10/14/13: Sonos escalates assault on home radio

Brad Hill
October 14, 2013 - 11:25am

It has been a roiling 7 days in the Internet-enabled home speaker category. Nearly simultaneous with the launches of Samsung Shape (RAIN coverage here) and the Bose SoundTouch (RAIN coverage here), legacy WiFi-speaker company Sonos releases a low-cost addition to its lineup, the Play:1. Well, relatively low-cost. WiFi speakers comprise a premium, pricey category of consumer electronics.

Sonos is marketing the Play:1 is “Mini but Mighty.” At $199 per speaker, another tagline could be, “Economical yet Expensive.” While these app-controlled devices open up a gateway between the user’s music collection and home spaces, thereby encroaching on radio-owned territory, the price differential between the two reception technologies is daunting. The Bose SoundTouch ranges from $400 to $700 per speaker (each speaker provides mono audio in one room), and the higher-end Play:5 from Sonos is priced at $400 on Amazon. Clearly, there is a vast expanse of downside pricing to be explored, and the Play:1 is reaching into that market. 

Does it reach far enough to attract new buyers? Time will tell. Anyone considering a Play:5 or SoundTouch, but hasn’t yet pulled the trigger, might be pushed over the edge by the alluring possibility of wiring up two rooms for the same price. And there is this: when you consider the cost reduction implicit in moving from the purchased-music model of ownership to the accessed-music model, the presumed savings from unbought CDs can be transferred into wireless home audio for streaming music.

RAIN does not particularly advocate for WiFi speakers. But their very existence, and traction in the high-end market, is an indicator of how streaming audio is rewriting the personal economics of music consumption.

Brad Hill
October 14, 2013 - 11:25am

It's a rising tide. While Pandora, iTunes Radio, and other IP-delivered music services build momentum, Sirius XM continues to disrupt AM/FM’s automotive presence, with enviable subscriber numbers. As Tom Taylor notes in his NOW newsletter this morning, “Sirius XM recently passed the 25-million subscriber mark, and its stock hasn’t traded this high since early 2006.”

Distribution is the key driver. Satellite radio was developed specifically for the car, where Sirius XM now enjoys a widespread installed base -- nearly seven out of 10 new cars have Sirius XM on board, according to Seeking Alpha. The company also furnishes an online component, in a reversal of the distribution order of Internet pureplays like Pandora, which started online and pushed its way into cars secondarily. (Sirius XM also offers stand-alone receivers.) Many new-car buyers discover SiriusXM’s diverse and star-studded programming with free introductory trials that last for months. An impressive 45 percent of those buyers convert to paying subscribers. (Pureplays take note: it can take MONTHS to habituate new users to a listening service … not days.)

To capture subs that have fallen off the grid, Taylor notes that Sirius XM is offering a six-month re-subscription for $25, total. Normal subscriptions cost between fourteen and eighteen bucks a month. 

That’s smart business, but the smartest part of satellite’s success has been hitching its fate to the car. Internet pureplays are not oblivious, and they are all scrambling for position in the connected dashboard. When they get there, they find competition from two staunch legacy forces: broadcast and satellite.

Brad Hill
October 14, 2013 - 11:25am

The 2014 Mazda3 (which we must say, although we are not in the automotive reporting business, is the most drop-dead beautiful economy car around) has entered showrooms as the first Mazda model equipped with Clear Channel’s Total Traffic HD Network on the HD Radio platform. Other Mazda cars (CX-5, CX-9, and Mazda5) are equipped with HD Radio. iBiquity is the technology partner for this launch.

The Total Traffic Network is a hybrid digital-broadcast/Internet information network that seeks to deliver real-time traffic information and maps. HD Radio generally provides listeners with more interactivity than traditional lean-back AM/FM, though not the extreme degree of customization afforded by music-discovery platforms like Spotify, Rdio, or Rhapsody -- all of which are pushing onto the digital dashboard, inch by inch. Internet radio leader Pandora owns first-mover advantage in the automobile, among Internet pureplays.

This bit of HD Radio news fits into the mad scramble for positioning on digital dashboards, and provides an interesting counterpoint to SiriusXM’s escalated push for in-car listening (see the previous story in today's newsletter, or click here). According to HDradio.com, HD Radio is distributed by 33 car companies, across 167 models, with Toyota being the most bought-in (16 models). Nearly 30 percent of 2013 car models shipped with HD Radio. HDradio.com claims that in 2014, every American car dealer will have at least one HD-equipped car on the lot.