Power

Sonos CEO says Amazon is breaking the law by selling Echo smart speakers below cost

Patrick Spence called Echo discounts "predatory pricing" and said his company was working on future Ikea products.

Patrick Spence holding a Sonos speaker

Sonos CEO Patrick Spence argues that companies like Amazon and Google are only able to engage in these kinds of price wars because of their ability to make up for losses from hardware sales.

Photo: Andrej Sokolow/picture alliance via Getty Images

Sonos CEO Patrick Spence believes that Amazon is breaking the law by selling its Echo speakers below cost. "That's predatory pricing," Spence told Protocol on Wednesday. His comments came in response to last week's Big Tech hearing, which included Amazon CEO Jeff Bezos' first appearance on Capitol Hill.

During the hearing, Bezos was asked by Rep. Jamie Raskin whether Amazon priced the Echo speaker below cost. "Not its list price, but it's often on promotion," Bezos responded, adding: "And sometimes when it's on promotion, it may be below cost, yes."

"That's illegal," Spence said Wednesday. He argued that companies like Amazon and Google are only able to engage in these kinds of price wars because of their ability to make up for losses from hardware sales. "They just take money from their monopoly business, they just subsidize, subsidize, subsidize," he said.

The Sonos CEO took part in a hearing of the House antitrust subcommittee in January and has been a vocal critic of both Amazon and Google in recent months. Sonos sued Google for patent infringement in early January, and it's also at the center of an International Trade Commission probe over Google's alleged patent infringement. Google responded with a countersuit in June.

Spence said that he was looking forward to the ITC hearing next February and to any legislation that may come out of the House. "We were encouraged by the hearing last week," he said, while pledging to continue to be involved in the process. "You gotta stand up to bullies."

Protocol caught up with Spence ahead of the release of the company's fiscal Q3 2020 earnings. During the quarter, Sonos' revenues were down 4% year-over-year, totaling $249.3 million, due to COVID-related retail closures. At the same time, Sonos saw direct-to-consumer sales grow by 299%, contributing to a 2% revenue growth guidance for fiscal 2020. "We benefit from the fact that people are at home and are investing in their home," Spence said.

The company's partnership with Ikea was hit particularly hard during the recent quarter, as the furniture chain closed almost all of its stores worldwide. However, Spence said that Ikea would continue to play a big role for Sonos, including with "future products" that he said are now in the works.

In the past, Sonos executives have hinted at efforts to launch additional out-of-home products, including via partnerships. Spence said that some of the company's roadmap had to be adjusted to account for the new reality of homebound life under COVID, but he reiterated that Sonos was looking to replicate the Ikea partnership model with other companies in the future.

Correction: This post was updated at 2:30 p.m. PT to correct the percentage of direct-to-consumer sales and to clarify that it contributed to revenue growth guidance.

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