The Vergecast - Sonos CEO Patrick Spence, E3, and net neutrality ends

Episode Date: June 15, 2018

In addition to our classic Nilay, Dieter, and Paul trio, we’ve added a few things this week. To give you the best coverage of E3, culture editor Laura Hudson gives us a quick rundown of the news from the expo to start off the show In the second half of the show, Nilay sits down with Sonos CEO Patrick Spence. Don’t worry, there’s plenty of other classic Vergecast — some gadget talk, Paul’s weekly segment (you know, “How big is the Moon?”), and some deep dives into net neutrality, antitrust law, and Comcast’s $65 million bid on 21st Century Fox. 02:06 - Laura Hudson’s E3 roundup 07:13 - Sony issues weak response to Fortnite cross-play controversy on PS4 and Switch 11:26 - Microsoft is getting ready for the next Xbox vs. PlayStation console war 16:33 - Joseph Gordon-Levitt is defending a controversial plan to crowdsource Beyond Good and Evil 2 art 25:01 - Interview with CEO of Sonos Patrick Spence 1:02:49 - Paul’s weekly segment “How big is the moon?” 1:06:28 - I picked up a Boring Company Not-A-Flamethrower and it’s mine now 1:07:04 - The Boring Company’s Chicago project seems awfully cheap for something so big 1:11:18 - HTC U12 Plus review: fixing what didn’t need to be broken 1:12:54 - Samsung upgrades the Chromebook Plus with a second camera and new processor 1:13:44 - Eero promises not to brick routers if you don’t pay a subscription 1:17:47 - Net neutrality is dead — what now? 1:19:48 - Comcast makes $65 billion offer to steal 21st Century Fox away from Disney Learn more about your ad choices. Visit podcastchoices.com/adchoices

This episode of The Vergecast is brought to you by IBM. The music industry is facing new frontiers for talent discovery. Find out how IBM partnered with Spotify and multi-platinum music producer Alex to kid to help Alex work smarter using AI to discover the perfect artist for his latest single, Go. Learn more at IBM.com slash music. Hello, and welcome to the Vergecast, the premiere podcast of the Box Media Podcast Network. How do you like that? Is that like a soccer reference?

Yeah. Because of football? No, but it could be. Sorry, World Cup. Yeah, the FIFA podcast that you've been waiting for. Anyway, this show is huge this week, but there's only three of us. Yeah. How do you like that?

But Paul's back. Hello. Dieter's here. Hi. And I'm Neely, your friend. I'm going to just tell you, the show is out of control this week. E3 is going on. I interviewed the CEO of Sonos after the beam came out.

We're going to run a piece of that. We're going to do a chunk of that interview. It's very interesting, by the way. Every company has bought every other company, from what I can tell, which is a lot. Net neutrality is over. And a number of companies are threatening to kill your Wi-Fi router if you stop paying them a subscription fee, which is just a lot. It's like the world is creating content for us. Yeah, it's so much.

And we found out today that some artist painted a bunch of our headlines in the New York Times font in giant letters at our Basel, which is amazing. Ron Tarada. You know, as the flagship podcast, I feel like you should have done that little summary, and then at the end added all that and the Blackberry Key 2 on this week's Vergecast. And then we run an ad.

We don't have an ad to run there, but all that and the BlackBerry Key 2. Will we back after we tell you how to shave or not shave. We've told you how to shave so many times. I still don't know. All right. Let's start with E3. So here's the deal. We're to try something new here.

On this, the Vergecast. Yeah. The flagship podcast of Oxfony Network. I really wanted someone who is at E3 to come on the show with us today. Laura Hudson, Megan Fergmanache, Casey Newton. A bunch of people are all there. There's a ton of coverage from it on the site. Unfortunately, between flights and scheduling East Coast, West Coast, we couldn't make it happen.

