So Much For the Public Interest: Sonos CEO @Patrick_Spence Reveals the Harsh Retaliation of Google and Amazon

If you’ve ever been to the Huntington Hotel in San Francisco’s toney Nob Hill, you can’t miss the hotel’s famous restaurant called The Big Four.  The eponymous paean to 19th Century monopolists, “The Big Four” are railroad men: C. P. Huntington, Charles Crocker, Mark Hopkins and of course Leland Stanford, for whom Leland Stanford Google University is named.  The railroads of the 19th Century were in many ways the Internet of their day–he who controlled the American railroads controlled the life blood of the world’s economy.  And I do mean “he.”

One can just imagine little Larry and little Sergei sitting in the clubby Big Bar and letting their imaginations run wild with dreams of how they, too, could dare to be as ruthless as these four cutthroats…sorry…titans of progress.  Yet The Big Four would be salivating at the thought of the level of monopoly profits that Google has been able to extract from the economy during the “Stanford window” (being the period of time that a group of companies can pillage their competitors before the government stops them, either through the courts or by an act of Congress).

But those dreams all came to a head on January 17 at a field hearing of the House Judiciary Committee’s antitrust subcommittee at the University of Colorado Law School.  You can see the video of the event above.

Sonos CEO Patrick Spence was one of the witnesses.  It’s not so easy to find the written witness statements, but I tracked down Mr. Spence’s statement which is worth reading.  Recall that since 2002 Sonos has made a home speaker that supports a multiplicity of music streaming services.  A Sonos speaker looks an awful lot like Amazon’s Alexa speaker or the Google Home speaker, but predates each by many years.

Mr. Spence summarized the Sonos business model:

Our business model is simple — we sell products which people pay for once, and we make them better over time with software updates. We’ve achieved success without trying to monetize the data of our customers. We live by the mantra that if we keep making great products, customers will recognize that, and come back and buy more over time.

In other words, the data scraping that is at the heart of Google and Amazon’s trillion dollar market caps is not part of the Sonos equation.  Surveillance capitalism is not the prerequisite for success.  Neither is wardriving through every loophole in user expectations of privacy, advertiser fraud or copyright.

Mr. Spence warns the Subcommittee in a way that is very familiar to artists.  The size and scale of these surveillance capitalists is a self-fulfilling perpetual motion machine on steroids.   Allowing them to run loose on the public without regulation makes about as much sense as it would to have put The Big Four in control of the Interstate Commerce Commission (that was created for the public to resist the anticompetitive passions of the railroads).  Mr. Spence explains the danger (in a passage reminiscent of the seven anonymous amici in the Microsoft antitrust case)(my emphasis):

I welcomed this Committee’s invitation to testify because I’m gravely concerned that the market conditions that allowed Sonos to innovate and thrive — and many smaller companies like us — are endangered by the rise of a small group of companieswith unprecedented size, scale, and dominance. And although I appear with a bit of trepidation as it may impact the willingness of these companies to provide us access or to partner with us, Sonos is strong enough and successful enough to say what goes largely unspoken, but remains very much on the minds of countless tech entrepreneurs at smaller firms and people thinking about starting new businesses.  One reason they do not speak up is that they’re afraid of how dominant platforms could retaliate against their businesses. [W]e also know from hard experience that they have come to use the scope of their platforms and their overwhelming dominance in certain markets to unfairly disadvantage competitors and squelch potential competition. 

Mr. Spence’s concerns will resonate with any artist who has had to deal with YouTube’s licensing practices–remember Zoë Keating’s experience with YouTube’s intimidation tactics:

My Google Youtube rep contacted me the other day. They were nice and took time to explain everything clearly to me, but the message was firm: I have to decide. I need to sign on to the new Youtube music services agreement or I will have my Youtube channel blocked…. What should I do? As much as it makes me grind my teeth, does having all my music forced onto Youtube’s music service really just not matter all that much? Should I just close my eyes and think of England?

The Subcommittee hearing is another sign post along the path of stopping these anticompetitive and loophole seeking practices.  Because make no mistake–if Google will not only solicit a showdown with Oracle over Google’s tortured interpretation of verbatim copying as fair use but also prefer to litigate with Sonos rather than change Google’s tactics in the marketplace.  Google will definitely leverage that fear of retaliation among artists.  Sometimes it backfires, like it did with Le Tatou’s expose of YouTube’s tactics against YouTubers over the European Copyright Directive (Ce Qu’on Ne Vous Dit Pas Sur l’Article 13  (What No One Tells You About Article 13)).

But it’s more likely that fear of retaliation will result in many, many artists choosing to take the abuse rather than engage in Google’s game of chicken à la lawfare that they cannot afford even if they could withstand the retaliation.

Judge Leval said of the fair use defense that the primary question is whether the otherwise infringing use contributes to the intellectual enrichment of the public.  This utilitarian public interest test is largely applicable to competition law as well (if not all public laws).  So how do Google’s business tactics in crushing opposition from Oracle to Sonos and beyond further the public interest?   They don’t.

Mr. Spence sums up the problem facing lawmakers and the courts:

This is one of the many reasons we believe that [Congress] needs to act urgently to support the next set of big ideas and to create a fair playing field for smaller technology companies. If we do nothing, America’s leadership in innovation will suffer with inevitable negative long-term consequences for American consumers and the economy as a whole.

Instead of being impaled on the fangs of The Big Four, we just get the FAANGS.  (Facebook, Amazon, Apple, Netflix, Google and Spotify.)