, I don't think this will leave many folks scrambling as IBM's cloud wasn't popular, and because IBM's IoT Platform really wasn't much beyond a way to use MQTT to get data into IBM servers. Unlike AWS and Microsoft Azure's cloud offerings, which have a lot of analytics capabilities and services for the data once it's in the cloud, IBM doesn't really have much there. That should also make it easier for users to switch. We're likely seeing the end of this cloud as part of an overall realization that getting to scale is a big challenge for the IoT, especially as pilots can start and stay small for a while before becoming big enough to matter from a revenue perspective. Meanwhile, providing cloud capacity is a scale game that requires a large investment up front. IBM made that investment but few customers came. (The Register)
Encrypted packets can tell tales too: University of Georgia researchers have published a program called ChatterHub that can look at the encrypted packets traveling to and from a smart home hub to determine what's happening inside the home. Based on the time of day and packet length, researchers can use AI to make educated guesses about when someone is turning on lights, locking doors or telling Alexa to play a song. The researchers suggest that hub makers can use packet padding to make packets all the same length, or insert random packets into the daily mix of traffic to help prevent such discoveries, but I'm not really sure if that's the top of mind for most hub makers when it comes to security. Perhaps a larger concern of this research is understanding that even encrypted smart home data will tell the hub makers more about you than you might realize. (Tech Xplore)
OnLogic adds a connected Pi 4 for industrial use: OnLogic, which makes customized industrial computers, has created a second computer that will use the Raspberry Pi Compute Module 4 for industrial use cases. The Form Factor 202 device will add connectivity plus a touchscreen interface so OnLogic customers can easily deploy and program the computer for their needs. The Factor 202 out now, which means that apparently OnLogic can source the very popular Pi 4 compute module. (OnLogic)
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