The Engadget Interview: John MacFarlane, CEO of Sonos, Inc.

John MacFarlane Sonos

Veteran journalist J.D. Lasica interviewed John MacFarlane, CEO of Sonos, Inc., about the company's soon-to-be-released digital music system, the state of home entertainment, and how to throw a wireless party.

Please give me the 30-second rundown on Sonos – what do you do, where are you located, when were you founded?

We're in Santa Barbara, Calif., and Cambridge, Mass. We've been going at this for a little more than two years now. We're a group of people with prior successful backgrounds who all enjoy music, and we all wanted a better way to experience music around the home.

How big is your staff?

We're a little north of 50 people.

The Sonos Digital Music System is your first product. Will it be out next month?

That's correct. We're racing to get our first product shipped by mid- to late January.

What does your system do?

The system is designed around someone who enjoys music in multiple locations in their home or their office.

So tell me about the components.

There's the handheld controller, which is a horizontal, 3.5-inch color LCD with a scroll wheel, which is your main experience with the system as a user. Then there are units called ZonePlayers, which serve as very high-quality two-channel amplifiers and computer networking. The ZonePlayers connect into your home speakers. Those units will pull music off a PC, Macintosh or a Network Attached Storage, including an Internet radio stream. The controller aggregates up a view of all your music by album, artist, genre or playlist and lets you navigate what you want to listen to and where you want to listen to it.

Network Attached Storage is those dumb boxes, right? Yeah. It's basically the evolution of USB storage to include an Ethernet connector. What's pushing that is digital photography - people have such a huge accumulation of pictures and they need a place to store them.

Does your music system essentially replace the home stereo system?

Yes. We started from a different set of principles. If you were going to design an audio system for the next generation of digital music, how would you do it? That's the approach we took.

The other viewpoint we took was, while some of us are technical people, all of us enjoy ease of use and not having to think about technology. The aim was for a nontechnical person to be able to set up the system and enjoy it.

How do the ZonePlayers connect up to the system?

First, they work wirelessly over the wifi band. Very few people have structured Ethernet wiring. This allows you to put the units where you want them to go, not where your networking is available. We built a mesh networking technology on top of that, so you're not tethered to an access point. Basically, as long as each unit can see another unit, they'll work together as a system.

Is this 802.11g?

It is 802.11g wave form. The mesh networking is something else, which we call Sonosnet.

I understand that the system can play music from multiple devices, not just off a computer.

There are a lot of features built in. There's a line-in on the back of each ZonePlayer, and you can plug a CD player, MP3 player, or iPod or TV into it. There's an auto-sensing jack in the back so when you pop the RCA cables in, it will pop up on your controller.

Just this weekend my brother brought his iPod over and we were playing music throughout the house on it.

When I interviewed Musicmatch founder Dennis Mudd last year, he said his main motivation for founding the company was because he wanted to create the ultimate party CD. With a Sonos setup, sounds like anyone can bring a party to your house.

Listening to your music when you're sitting at your PC is not most people's idea of musical enjoyment. So, yeah, you bring your iPod over, plug it in and enjoy away. With some subscription services you can access the music on your account and play it anywhere.

Did Sonos create the software, design the hardware and contract it out to factories in Asia to build?

We designed the entire product: hardware, software, industrial design, mechanical. The manufacturing was done by a super-high quality contractor in Taiwan - the same people who built the iPod.

Who are you targeting as your main customers?

If you're eight years or less out of college, this is a no-brainer to you because most of your music is in a digital music library. So those people get the idea right away. Of course, that's generally not the sweet spot of homeowners with a desire to listen to music in multiple zones. Our customers are people who are generally broadband connected, have digital music, are music lovers. They're not technical but they'll often have more than 100 MP3s or digital songs.

How are sales going?

It's too early to say. We have a healthy pre-order list but you never know until you're six months into sales what the run rates are.

How much does this cost?

The most meaningful package for a first-time customer is our bundled package, which includes two ZonePlayers and one controller for $1199.

Who are your main competitors in this space?

First, there are the companies that make digital media receivers, and I don't really view that as direct competition. They include the Apple Airport Express, DLink, Linksys - a whole variety of folks make these gateways between the home stereo and your computer. They don't include a controller, so with the Airport Express you run it through the iTunes software on your PC or Mac. The Roku Soundbridge is another.

Second is the category of CEDIA or custom home installers like Escient, Fireball and Yamaha's MusicCast. They're self-contained systems, but they're somewhat proprietary and very high end.

Fitting into this market, we saw that products like the Roku and Airport Express do a good job of bringing music into one room. And you have the high-end hard-wired CEDIA types that do multi-room audio and are very expensive. An installer places infrared eyes in each room and they home-run all the speaker cables to one spot in your house and put this huge rack of gear there. If you wanted to get four rooms of music done by a custom installer, you are looking at about $12,000 vs. $2,300 with our system.

So we're fitting in the middle of those two product categories. We're offering a product that is multiple room and at a price point that's well below anything you can get from Yamaha, Escient or anybody else. Digital music and networking allow just a really rich multi-zone experience. And our controller is the bread and butter that none of them offer. So we're developing a new category called digital music systems.

Let's touch on rights management for a moment. What kinds of files will play on your system?

At release, it'll play MP3, WMA without the DRM, AAC without the DRM, WAV and a couple of other formats. Both Apple's FairPlay and Microsoft's DRM aren't supported right out of the gate for us. Apple doesn't support its format with any other vendors yet. Microsoft's DRM is centered around a handheld, not around a multi-zone approach.

What about if some kids at MIT wanted to tap into their dorm neighbors's ZonePlayers - could they?

We considered that scenario. The ZonePlayers have an encryption key between them, and if you're in a college network and in the same dorm but don't want to share your music collections, the systems won't allow the two to intercommunicate.

But if I were interested, I could.

You could for formats that are not DRM-protected. If you were playing an MP3 stream, you could link it into another room and play it, yes.

Sonos get any buzz at the Digital Music Summit last week?

Quite a bit. Ted Cohen of EMI was raving about us during his keynote. He stopped by our booth with somebody new about five times. We're asking him to be part of our beta program to try out the system. We're a new company and so our first impression has to be our best impression.

What can EMI or the music industry do for you?

What Ted liked about us is that this isn't a gateway product. We look at our product as a consumer electronics device, not as a PC peripheral. We're not relying exclusively upon a PC or Mac.

We are big supporters of DRM. However you look at it, the artists have to be paid. IT's not sustainable if they're not. The challenge is getting that industry to getting understand the computer industry a little better so that there's a good solution that works. Apple as one solution, and Microsoft DRM is another, but you're out of luck if want to play a song with Microsoft DRM on an iPod.

All these kinds of competing DRMs just extend the longevity of MP3 and the open formats. So our focus out of that conference and the interest out of EMI for us is an open DRM that we could embrace so make them happy and comfortable.

Open DRM? You mean cross-platform?

Yeah. One DRM that's usable and cross-vendor formats. We're in the Betamax-VHS wars right now. Those wars don't benefit consumers or content producers. The industry has got to mature beyond that. One of the parties that can push that is the people who produce the content.

Sonos won a Best of Audio award at last month's Consumer Electronics Association awards competition last month. Not too shabby.

That was beyond our most hopeful expectations. We're pretty proud.

What other kinds of devices might we eventually see coming through the Sonos pipeline?

We're pretty focused on getting this product out the door and getting a lot of happy customers right now. It's just the very beginning of this industry. DRM is a major topic, how you work with the music industry in home entertainment - there are just a lot of interesting areas.

J.D. Lasica is author of the upcoming book Darknet: Hollywood's War on the Digital Generation.