So there\u2019s more to the value proposition in the luxury space. It\u2019s true in the premium space too. Design really matters, color matters, feel, touch, comfort, all those things matter in addition to the sound. I think it\u2019s just even that much more elevated in the luxury space.<\/p>\n<\/div>\n
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I\u2019m really curious about all the different sets of new customers you\u2019re describing. There\u2019s the B2B business, which is growing in audio tech. Then there are luxury customers who have a lot of money, but they\u2019re fickle. And particularly in high-end AV \u2014 and I\u2019m a high-end AV nerd through and through \u2014 convincing people it\u2019s worth it because they can hear it has always been the hardest problem.<\/strong><\/p>\n<\/div>\n\n
Maybe the most fun problem, because you can convince a lot of people they\u2019re hearing a lot of things that aren\u2019t there. You can sell expensive cables at a hundred times the price of the regular cables, even if they don\u2019t do anything different. This is a lot of new customers for Bose. Do you think the B2B business is going to distract your core technology roadmap? How are you holding that all together?<\/strong><\/p>\n<\/div>\n\n
It is more complex for sure. It is a broader mission, and I think we\u2019re ready for it. When I was here last time, we were in the middle of the transformation that I would say was solidifying the foundation of Bose, and now we\u2019re building on top of that. We\u2019ve built an amazing marketing and brand infrastructure that we\u2019re now using to power three brands instead of one, but a lot of that capability can be put in the direction of all three.<\/p>\n<\/div>\n
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So the key is real clarity about who the customer is, which we\u2019ve done a lot of work on the Bose brand for sure. We talk about the music lover for Bose, but we\u2019ve done the same work for McIntosh and the same work for Sonus faber so that we are one thousand percent clear about who the customer is and how we want to talk to that customer.<\/p>\n<\/div>\n
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On the kind of products side of our company, I think we\u2019re really clear about what the mission is for each one of those brands. On the technology side, interestingly, as we become more of a B2B technology company, it\u2019s actually creating advantages back to the Bose brand and our luxury business as well. And what I mean by that is that it\u2019s caused us to completely rethink the way that we do research and we develop our tech.<\/p>\n<\/div>\n
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In the past, if you think about Bose developing products, we were developing purpose-built technology for a pair of headphones or a car audio system. And I think last time we talked about the tech franchises. We care a lot about noise cancellation. We care about immersive, lifelike audio, and we care about this idea of hearing what you want. And those are all experiences that are built on some basic building blocks of technology that we\u2019ve been developing for a long time.<\/p>\n<\/div>\n
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But because we were developing them for our own products, we\u2019ve had to do a complete shift in the way that we think about it so that we\u2019re now developing, from the ground up, those building blocks. Now we\u2019re able to say, with common platforms, common algorithms, AI \u2014 think of them as sort of AI units \u2014 we can create different experiences for our own products, and we can port that same technology through the same platform tech into other people\u2019s products.<\/p>\n<\/div>\n
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What that\u2019s creating is a lot of efficiency at the research and development level. It\u2019s creating more breadth because now that we\u2019re thinking about things like noise cancellation for different spaces, spatial audio, or hearing what you want, it is actually creating more innovation and more invention at the core. It\u2019s making us faster because we\u2019ve made these building blocks a lot more consumable for our B2B customers; it makes us faster at bringing our own products to market, too.<\/p>\n<\/div>\n
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I think this is a great place to ask the Decoder questions because you\u2019re describing the endpoint of a pretty big culture and structure shift at Bose that you\u2019ve been architecting for several years. So how is Bose structured today?<\/strong><\/p>\n<\/div>\n\n
There\u2019s a business unit structure, there\u2019s a functional structure, and we are living in what I would describe as a hybrid. So for the core functions that matter deeply to what we deliver, like engineering, marketing, and supply chain, those are global functions that support all of our businesses. But because we\u2019ve added new customer sets and really two new businesses with luxury and audio tech, we\u2019re also running four business units. So those four business units have business unit presidents, and they draw on the global functions for the work that they need.<\/p>\n<\/div>\n
