Sonos, a renowned speaker manufacturer, introduced a comprehensive set of reforms on Tuesday, aiming to rebuild its tarnished reputation following a disastrous app update in May that severely damaged customer trust and led to staff reductions. In an exclusive interview with Reuters, CEO Patrick Spence admitted to errors surrounding the app's release, which serves as the central hub for music playback and speaker control. Spence, along with seven other top executives, has decided to forego their bonuses for the most recent fiscal year and potentially the next one, unless specific performance benchmarks are met.
"This is clearly a failure on Sonos' part, but it begins with me in terms of where it originated," said Spence, 50. "These commitments are our way of ensuring we learn from this experience and enhance the Sonos experience moving forward." Shortly after the app's release, Sonos discovered that users were unable to perform crucial functions such as accessing or searching their music libraries, setting sleep timers, or even downloading the app. The company has since been updating the app approximately every two weeks, and as of Tuesday, it is over 80% towards completing a full overhaul.
Since May, both Sonos and Spence have been actively apologizing to their approximately 15 million users. The company has issued multiple apologies, considered reverting to the previous app, and released new updates. In August, Spence even engaged with frustrated customers on Reddit.
Spence attributed the app's issues to inadequate testing and an ambitious plan to release too many features simultaneously, which he referred to as a "big bang roll out." "We underestimated the system's complexity, and thus, our testing failed to capture all necessary aspects," Spence explained. "We released it prematurely."
In response to the crisis, Sonos has extended existing speaker warranties by an additional year, enhanced app testing, committed to releasing upgrades every two to four weeks indefinitely, and appointed a current employee as a "quality ombudsperson" to provide regular updates on new tech developments. The company also plans to establish a customer advisory board, similar to its dealer network advisory, to offer executive guidance on necessary improvements before broader releases. Spence noted that this committee is yet to be formed.
The app debacle has been financially burdensome for Sonos. The company revised its fourth-quarter sales projections downward, postponed the launch of two new products, estimated a $20 million to $30 million expense related to fixing the app, and in August, laid off about 6% of its workforce, equivalent to 100 jobs. Since the new app's release, Sonos' shares have declined by over 30%. Despite these challenges, Sonos reported a 6% increase in third-quarter sales to $397.1 million and a swing to a profit of $3.7 million compared to a loss of $23.6 million a year earlier.
Spence assured in the interview that no further job cuts were planned. The CEO also mentioned that the board and other executives were developing new metrics to assess leaders' success for bonus eligibility, with details to be disclosed in a securities filing. Spence, whose total compensation was $5.19 million in fiscal 2023, received a cash bonus of approximately $72,000.
"We won't stop until we're fully satisfied," Spence concluded.