But we got Laura to record just a couple minutes of all the biggest headlines so that you can know what they are. And then we're going to dive into a couple of them. So let's listen. This is Laura Hudson, our culture editor. Check this out. Hey, it's Laura Hudson, Culture Editor at The Verge here. The team has been out at E3 all week hitting the news. But if you haven't had a chance to keep up,

here are the headlines you need to know. One of the biggest announcements at E3 also ended up being one of the most frustrating. The massively popular Fortnite came to the Switch, and the game was downloaded 2 million times within 24 hours. But we also learned that Sony is blocking crossplay between the PS4 and the Switch and Xbox 1, which understandably infuriated.

many fans. Bethesda gave us our first look at Fallout 76, which will take players back to the world of Fallout through an online survival game set in West Virginia, where you'll be able to nuke other players. We also got a glimpse of Doom Eternal, a sequel to the 2016 reboot of the classic shooter, the announcement of Elder Scroll 6, and the news that the next Elder Scrolls will be a mobile RPG called Blades. We also got the announcement of Starfield, Bethesda's long-rumored sci-fi adventure. There are VR games coming. for both Prey and Wolfenstein and a new Wolfenstein game called Youngblood,

where you can play co-op or single player as the twin daughters of Nazi hunter B.J. Blascoitz in 1980s, Paris. Nintendo gave us a detailed look at Super Smash Bros. Ultimate, where you'll be able to play as Metroid's Ridley, as well as every other character that's ever been in a Smash Brothers title before. Minecraft Story Mode is coming to Netflix this fall

as an interactive adventure, and TellTill is making a standalone, Stranger Things game for consoles and computers. We got a closer look at gameplay from Death Stranding, the bizarre baby-focused horror game from Hideo Kojima, as well as the very cool-looking open-world RPG cyberpunk 2077, and the hotly anticipated Last of Us Part 2,

which centered on a much more grown-up Ellie, kissing girls and cutting throats. We learned that there isn't going to be any romance in BioWare's upcoming game anthem, but there will be an Assassin's Creed Odyssey, which will take the time-traveling franchise back to ancient Greece. Gears of War Five is coming in 2019, and we learned that Microsoft is not only hard at work on its next console,

but making a big push for Xbox exclusive games by acquiring Fyphe Studios to help make them. On the indie side, we got a closer look at the super slick-looking NeoCab, an emotional survival game where you play as a rideshare driver in a dystopian alternate reality that honestly doesn't seem that alternate. And there are two unstoppably cute games coming from Double Fine, Ublitz, which is Animal Crossing meets Pokemon for dance battles, and Nights and Bikes, which is Stranger Things meets Little Big Planet, but with badass bike riding girls on an isolated British island.

Oh, and there's a new Battletoads game on the way. Those are the big stories for E3, but we've got a lot of interviews and deeper dives on the site as well, and lots more to come. Thanks, Laura. Back to you, Paul. So basically, let me break E3 down for you. Yeah. By the way, that was great. Before you do that, I thought that was great.

Let us know if you want us to do more. Like recap stuff. That kind of thing. Quick summary. I learned a lot. Yeah. And I've been basically, so here's what happened. Tyler the creator tweeted with Sony France tweet that had an image of a guy with a skateboard.

Microsoft announced a terrible looking, I mean, I've seen a lot of previous for this game called Session or whatever. Yeah. Oh, yeah. What a world needs escape for? Yeah. The creator knows that. Microsoft knows that, so that's why they're backing this Kickstarter game called Session. Does EA know that?

EA, in the biggest PR hole of its very deeply dug PR whole history. Yeah. EA just doesn't know that they need escape for. And so I was like, here it is. EA didn't announce it at their pressure because they're saving it, so Sony can like announce a timed exclusive. So like the only press conference I watched front to back, which by the way happened at 9 p.m. ET, guess what was happening also at 9 p.m. ET Trump and Kim Jong-man were meeting.

So I'm like watching these two things, hoping for escape four, hoping that there's no nuclear war. And instead you got no skate four and you got a nuclear war. Yeah, like a loose agreement to not know what he's dying yet right now. And also I can't skateboard. So that's my E3. I will say this. When we were putting together a show notes, I was like, Paul, we got a big show.

And he's like, I'll do an hour on skateboard. But let's focus on the first thing Laura mentioned, which was the news. Speaking of the Sony press conference, they didn't address it there. But Nintendo announces, Fortnite on the Switch. Not just announces, but it got released. Bang, right away.

