It’s been a tough six months for Sonos. After the disastrous launch of its new control app, the multiplex giant has spent much of the last few months on a mission to save its reputation: apologizing (a little late), putting products on hold (at least briefly), and investing money in solving an application that is not yet completely finished.
A couple of weeks ago he announced his fiscal year 2024 earningsand they were not, perhaps unsurprisingly, too pretty. Overall revenue was down 8 percent year-on-year (y-o-y), with the fourth quarter being particularly bad, down 16 percent year-over-year. Sonos attempted to downplay the impact of its own mistakes, blaming “weaker demand due to difficult market conditions” before, in a mea culpa, admitting that “challenges resulting from the recent launch of our app” had also played a role.
It could be true, though: there could be bigger things at play here. This is the second year in a row that Sonos has posted a year-over-year decline in revenue – down 5.5 percent in 2023, despite two rounds of layoffs. “Challenging” was the word CEO Patrick Spence used to describe that year too, and while maintaining momentum after two extraordinary years during Covid was never easy, something of a pattern may be emerging.
in your FY24 Results CallInvestors even commented that Sonos had only added 1 million new users this year; That may sound impressive, but it was said to be the lowest number in the last “five to 10 years.” And while the total number of speakers per household has increased to 3.08 from 3.05 last year, with a slowing new user base, how can Sonos continue to make money in what appears to be a saturated market?
In good company
Sonos wouldn’t be the first company to consider whether a subscription model could help keep things buoyant. Recurring revenue streams make a lot of financial sense, and some big brands use them to their advantage for that very reason.
GoPro first turned to a subscription model before bad sales in 2016which offers cloud storage for footage from your expensive action cameras. It further expanded its GoPro Plus offering in 2018 and has continued to do so, growing the subscriber base from 160,000 members at the time to 2.56 million as of now. November 2024. While overall revenue was down year-over-year in the third quarter of 2024 and layoffs are occurring as a result, its subscriber revenue was up 11 percent, demonstrating the promise this model has when hardware sales falter.
Game console makers have also found that subscriptions are hugely beneficial to their bottom lines. In 2021, during the Activision Blizzard acquisition, legal documents showed that Xbox Game Pass had generated a total of 2.9 billion dollars of consoles in the fiscal year ending in 2021: about 18 percent of Xbox’s total business. This could have risen to $4 billion the following year, it has been reported. provided. So with Xbox sales plummeting Earlier this year, perhaps not surprisingly, the company responded Raising the price of Game Pass by 25 percent in the same month.