Sonos filed for an initial public offering on Friday amidst an ongoing business transformation that will test its mettle against tech’s biggest names.
The long-anticipated move comes as the stereo company has been upgrading its speaker lineup with voice functionality and other smart-home capabilities as part of a plan to make its devices central hubs for digital media of all kinds. The transition will up the competition between Sonos and Silicon Valley giants like Google, Amazon and Apple, each of which have rolled out smart speaker offerings of their own.
But to make matters trickier, Sonos also relies on each of those three companies to feed its platform with their respective voice assistant programs and streaming services. It integrated Amazon’s Alexa voice assistant last fall and plans to add Siri and Google Assistant later this year.
Sonos clarifies in the filing that it’s well aware of this contradiction, noting that these companies could cut off services or raise licensing fees at any time if they decide it’s advantageous.
“Our success in introducing voice-enabled speakers enabled with third-party technology, especially voice control, will increasingly depend on the willingness of our technology partners, many of which sell or may develop products that compete with ours, to continue to promote and enhance our products,” the company wrote in the document.
“These technology partners may cease doing business with us or disable the technology they provide our products for a variety of reasons, including to promote their products over our own,” the company continued.
Sonos still holds the competitive edge over these companies in sound quality, however, with stereo systems honed over a decade and a half in the business. And its partners do get the benefit of a wider audience for their services through Sonos, which means more data collection opportunies and brand visibility.
But maintaining these relationships will likely be a key priority for Sonos as it moves towards a product lineup built around what it calls the “sonic internet,” the idea of bringing online media like music, movies, TV shows, video games, podcasts and virtual and augmented reality together under one voice-controlled umbrella. While that mission doesn’t sound much different from those of products like the Amazon Echo, Google Home and Apple HomePod, the company claims it will set itself apart with a focus on bigger and better sound equipment.
“Large, diversified technology companies are attempting to capitalize on the expansion of voice control to drive consumers towards their web services, such as e-commerce and search,” the company writes, clearly alluding to Amazon and Google. “To date, they have created discrete devices that are not optimized for sound throughout the home and often constrain consumers to a specific partner ecosystem.”
Nevertheless, Sonos concedes that its competitors are better funded and resourced than it could realistically hope to be.
“Most of our competitors have greater financial, technical and marketing resources available to them than those available to us, and, as a result, they may develop competing products that cause the demand for our products to decline,” the company warns in the section listing possible risks.
With the release of the company’s Sonos One smart speaker in January, the Beam smart speaker TV accessory last month and now the IPO, CEO Patrick Spence told Variety last month that this could be a make-or-break year for the company.
“Looking back 10 years from now, this will be the point where we made the leap into the next phase of Sonos,” he told the magazine.