Yeah. I feel like at this port, there's a team at Epic that has ported Fortnite to everything. and they're just waiting. Well, so Epic talked about this at the, at GDC, I believe. Like, Epic is very important to them cross-platform, and they're going to use as much leverage as they possibly have, and they've never had more leverage because they have the most popular game in the world right now.

Yeah. To make cross-platform play happen, and they've been engineering Unreal Engine to be super cross-platform, which is why not only was Fortnite came to mobile, but PubG, which is also built on Unreal Engine, was quickly, was able to come to mobile. So, you know, Epic has been setting themselves up for this cross-platform future. And now, who looks like a stick in the mud? So Sony is not allowing. It's actually worse than this.

It's not just the not allowing cross-line. Let me just give you the rundown. Yeah. So they announced, all right, Fortnite's available on the switch. Go get it at 10 p.m. Pacific. Everyone's like, hooray, and they go, and they download it. And then they start it up. And if you have ever, even once, played Fortnite on a PS4, you cannot log into that account on your Switch.

You've been locked out. You can do crossplay across PC and Xbox and Switch and mobile and all that's fine. But Sony specifically seems to be blocking crossplay with the Switch. Although, nobody knew for sure what the story was because people saw this error message. There was this air message from Epic that was just like ice cold. Yeah, the air message is common. This doesn't work. This doesn't work.

And don't email us or call us because we can't fix it. Make a new account. Sorry. At which point, Epic says nothing. You know that there was probably a lawyer with like a Sony logo on their lapel with a knife just like standing next to their Twitter account. People just like, be quiet. Sony said nothing. Xbox, Microsoft was like, ha, ha.

They like, no, our stuff is cross compatible. I don't know what's up. for something like 36 to 48 hours. And then finally, Sony issued a statement that was, we love crossplay. Our crossplay works with PC. Bye. Completely ignoring the massive backlash that they've been facing.

Something about we like to hear people's comments. Yeah. Yeah. We want your feedback. Yeah. Our feedback is stop it. Yeah. The Sony corporate PR AI machine was like,

Feedback accepted. Yeah. It's a mess. Here's what I don't understand. Can you help me figure this out? Yeah, yeah, yeah, yeah. It's very confusing, actually. So when you log into Fortnite, you're logging into Epic.

Mm-hmm. Right. So how can Sony, like, intercepts? As far as I know, at one point with Fortnite, there was a bug in Fortnite, and there was cross-platform play. Yeah. Epic is artificially restricting cross-platform play from PS4 specifically, because Sony wants it.

Okay, so what is Sony giving Epic? Right, that's like an interesting dynamic there that I don't understand because it's just software that connects to a server. I think they're giving them access to the platform. Like, maybe they're giving them money. Maybe there's something under the table there. But I think it's just as likely that what they're doing is not banning Epic from the PS4. And so if that's the case, the question is, does Epic have enough leverage to be like,

whatever, we're turning it on? Or can Sony somehow block it in their system where everything that goes on, line gets routed through Sony's server at one point through your PSN account, which means that Sony can block it and Epic doesn't even have a chance to say, no, we're doing it, screw you. Well, you can't play online in a PS4 unless you're signing a PSN. Right. And so you'd have to be pinging Sony's servers at some point for that identity stuff.

But obviously, that's already working for, like, if on Epic's end, they just pretended like the Xbox and Switch were like iOS devices. As far as I know. Yeah, so that's, I mean, that's what, and so the other thing Laura was mentioning is Microsoft's really, and at least exclusive. Doesn't anybody realize? I feel like we're out of the exclusive era. I understand that, like, Nintendo can do Nintendo things. I don't think Sony and Microsoft really get to do the classic console war anymore because I just feel like, I don't know, man.

PC gaming, it has so much power in this market now. I mean, Sony won, though, because. if it's exclusives. They just blew Microsoft away this generation. Microsoft's announcement were not about fixing the Xbox One. Also, God of War, by the way, exclusive. Just saying, like, one of my favorite games of the past six months. Anyway.