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How many people is Bose today?<\/strong><\/p>\n<\/div>\n\n
And you\u2019re mostly in Framingham, or are you all over the place?<\/strong><\/p>\n<\/div>\n\n
We\u2019re global. All over. Yep.<\/p>\n<\/div>\n
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You said you\u2019re a hybrid. How\u2019s that split between engineering, sales, all that sort of thing?<\/strong><\/p>\n<\/div>\n\n
I don\u2019t actually think about it that way, but the one thing that I do know \u2014 sort of the most important statistic to me \u2014 is that half of our employees are engineers.<\/p>\n<\/div>\n
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You\u2019re describing AWS, you\u2019re describing Amazon. You\u2019ve modularized a bunch of components inside the company; now you can build new products faster. This is really great. Every company that goes through this transition ends up hiring more and more engineers over time because you just need to build more and more components. Has that been growing? Are you investing more in that kind of engineering?<\/strong><\/p>\n<\/div>\n\n
We are for sure. I think it\u2019s probably not unique to us. We\u2019ve been in this transition of hardware long, long ago. It was just hardware, and then hardware and software, and then more and more software. And now as we\u2019re building the technology pieces, those are truly just software products that are an algorithm- or AI-based product that we\u2019re selling with.<\/p>\n<\/div>\n
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You see that mixed shift continuing. We\u2019re certainly seeing growth in our engineering ranks. And we\u2019re getting a lot more productivity out of engineering as we start to have more sophisticated tools, as we use AI and other things to help with some of that development. So yes, growing. And I think more productivity per engineer, if you will, as we start to use more sophisticated tools to do the development.<\/p>\n<\/div>\n
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You said it\u2019s pure software products, right? When you sell out to B2B, you\u2019re just selling the algorithms. Do those feel protectable? This is one of the things that I think about all the time. What is the actual thing you\u2019re selling, and how easily can it be copied by a Chinese firm that does not respect our intellectual property laws or something like that?<\/strong><\/p>\n<\/div>\n\n
Yeah. I\u2019m probably oversimplifying. We\u2019re really selling three things. We\u2019re definitely selling software, algorithms, et cetera. I\u2019ll come back to your \u201chow do you protect it?\u201d question. One of the very special things about Bose is actually systems engineering, which is an underappreciated discipline in my view. So software\u2019s great, but software has to run on hardware in our world. Ultimately, that software has to get delivered through something.<\/p>\n<\/div>\n
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The magic at Bose, the secret sauce, has always been systems engineering and how you\u2019re marrying together hardware and software elements for an experience that feels unified across the device and that\u2019s optimized to provide the best experiences. So we\u2019re certainly doing that on our own products, but you see that kind of a service as we start to sell more and more technology into our B2B customers.<\/p>\n<\/div>\n
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There\u2019s also a lot of desire for help on that system side because our expertise there is real. That\u2019s always been true in our automotive business, and it is increasingly true in our partnerships and our customers on the audio tech side as well. So I think that the second piece, which is really important to call out, is that it\u2019s not just software for software\u2019s sake. It\u2019s software that has to be integrated into a system where everything comes together to work. And then you\u2019ve got kind of the idea of systems engineering and then services on top of that.<\/p>\n<\/div>\n
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So, how you tune a product. Some of our partners and customers need help with that, want help with that; some don\u2019t. There are a lot of services that get married along. Sometimes it\u2019s systems engineering. Sometimes it\u2019s things like tuning, et cetera. So three pieces.<\/p>\n<\/div>\n
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Can I play devil\u2019s advocate here for one second? What you\u2019re describing here, if you wanted to poke at it as hard as you could, is a process of a little bit of commodification. There are a lot of common components here, and then it\u2019s the layers on top that differentiate in the market. <\/strong><\/p>\n<\/div>\n\n
If you\u2019re an audio nerd, the magazines are all saying one engineer in their garage innovated on speaker technology, and they made the speaker cones out of waffle paper, and now they\u2019re more transparent than ever. Whatever that myth was that sold a lot of speakers back in the day.<\/strong><\/p>\n<\/div>\n\n
