Dec 1, 2015 · 11 minutes

While others are worrying about when the late stage funding might run out, how to tamp down their burn rates, how quickly they can expand into adjacent markets to keep the growth going and investors happy, or how on earth anyone can go public without the Dick Costolo-treatment, John MacFarlane’s life is looking pretty fucking sweet.

His hardware and software company, Sonos, has raised half a billion dollars. It’s been around more than a decade. Early investors and employees have already cashed out, and there’s no pressure for another funding “event.” His company releases new hardware only when it knows it has something better than its released before -- hence the long-awaited new Play:5 on pre-sale for the holidays. 

The Sonos team also doesn't seem to feel the need to stay locked to a given price point. They charge whatever each device needs to costs, and consumers seem willing to pay. The company only has a handful devices on the market.

Perhaps most enviable, Sonos is still working on its single stated mission: To make sound in the house the best experience it can be. MacFarlane says he is obsessed by it.

Advisors and investors have begged him to build an in-car version, for instance. To expand in some other ways. But MacFarlane knows he isn’t done. The software isn’t easy enough to use, the sound not as good as it could be.

I’ve been a Sonos customer for at least seven years. I had one of their cludgy controllers before it was all controlled by the iPhone app. My original Sonos devices are some of the few electronics that I’ve owned for so long and used every single day that I’m in my house, some days for stretches of 10 hours or more. What compares to that? A coffee maker? A fridge?

Much like the Sonos logo, Sonos is impressive no matter which way you look at it. 

The media-shy MacFarlane and I caught up a few months ago when he was about to release the system’s Trueplay software that adjusts the sound based on where your box is in a room and the new Play:5 device. Unfortunately, pneumonia ensued, and I never published the interview. But I kept thinking of it as we spend this month focused on our “Pivot to profitability” series.

The following are edited excerpts of our conversation. I started by asking him what is behind his his ten year obsession with home audio and whether he considers Sonos a “startup” still.

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Jonh MacFarlane: The world is slowly but surely moving to being able to play anything you wanted any place you want but it’s just starting. Half the listening time of any person in most major countries is spent in the home. We have a long way to go to make that a better experience.

The last twelve years of Sonos has been finding people who love music and had collections and getting them into Sonos and then, later, adding streaming after. Most folks already had a collection and wanted to listen to it. But now streaming is finally happening after 17 freaking years post Napster.

It’s such a better place for us to be. In that way, we’re a startup. It’s a big startup of 1,300 people. It’s a lot larger than startups I’ve done in my history.

The Internet in 1996 had 40 million paid subscribers and Netscape was king of the world. Only 40 million to 50 million people knew what the Internet was. It was impossible to explain what it would mean to books or to news. But you can’t imagine a world without it now. As your kids grow up, it will be third nature.

The world of music for you and I was to go buy the material in a record store and go home and play it. Maybe discovery was your radio. Your kids world of music is available at their fingertips.

The whole landscape is still a startup.

Sarah Lacy: But a lot of people see the “future” of music as more cannibalization. Streaming at least makes money for the recorded music industry. But people complain it isn’t enough, it’s distributed unfairly, and YouTube is far worse. Will the recorded music industry actually make more money as this landscape develops?

JM: You could have said the same things about Internet companies in 1995. The music business has been a purchase business and now it’s a subscription business. You can have everything you want. It’s such a huge habit change. I think the size of the pie hit bottom at the beginning of this year, and it’s only going to climb. It’s going to be bigger than the peak of the CD boom. If the pie isn’t big enough, how you slice it doesn’t matter.

SL: So you don’t buy that there’s just something different about music. That people won’t pay for it the way they will for, say, movies or TV. Afterall, this isn’t just an Internet thing. An annual Spotify subscription is well more than people have historically paid for music over the course of a year on average.

JM: Oh, I don’t buy that at all. It’s just like your business. We trained people not pay for a while and you have to work your way through that.

Look at the 20 million Spotify subscribers. They are mostly young. That answers your question.

Ironically, Sweden where Spotify is based was ground zero of the pirate music movement. They got the start in converting to paid. More people are listening than every before, and there’s more music being made than ever before, and everything in between is broken. Music is finally getting fixed.

Books made that transition. If you are an author, it’s never been a better time. We fell for the allure of putting hard-created content in the world without protecting it.

SL: Let’s talk about you guys more specifically. You are considered a “high end” device. Do you consider it high end?