But I think Microsoft bought all these studios so that when, because they're already talking with their next generation, Sony was out there a month or so ago being like, we're in the final phase of the PS4, right? They're setting themselves up for the next console generation. Yeah, but I just feel like... So is Microsoft, although for a different reason. No, I'm saying both of them. I'm saying winning the Battle of Console exclusives is winning what is not necessarily a smaller pie, but it is a small pie relative to the future of games.

The most important games of the world are Fortnite, which is everywhere. PubG. Which is just one place. No, it's everywhere. It's everywhere now? It's everywhere, yeah. League of Legends, which is PC. Minecraft, which is everywhere.

I mean, jump in if there's stuff I'm missing. Like, I know that there's really important games that people love. It's good for. It's one you're missing. Technically, that was an accurate answer. That's true. I guess we're saying the biggest games in the world are everywhere.

Yeah. But you've got to move it on the margin, right? So like, you want to sell more. They're playing for the margin. They're fighting over the margin. They're not fighting over the future. Whatever. I don't care. You're just going to.

I don't know that I do care. I stupidly. bought a PS4 Pro instead of an Xbox 1X. Because everyone was like, you gotta get these exclusions. You made the right decision except for this Fortnite garbage because there are better games on the PS4. They just are. I think built into

that argument is that PC gaming is the future for everybody and I just don't. Nope. Sorry, I hate PC gaming. I love gaming and consoles. Like, having a big, dumb, corty keyboard in front of me while I'm trying to play a video game is not fun or immersive for me. What I like doing is buying all the video games than not playing them. That's my strategy.

Yeah, I do that. Yeah. Any other E3 News that you want to talk about, Dieter, Paul? I mean, so Microsoft, they bought a bunch of companies to try and actually make games for the Xbox to get exclusives. They are planning a streaming, a good streaming video game service, we'll see. But they want to release stuff, you know, day and date on the streaming service and have it be high quality and not wait for it to come later as like, you know, other stuff. There was no Metroid Prime 4. I'm very unhappy about that. It's fine.

It's fine. I know I should be excited about Smash Bros. I'm not, I know I should be, but I'm bad at video games and you have to be good at video games in order to enjoy playing Smash Brothers and I'm bad at them and therefore, whatever. I think it's Cyberpunk 27 or whatever. It looks fine. It looks good. I played cyberpunk back in the day, like the RPG that this is based on. But I don't know.

Something about it strikes me is it's like they're not going to pull it off. It'll be good, but I don't think it's going to be like generation defining. And I wish I had something interesting to say about death strength. beyond the thing that everybody says, which is what the hell is going on here, it looks like it's just going to be unsettling all the time. I was talking to my buddy, and it's like, there's a game coming out where you're like a male man. It's like, you're just alone, and then it's like weird apocalypse and you're a male man. I was like, you mean the Kojima game?

It's like, oh, that makes all of sense. Yeah. I'm very excited about that. I love a Kojima game. I mean, yeah. I love carrying babies in little weird things, and then they detect invisible. creatures. It's unsettling and it's different and you don't expect it. Yeah. I think that's what's worrying about like, Fallout 76 was probably, to me,

it seems like the biggest announcement of the show. And it's just not unsettling or different enough. It's like, what if we mixed Grand Theft Auto online with Rust and kind of something a little bit like fallout, right? Yeah. Yeah. So it's like, I think everyone's chasing the Fortnite wave, right? Like, what if we take our world and make it funner for everyone to play? And like, maybe maybe that's what you want? Yeah. Yeah, it's going to be different. I personally hope Beyond Good and Evil, too, is great because I loved the original Beyond Good and Evil. But did you see this drama about Jason Gordon Levitt's hit record thing?

Apparently, they're going to try and crowdsource music for it. And everyone's like, that's spec work, yo. And he's like, no, it's fine. And just, I don't know, man. If you're partnering, like, he's a very fine actor. And I love that he gets to make a viral video once a year where people feel like they're empowered. That's all very nice. but it's so clearly just like a play for him to make money off of branded content.