If we\u2019re not starting from the products back, but you\u2019re starting from the components up, there\u2019s a risk that everything kind of becomes the same, and it\u2019s branding and marketing, and maybe the sound signature that\u2019s tuned into it is artificial now \u2014 it\u2019s not from the components themselves. How do you balance that? Or is that just not a worry with modern consumers?<\/strong><\/p>\n<\/div>\n\n
I think what you\u2019re describing is that if we\u2019re putting Bose technology in other headphones, doesn\u2019t that just revert to the mean? I think there\u2019s a second, bigger market for us that is not audio products. Things that we call audio second. So for example, the XR glasses, the main function is not audio, but audio is really important. You don\u2019t usually buy a car because it has a Bose sound system, but when you buy the car, the sound system is actually one of the most important features of the car.<\/p>\n<\/div>\n
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A projector that you buy for your house, you\u2019re buying because it\u2019s a great projector. We\u2019re partnering with Epson, and the sound is also really important there. So it\u2019s a little bit different, I think, when you get into audio second. In the audio market, I think that the key is that there are so many different customers who want different things.<\/p>\n<\/div>\n
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When you think about products that have ingredient technology that\u2019s the same, it\u2019s really enabling you to do things for your customer and the experience that you\u2019re trying to create. I\u2019ll just use Skullcandy as an example. Skullcandy just launched a pair of headphones with Sound by Bose, and you couldn\u2019t have two more diverse customer sets between who they\u2019re targeting and who we\u2019re targeting. We helped them with the technology. So there\u2019s Bose technology inside to help make that sound better, but the design choices of what they want for their customer are incredibly different from what you would find [with Bose].<\/p>\n<\/div>\n
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So I don\u2019t think you would ever put those two products, a Bose headphone and a Skullcandy headphone, side by side and say, \u201cWow, this is really commoditized. It sounds the same. It is the same.\u201d They\u2019re very, very, very different.<\/p>\n<\/div>\n
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I think I\u2019m asking slightly more about the audio-second product. If all of your audio-first products come from the same technology base, the same modular components that can be remixed into all the products you want, do you lose the ability to innovate at the product level? If everything is made out of the same Legos, at some point you can\u2019t be like, \u201cActually what I need is all new Legos.\u201d<\/strong><\/p>\n<\/div>\n\n
I think the answer is no, because the product is so much bigger than just those ingredients. So if you think about headphone design, the comfort and all of the other features, right? There may be a lot of ingredient technology, but the ones that you choose may be different.<\/p>\n<\/div>\n
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One of the things that we talk a lot about now is being at the intelligent edge. Everything Bose does is what we would describe as at the intelligent edge. And as you know, it\u2019s a pretty hostile environment. You have limited compute, you have limited power. You\u2019re always making trade-offs between what I am putting in this product and how does that impact my ability to do that? Because there\u2019s just not enough room to put everything in it.<\/p>\n<\/div>\n
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So I think the reason why you still see so much differentiation among products, even if some of the ingredients are the same, is because all of those product choices that you\u2019re making are really critical, and you have to make a lot of them to fit inside that constrained environment that you\u2019re working with.<\/p>\n<\/div>\n
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This brings me to the other <\/strong>Decoder<\/em><\/strong> question about decisions. You\u2019ve obviously made a lot of them, and you\u2019ve got a few big ones to make that I want to come to concerning AI. How do you make decisions? What\u2019s your framework?<\/strong><\/p>\n<\/div>\n\n
I am a believer that you get the right people in the room, you have an intense debate that isn\u2019t always comfortable, that sometimes makes people a little bit queasy, and you move as fast as you can to decide, knowing that if it\u2019s wrong, you can pivot. That is, in my simplest terms, the way I think about it.<\/p>\n<\/div>\n
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We get a lot of type one and type two decisions, move fast, in that we had an ex-Amazon employee write to us and say, \u201cEvery decision is reversible if you have enough money.\u201d<\/strong><\/p>\n<\/div>\n\n
[Laughs] That might be true for Amazon.<\/p>\n<\/div>\n
