Exclusive-Sonos CEO promises reform after ‘failure’ of May app release; leaders will give up bonuses

by Greg Bensinger

(Reuters) – Speaker maker Sonos unveiled a series of reforms on Tuesday that it hopes will restore its reputation after a disastrous app update in May that damaged customer trust and caused the company to cut staff.

In an exclusive interview with Reuters, CEO Patrick Spence acknowledged flaws with the launch of the app, which is a hub for users to play music and control speakers, and said he and seven other company leaders would forgo their bonuses in the last fiscal year and the next unless certain criteria are met.

“This is obviously a failure on Sonos’ part, but in terms of where it starts, it starts with me,” Spence, 50, said. “So these commitments are things that we’re putting together to make sure that we learn from this and learn from this,” said Spence, 50. “As we move forward, the Sonos experience is better than ever.”

Soon after its launch, Sonos learned that the new app did not allow users to perform basic functions such as accessing their music libraries or searching, setting sleep timers, or even downloading the app. The company has been updating the app with new or revamped features about every two weeks since then, and said Tuesday it was more than 80% closer to its goal of a complete overhaul.

Since May, Sonos and Spence have been on an apology tour of sorts to their roughly 15 million users. Sonos has issued multiple statements of regret, attempted to bring back the previous app, rolled out new app updates, and in August, Spence answered angry customers’ questions on Reddit.

“We hear about it when we make a mistake, and that’s okay,” he said in the interview.

Spence said the app’s problems stemmed from inadequate testing and a desire to release too many features at once, calling it the “big bang.”

“We underestimated the complexity of the system, and so our tests did not capture everything they were supposed to,” Spence said. “We released it too early.”

COSTLY MISTAKE

The Santa Barbara, California, company said it would extend existing speaker warranties by another year, improve application testing, continually release upgrades every two to four weeks, and appoint a current employee as a “quality ombudsman” to provide managers with regular updates on new technology. Develop and publish an audit twice a year.

Sonos is also creating a customer advisory board, similar to the one in its dealer network, that can advise executives on what improvements are needed before a general launch. Spence said the committee has not yet been formed.

The app mishap cost Sonos dearly. The company lowered its fourth-quarter sales forecasts, delayed the launch of two new products, estimated an expense of $20 million to $30 million related to fixing the app, and laid off about 6% of the staff, or 100 people, in August. Its shares have fallen over 30% since the day before the new app launched.

Still, Sonos posted a 6% increase in third-quarter sales to $397.1 million and a profit of $3.7 million, compared to a loss of $23.6 million the year before.

No additional layoffs are planned, Spence said in the interview.

The CEO said the board and other executives are working on new metrics to measure leaders’ success in securing bonuses and will disclose those details in a securities filing. Spence, whose total compensation in fiscal 2023 is $5.19 million, received a cash bonus of approximately $72,000.

“We will not give up on this until we are satisfied,” he said.

(Reporting by Greg Bensinger; Editing by Muralikumar Anantharaman)