He's been like partnered with LG for years that I kind of just don't care and I wish they wouldn't have bothered. So I read his whole thing immediately. So Joseph Gordon Levitt just to explain what's way on. JGO. He is making music for a game and he has a platform called a hit record. Called hit record where everybody can like participate in the making music. And his thing is like participate in making music and we'll put it in this game. But it was unclear until today, where it got slightly less unclear, how anyone get paid for that work?

Like, why would you participate and give something away for free to a game that would be sold for money and presumably play JGL? And then he, like, this long thing about how everyone gets paid if you're in the final thing. And some people's contributions are small, so they get just paid pennies. Some people get paid hundreds of dollars. It was a very long thing about how the payment would work and his theories about. payment and I just we're coming to a point on the internet where the kids are going to start realizing

that Metallica was right. It's going to happen. We're going to look back on Lars Ulrich being like hey don't steal our shit and give it away for free and everyone yelled at him and now we're going to loop all the way back around to anytime I publish something on the internet I should get paid for it. Which is not a bad

argument it's just to me very funny because of how pilloried every artist years and years ago was about stealing music. I feel like we're progressing towards the end of copyright. You are definitely wrong. Probably. No, it's just like you can't, I was talking about this with a bunch of our culture reporters, Megan, and Bajon, Patricia, and Devin. Like, YouTubers don't get mad when people steal their formats, right? YouTubers get really mad when people do reaction videos to their videos. All that stuff

is just, it's fundamental copyright stuff. And the moral outrage they feel, is actually reflected in the law, but they hate it. So it's like this parallel system where just like how many, how many internet comment points you score is like the alternative to like getting lawyered up. It's really wacky. Explain what you're saying, because I don't quite understand. My understanding of YouTube culture is they are freaked out if anybody's going to do

copyright strikes against them. Right. So they hate that. Yeah. But they don't, they also don't like it. If like you're a smaller YouTuber and a bigger YouTuber lifts your fore. lifts your format or they do a reaction video to your thing or there's a lot of people who they're like my music got used but the cycle or here's another example smaller designers hate

it when bigger brands steal their designs right which is a thing that happens all the time and there's like there's waves and waves of outrage but I feel like YouTube culture is not very much like that people are used to this idea that you get exposure I think that's changing through this I think that's changing in serious ways and I think this video game thing is interesting because, you know, Bethesda, it feels like one of the, just, it's a behemoth now. And a lot of it is based on a user-generated content. Yeah. So I think that. Which happens after release, after people have already paid for the game and people build content for Skyrim or Fallout after the fact. Yeah. So, but I think it's,

it's like parallel thought processes that are not reconciled. One is, you built a thing. I'm actively participating in a thing and the dawning realization that I'm receiving no compensation, but you're getting rich. Right. And there's like a something is changing in there. Right. And then on the other side, there's like the formal copyright regime, which is I'm going to lift the new Ariana Grande song and put it on YouTube and write no copyright intended under it.

And that should be fine. And like those things have not been reconciled at all. Right. Right. Either you're like, you live in a world where it's fine to just like take and remix and share. and then some people will like sell it. Or you live in a world where it's not fine. And I just watching sort of this new generation of creators,

which I love, I love the fact that they just have different ideas. I'm just watching everybody sort of reconcile the idea that they're making stuff and they want that stuff to be valuable with the environment, in many cases, the platforms that like created the ability for them to make stuff.

So like this thing to me is, this JGL thing to me is just an example of we're past the point of corporations really asking people to make them suffer free. Right. Right. Like they're like no you're going to you're going to make a lot of money if I do this. In some industries we are but ultimately it's their right to do spec work. Like obviously a lot of industries like it's really frowned upon but like I'm not going to get outraged on behalf of somebody who's totally fine within and into it. Yeah.

You know? It also is a way to like in many cases, like, submit a thing where you would never have the entry point. Yeah, if you want to be involved in something bigger than yourself or you want exposure or whatever, go for it. If you say, no, my work is worth money, I will only do it for money. Then go for that as well. Yeah, I'm actually not mad about the spec work that, or not that mad about the spec work. I think you shouldn't do it if you can avoid it. I think it's not great for, you know, your life.