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That\u2019s a very Amazon perspective. The reason I bring this up in the context of AI is that I\u2019m looking at the sweep of things you\u2019re doing, and I\u2019m looking at where, in particular, the big tech companies think their headphones are going to go.<\/strong><\/p>\n<\/div>\n\n
I was reviewing our conversation from four years ago. Boy, did we talk about Bluetooth a lot. We did. This is a core limiting technology. It\u2019s an enabling technology in an important way, but they hold onto what Bluetooth can and can\u2019t do on their platforms very tightly. And then their products, their first-party products, get to extend that standard in different ways \u2014 and they all do it. <\/strong><\/p>\n<\/div>\n\n
This broadly means if you have an iPhone, the best working headphones that will do all the things the platform wants you to do are probably AirPods. If you have a Pixel, it\u2019s probably Pixel Buds. If you have a Samsung phone, it\u2019s probably their buds.<\/strong><\/p>\n<\/div>\n\n
And this is because they have reduced the capability of the interconnect. One of the reasons they\u2019re doing that is because they want your earbuds in your ears 24\/7 so you can talk to their AI systems on the back end. And this is their future. Maybe the answer is that we\u2019re all going to wear Meta Glasses, or we\u2019re all going to wear Xreal glasses. It seems up for grabs in big particular ways. What\u2019s your view of that? What\u2019s your view of AI wearables? And do you think there\u2019s room for third-party players here?<\/strong><\/p>\n<\/div>\n\n
We absolutely think wearables are critical to the AI future. I think that we\u2019re clear on that. The form factor, if you work backwards from that, we\u2019re going to use our wearable devices to communicate with our AI agents. And that is going to become more and more important and more and more natural. We strongly believe that.<\/p>\n<\/div>\n
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The second thing we believe is that it is more likely to be conversational and sound-based than anything else. At least we think that is probably the primary mode. And so the types of technologies we\u2019re focused on are around voice pickup, clarity, speech enablement, and we think all are incredibly important. What form factor you want to use as your wearable, I think the jury is still out. I think the answer is going to be a whole proliferation of them. Some people will like glasses because they like the glasses.<\/p>\n<\/div>\n
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Some people will like open earbuds, which we hadn\u2019t launched when you and I talked last time. We talked a lot about open ear audio, but not yet about that form factor, that clip-on form factor that Bose invented and launched into the world. We think that is a really powerful form factor that will be for some. Others might want a watch, a pin, a ring, or 18 variations of how those work together.<\/p>\n<\/div>\n
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Part of the reason we think being in the audio tech business is important is that it gives us the ability to participate in a lot of those different places that we might not naturally be able to go on our own. So we think form factor is going to matter, but I don\u2019t think there\u2019s a single winner there. At least that\u2019s my current view. I think that there will be multiple types of devices that consumers will choose based on their own personal preferences.<\/p>\n<\/div>\n
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We know there are going to be a limited number of LLMs, right? We know that those are going to converge to the large ecosystems that already exist. New ones may emerge, as we\u2019re seeing, but there won\u2019t be hundreds of those. There will be few of those. And yes, there may be some advantages if you stay within that ecosystem for your earbuds. But fundamentally, I think even though a lot of people choose earbuds, headphones, and other devices in their ecosystem, a lot of people don\u2019t.<\/p>\n<\/div>\n
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I think consumers still want choice. And I think it is important for those ecosystems. In our conversations with them, they need third-party players to interface with their AI as well. They need third-party players to produce devices that work with what they\u2019re doing because they recognize that they\u2019re not going to have a full share of the market and that choice matters.<\/p>\n<\/div>\n
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So we believe we\u2019ve got a couple of ways to compete now. Our own devices, for sure, need to be compatible across the different LLMs and the ability to interface with them. And we need our technology starting to crop up in other places where that interface will happen.<\/p>\n<\/div>\n
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Is this a way to just hedge the bet that no one actually knows what\u2019s going to happen with AI? If you\u2019re selling Bose beamforming technology to a handful of Silicon Valley startups making pendants, that means you\u2019re not making the big bet on pendants being a form factor yourself. You can wait and see. Is this just a way to make sure the technology is available and being monetized while you wait for the answers to emerge?<\/strong><\/p>\n<\/div>\n\n