JM: I don’t know, the Play:1 is $199 and the same price as a quality bluetooth speaker but a hell of a lot more value. If you’ve got your first job and your first apartment, can you afford a Play:1? Sure.

What’s the price over ten years? That’s the change in consumer electronics right now. CE has traditionally been the case that this year’s products are incompatible with the products the next year. I definitely would say that hardware is going to be more like furniture going forward.

Mobile phones are a different deal, but maybe we will reach diminishing returns like on laptops. But right now there’s enough rich innovation in the hardware that most people have two year cycles.

As you are reproducing music in the home, there’s a lot of innovation there too. But it needs to be much more like a piece of furniture. Something that is part of your home. It can’t be a one or two year replacement cycle.

I love it, because the last place to really enjoy music in a community is in your home. That only increases as we are doubling down to make that experience better. It’s better for the artists who are dealing with an ecosystem in turmoil. They are wondering: Is there a future for me? To be able to bring the level of quality that they artists want into your home. My home. That’ll help artists embrace streaming.

Neil Young hates streaming, because he doesn’t think it’s high enough quality. Trueplay is a better experience than music has ever had in your home. We are contributing, not just drawing from the artists.

SL: I like to refer to you as “Maria von Trapp,” because Sonos brought music back into my home. It’s so many little things. Just the other night, we had a family birthday dinner for my son, and I made him a playlist of all of his favorite songs from every movie, every bad pop song he’s ever loved, and it was playing in every room. He was so delighted.

JM: See, how can you not be touched when you hear something like that? When my kids were younger, when the Play:3 came out six years ago. I was in Germany doing a press tour with the Play:3. I was meeting with a reporter who I’d known for some time, and we were talking about our kids.

I’m the morning person in my house, and I was having these epic battles with both boys getting them out of bed. I would go to work angry; I would be angry in my first meeting. I told this guy this story, and he literally stopped me like only a German could and said, “You’re an idiot.”

I said, “I’m with you, can you tell me why?”

He said, “Do you have a sonos in their rooms? Take a Play:3 and put it in each room and when they are going to bed, ask what songs they want to wake up to. Turn it on fifteen minutes before they need to get up.”

I did it, and it changed my life literally. We discussed music every night, and in the morning I’d turn it on. And I’d walk in fifteen minutes later, and they’d be singing in their beds. It was a different world.

Life is too short. This is why it’s so important and it hasn’t been done well enough yet. We’re still not done.

[Editor’s Note: I put a Play:1 in my four year old’s room after this interview. We do things a little differently. As I write this, the opening song from “Cars” is set to play when he decides to get up and pushes the button on his device. Because it’s paired with the one in the kitchen, I’ll hear it and know when he gets up. By the time he emerges from his room, breakfast is on the table, I have coffee, and we’re all in a good mood to start the day.]

SL: What do you need to do better?

JM: Now that you can play all the music ever made, that you have access to 150 million tracks, what they hell do you play? The app is still way too hard to use. How do we make a morning playlist for you that just delights you. Oh man, we have so much to do.

Trueplay is a perfect example. It’s an age old problem in the music world. People would slave over music and make the perfect track and then walk into a friend’s house and it sounds all wrong. Where you put the speaker in the room changes the whole sound experience.

Trueplay has been a bunch of work for us. How do you make every home like the studio where they mastered the track? The people who love it are the musicians. You’d be amazing how many can’t even hear their own music because they hear it being done wrong. It’s like reading something you wrote with the spelling scrambled or the grammar all wrong.

SL: Let’s talk about how you built the company. Again, you seem to have this balance that most entrepreneurs assume isn’t possible. How did you figure it all out?

JM: These are all choices you make in life. You just have to make sure you are making the choices before they are made for you.

I don’t promise an investor anything other than what I believe we can deliver. You don’t promise an employee anything you can’t deliver. You don’t risk that anyone has control they can use against you. It’s like a good piece of writing. It’s intangible, but there are a whole lot of choices you make along the way that make it that way.

Look, I fucked it up once too. My first startup. I had one of the first Internet companies, started in 1992, Software.com. And, you know, we merged it with Phone.com in 2000. And it went straight to hell. So I fucked it up too.

That helped me the most. Learning the lesson of what you don’t do. It’s easy to tell someone all the mistakes. We just put a lot of time into understanding what we wanted to be a stuck to it. Sometimes it has been hard and it took discipline.

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