What the Sonos-Google War Means for Big Tech

(Bloomberg) --

On Friday, Patrick Spence, chief executive officer of the pioneering digital speaker maker Sonos, will testify in front of the House antitrust subcommittee, which is seven months into an examination of competition in digital markets. A week after suing Google for infringing on five of its patents, Sonos will presumably make the case that both Google and Amazon, which sell rival speakers powered by their voice-activated assistants, competed unfairly.

As a Sonos fan but former user, I have sympathy for the company but skepticism about an antitrust argument. Sonos is part a group of innovative companies that are ceding market share to the big tech companies—let’s call ‘em the Cedelings. Other members of the Cedeling club include the smartwatch maker Fitbit Inc., action-camera pioneer GoPro Inc., set-top box maker Roku Inc., Spotify Technology SA, a bunch of enterprise software companies and probably a lot of others I haven’t thought of. These firms are putting up varying degrees of valiant resistance to the inexorable migration of their basic ideas and markets into the bundle of linked services offered by Alphabet Inc.’s Google, Amazon.com Inc., Apple Inc., Facebook Inc., Microsoft Corp. and other large technology platforms.

I first set up Sonos speakers in my home about six years ago and enjoyed the rich, multi-room sound, all controlled via a smartphone app. But soon after, there was an earthquake in the home speaker world: Amazon introduced the Echo, a relatively inexpensive and easily networked speaker offering music and other stuff that could be summoned with basic voice commands. Suddenly Sonos, with a clunky app that seemed to require frequent updates and separate devices like the Sonos Bridge, was unnecessary. When I moved, I replaced most of my Sonos gear with Echos.

Throngs of other customers opted, like me, for voice-triggered speakers. Despite the fact that the Echo’s sound quality is relatively feeble compared to Sonos, Bose Corp. and other audio equipment makers, Amazon has become the top seller of home speakers in the world. Sonos responded by trying to integrate both Amazon’s Alexa and the Google Assistant into its products, but this was a dubious strategy, introducing an intermediary into their relationship with their users. As The Verge points out, Sonos acquired its own voice assistant only recently, five years after Alexa’s debut, but doesn’t plan to make a competing general-purpose voice product.

So did Amazon and Google (which followed into the speaker market with Google Home in late 2016) engage in anti-competitive practices? Let’s set aside the claims of patent infringement lodged by Sonos against Google, and last week’s intellectual property theft lawsuit from smartwatch maker Masimo Corp. against Apple. The real unfair advantages enjoyed by the tech giants are their deep resources, technical depth and capacity to out-invent smaller companies. That’s a difficult thing to regulate.

Meanwhile, a few Cedelings have fared perfectly well in this unfavorable landscape. Spotify has more than held its own (and has its own antitrust complaint pending against Apple in the European Union, over its 30% App Store tax). Roku continues to outpace Amazon Fire TV, Apple TV and Google Chromecast, in part by integrating its software into smart televisions. Netflix Inc. could have been a Cedeling but stubbornly refused, defending its streaming turf by plunging headlong into licensing and producing billions of dollars in original shows and films.

And Sonos stock may be down by about a third since its 2018 highs, but with a $1.7 billion market cap, it’s by no means out of the game. Even in the era of Big Tech, it’s possible for the Cedelings to survive and thrive—which is good, because Congress probably won't help them any time soon.

If you read one thing

Alphabet's legal chief, and Google's first lawyer, is out of his role following scrutiny about his conduct. David Drummond married one employee at the company, and had children with another—in a relationship that ended so badly she wrote a 1,300-word Medium post about it. Bloomberg's story is here. Drummond's exit comes as Google is still grappling with residual distrust between employees and management about executive conduct. 
 

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To contact the editor responsible for this story: Anne VanderMey at avandermey@bloomberg.net, Mark Milian

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