There\u2019s certainly a diversification play, absolutely. And I wouldn\u2019t shy away from betting on a few, and if one becomes a winner, awesome. I also think that it\u2019s important not to lose sight of what your brand is. The Bose brand is: we are for music lovers. And if we start to branch out and create some of those other devices that are not core to who we are, I just don\u2019t think it works. So it is a way to participate because we don\u2019t think those are areas that it makes sense for the Bose brand to go.<\/p>\n<\/div>\n
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One of the things I worry about, again, as a music fan, as an audio nerd, is every single time the tech companies come to music, convenience wins, and quality suffers. This is the pattern that has been repeating since MP3s first came out. We\u2019re going to go from CD quality audio, which in 2026 is still what people refer to as the best audio you can get. CD quality \u2014 that\u2019s the bar.<\/strong><\/p>\n<\/div>\n\n
But we went from that to, I don\u2019t know, 128 kilobit MP3s on iPods. We stayed there for a long time. We got a little bit better. The headphones got worse. The interconnect went from wired to a compressed Bluetooth interconnect. At every point, the market picks convenience. There\u2019s some point here, even in luxury, where you just walk in, and the music is playing because the AI has determined the music should be playing, and the endpoint of the music is the least important thing. It\u2019s just that it\u2019s happening to you. <\/strong><\/p>\n<\/div>\n\n
There\u2019s not this focus on listening intently because you\u2019re probably also watching TikTok at the same time. Or maybe you\u2019re only listening to music on TikTok, and that\u2019s where all your discovery happens, and all of your music money is spent at concerts and live experiences. Somewhere in there is the audio industry. It\u2019s been going through this convulsion.<\/strong><\/p>\n<\/div>\n\n
There\u2019s another turn coming here where Apple, OpenAI, Samsung, and whoever else are going to launch AI-first devices that are conversational, that have audio input and output capabilities. And they will say, \u201cAnd you can also listen to music.\u201d They will commodify it even further, and the idea of a music lover gets even more squeezed. How do you view that? Because as a music lover myself, I\u2019m like, \u201cThis is only getting worse. It\u2019s only becoming. It\u2019s not audio second. It\u2019s like audio 15th.\u201d<\/strong><\/p>\n<\/div>\n\n
Okay. So it\u2019s a complicated web there that you just spun.<\/p>\n<\/div>\n
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Yeah. I\u2019m having an existential crisis here. <\/strong><\/p>\n<\/div>\n\n
I\u2019m going to try to help you. In some ways, what we find with our luxury customers is that what they\u2019re looking for are moments of clarity, quiet moments where you put down the phone, you put on a record, right? You listen to it the way that it was supposed to be heard on an amazing sound system. And the quiet nature of that, the ability to step away from what is a chaotic digital world \u2014 that trend is picking up. It\u2019s picking up. We see it in the luxury space. We actually see more of it in the premium space a little bit now too.<\/p>\n<\/div>\n
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I do think that the appreciation of music, just appreciating it for the emotional state that it puts you in and what it does for your mental health. I actually think that is a trend we\u2019re seeing. And I actually think that\u2019s going to continue to grow.<\/p>\n<\/div>\n
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Our belief and part of the reason that we started this audio tech business is that we want you to have the best sound experience no matter what. Even if you\u2019re listening in a hostile environment, you\u2019re listening on a lower-cost pair of headphones, or you\u2019re listening to a crappier format, let\u2019s at least make sure you have the best experience possible and that you can tell the difference between what good and better sounds like, or what better and best sounds like. So I think that\u2019s the second thing.<\/p>\n<\/div>\n
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The other thing that I think is positive about what you said is there\u2019s just so much music discovery because it\u2019s everywhere. And not everyone is going to turn into a music lover, and that\u2019s okay. But I think for young people who are discovering, I\u2019m always amazed at the songs my kids are excited about because I\u2019m like, \u201cYou know that\u2019s not a new song, right? That\u2019s from when I was a teenager.\u201d I think that\u2019s great.<\/p>\n<\/div>\n
