Sonos CEO says Amazon is selling its Echo devices below cost

nanoguy

Posts: 565   +8
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In brief: Sonos is among the companies that are reporting a hit to their revenue for the three months ending in June, owing to the Covid-19-related store closures. Looking forward, the company believes Amazon's monopolistic powers pose a much bigger threat than the pandemic, and is accusing the retail giant of using "predatory pricing" to drive out the competition.

Last month, Big Tech CEOs were questioned by Congress members on a wide range of issues, in a hearing that was reminiscent of the Big Tobacco grilling in the 1990s, or the one involving Big Banks after the financial crisis.

The House Subcommittee for Antitrust is now busy compiling its report, so a number of companies that have been affected by monopolistic powers in the tech industry are using the opportunity to draw attention to certain issues that weren't covered during the hearing or weren't clarified by the executives in question.

For instance, Sonos CEO Patrick Spence told Protocol that Amazon has been trying to squeeze out the competition in the smart speaker market by selling its Echo devices below their actual production cost. This is known as "predatory pricing," and it's precisely the kind of behavior that got Qualcomm in hot waters in several regions.

During the antitrust hearing last month, Amazon CEO Jeff Bezos was pressed on this exact issue, but his explanation was that Echo speakers are often on promotion, which can involve slashing their price below cost. Naturally, Spence disagrees with this assessment, noting that companies like Amazon are able to sell certain products at a loss because they can more than make up for it through their other services.

Of course, not all competitors of Amazon in the smart speaker market are able to do this, but the retail giant can always bring up Google as an example of a company that can subsidize its hardware business by virtue of its many online properties. But as it stands, Amazon's Echo devices make up 70 percent of the smart speakers sold every year, mostly thanks to their relatively low price.

As for Google, Sonos sued the search giant in January for patent infringement and was prepared to do the same with Amazon. The company eventually decided that going after two tech giants at once would lead to a more arduous legal process.

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brucek

Posts: 499   +575
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Are they even directly comparable products? I've never bought Echos, because my assumption is their primary purpose is to get me to spend more on Amazon products & services. Whereas I do have Sonos speakers because I believe they exist mostly to just play music.

I doubt the total Echo revenue stream is below the cost of manufacture, but as a consumer I'd expect the purchase price to be discounted -- just like I know the printer is cheap because the ink is expensive.
 

Reehahs

Posts: 939   +587
Amazon could start giving the Echo Dots for free with certain sized order, Sonos would get saltier.
 
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Hexic

Posts: 743   +780
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If Amazon’s smart speakers worked as well as Google’s, below-cost or not, I’d consider purchasing them. But they don’t.

I’ll take quality & utility over price, because cheap **** you always have to purchase more often.
 

seeprime

Posts: 491   +526
If Echo's cheap offering was made with cloth covered stiffened cardboard, with a speaker that costs under $1, with a five cent speaker grill, would be easily able to sell for $10. China is willing to lower the cost of anything that they manufacture since the labor markup is not calculated like it would be in the US. In the US, with health care and benefits, labor cost at the same hourly pay is double that of China.
 

poohbear

Posts: 483   +361
If Amazon’s smart speakers worked as well as Google’s, below-cost or not, I’d consider purchasing them. But they don’t.

I’ll take quality & utility over price, because cheap **** you always have to purchase more often.
My uncle used to say "I'm poor, so I only buy expensive things". In the 21st century that obviously has limits what with all the super highend clothing brand names, but you get the point.
 
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