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The way that the younger generation is doing music discovery is creating a love of music that is not bound by time or genre. I think that\u2019s really cool. And our belief is that if you help people listen to that as best you can, they will get an appreciation for what better sound sounds like, and over time they will graduate into the formats and the products that actually bring that to life in an amazing way.<\/p>\n<\/div>\n
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But that\u2019s music. I appreciate that this is happening in music. I think the question I\u2019m asking is about AI and the almost religious belief in Silicon Valley that AI, in particular natural language input, will usher in a platform shift. Mark Zuckerberg has a religious belief that you\u2019re going to talk to Muse Spark through Meta Glasses. <\/strong><\/p>\n<\/div>\n\n
Whether or not you believe him, he is laser-focused on that because he wants to stop being constrained by Apple\u2019s platform policies. That is the story that plays out in the pages of Verge every single day.<\/strong><\/p>\n<\/div>\n\n
Apple probably believes this, right? Apple believes natural language input is some kind of enormous threat to the iPhone. They\u2019re reacting to it. Somewhere in there is, are you wearing headphones to talk to this? And can Bose headphones meaningfully participate in those ecosystems? Or will all of these companies create more first-party opportunities for themselves?<\/strong><\/p>\n<\/div>\n\n
I think both can be true. So I think we\u2019ll see if Mark is right, but that doesn\u2019t mean you want to have a crappy listening experience when you\u2019re listening to music. Do you take the glasses off and put on headphones? Do you make the glasses sound better? I don\u2019t think that just because we have a utility, which is AI on the… I\u2019ll just use phone calls. It\u2019s an old school example. Just because you can take phone calls on your headphones, if they didn\u2019t sound good to play your music, most people who love music would not wear those to listen to music. It\u2019s just the reality. And I think the same is true. It\u2019s a utility.<\/p>\n<\/div>\n
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If you\u2019re someone who doesn\u2019t care so much about music and it\u2019s not part of your personal brand or your identity, you may say, \u201cThat\u2019s good enough for me. I can\u2019t tell the difference.\u201d But I think for most people, they will choose multiple devices or they will choose one device that can do all of it really, really well. And I still think there\u2019s room for high-quality listening experiences, even in a world where we\u2019re all chained to our AI.<\/p>\n<\/div>\n
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So I\u2019ll just paint a picture for you. If Xreal wins the AI race and all of us interact with Claude all day long through our Xreal glasses, and the sound is powered by Bose through an audio tech partnership, is that victory? Is that success? Or is there more to be done?<\/strong><\/p>\n<\/div>\n\n
I think there\u2019s always more to be done. When you think about how fast technology is moving, I think we\u2019re imagining experiences today that can be had at the edge, that live within the compute constraints and the battery constraints that we have. Two years from now, those constraints are going to still be there, but the amount of capability you have will be larger. I think we\u2019re going to continue to see innovation and invention in the space that\u2019s going to create experiences we haven\u2019t imagined yet.<\/p>\n<\/div>\n
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One of the things that I\u2019m really curious about is just the amount of audio input all of these companies want to do. We had the CEO of Zoom on Decoder, and he was like, \u201cEveryone will talk to AI avatars in Zoom and all of us will be mediated by Zoom. And that means we\u2019ve got to record the in-person meeting. Everyone has to wear the rings or the pendants, and we\u2019re going to record everything all day long so the AI can fully know us.\u201d <\/strong><\/p>\n<\/div>\n\n
I have a lot of thoughts about that, but that\u2019s one vision in the world. We\u2019re going to record everything, which sort of puts a lot of pressure on noise cancellation, on rehabilitating the audio once you have it. There\u2019s not just a lot of noise, but damage that happens in the compression process and transmitting over the internet. That all seems like an opportunity for a company like Bose.<\/strong><\/p>\n<\/div>\n\n
Is that where the investment is to help the AI hardware companies deal with lossy streaming and TikTok audio? What do you think about that opportunity?<\/strong><\/p>\n<\/div>\n\n
One of the things that we\u2019re learning as we further venture into this space is that the core problems are the same. If you take something like speech clarity, voice pickup, that is a world we\u2019ve done a lot of research on, a lot of work on. It\u2019s an incredibly important part of a Bose headphone, for example, but it\u2019s also important in a dozen other places where the same type of technology, at its core, can be expanded and extended.<\/p>\n<\/div>\n
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