I'm just mad that JGL gets to, is still thinking that he can act like he's doing a, a nice, lovely internet thing and not just doing brand advertising, because that's what he's doing. Yeah. I mean, at the end of the day, aren't we all just doing spec work for Twitter? Right? We just get that shit away from free all day long. I want to go back to Microsoft really quick. And I know this is unfair, but, man, am I tired of Microsoft selling me on, like, they're going to get it right next time,

and that the future is going to be amazing instead of selling me video games right now. Yeah. Like, and I'm not just talking about, like, crackdown as taking front. ever to come out, right? I'm talking about like, they're like, here's our thing, but just hang on, the next thing is going to be even better. Microsoft can't help it because they're a platform vendor. That's what every platform vendor does, right? They think about the Xbox like Windows. They're like, we built a new platform. It's got new APIs. It's going to work in great ways. Take it away, developers. And the developers are like, Sony paid us. But like, we just came off

dev conference season, and like, that's what all the platform vendors do. They're like, look at all the new features of our platform developers taking away. It's weird to me because it seems like Microsoft understood this back in the day. What did they do to get the Xbox? They bought Bungy. Yeah. They outbid Apple for Bungy. It's true.

Or for Halo basically. Can you imagine? They also had Peter Moll. Yeah, but they were the first Xbox. It's the Xbox 360. That really did it. Right. And they beat Sony very significantly.

to that generation. Right? Like they were first out with HD, which is wild to think about. Oh yeah, they had Gairs of War. Right. They just sort of won the race

in a way that they have not yet won the race. But it just seems like, I don't know, I've never had a billion dollars, so I don't know. It seems like it's easy to spend a billion dollars and make a lot of video games that are exclusive. That's one way to get exclusive video games. Well, they just bought four studios or something,

so that's the plan. Like you said, years late. All right. We got to move on for me three. Thank you, Laura, for recording that segment for us. I'm very curious if you want more of that on the Verchcast. We have a lot of reporters who would just do that every week. Let me know if you enjoyed segments like that.

We'll have Laura on the show soon and actually get into it. But let me know if you like it. We are going to take a break. Then we're going to come back and check this out. I interviewed Patrick Spence, the CEO of Sonos. Last week on the show, Paul, you weren't here. I posited that Sonos's entire business model was driving people to build bigger and bigger houses so that you would need more and more speakers.

I asked him about this. This is true. This is a great theory. And I told him that if you have our partners with LinkedIn to build a career services division, I mold royalties. Anyway, we're going to have an ad. You're going to listen to me in every Patrick Spence. Deeter's just going to keep ranting about video games in the background. Then we're going to come back and talk about gadgets.

And honestly, and I trust law. And then a half hour about Sk4. All right, listen to this. Hi, Virchcast listeners. I'm Kara Swisher, the editor at large at Recode. I want to tell you about an interview I just published on my podcast, Recode, Decode. At the Code Conference this year, I interviewed Uber CEO Dara Kosashahi about replacing Travis Kalanick, its founder, and his plan for the future of Uber and what happens to its self-driving division after that fatal accident in Arizona. Once again, the name of the show is Ricodecoed hosted by me, Kara Swisher.

You can find it wherever you listen to the Vergecast. See you there. Hey, everybody. We're back. Patrick Spence, the CEO of Sonos, is with us. Hey, Patrick. How are you? Hey, good, Neela. How are you? I am great. You launched a new. product last week, the beam. How are you feeling? Feeling very good. Yeah, we were very happy with the reception of that product and really, you know, what we think is the best smart speaker in the world. Well, that's a bold claim. Let's let's dive into it. I like it. Just to set the stage,

you have been at Sonos for some time, right? Six years or so. That's right. Yeah, just, I'm just coming up on my six year anniversary. And you took over a CEO about 18 months ago. That's correct. So I was just looking at some of the, you wrote a great memo to your team. when you took over as CEO. And, you know, it's interesting. You'd been there for several years before, and you took over.

So you obviously want to make change, but you're from the culture. But there was one line, I just want to ask about specifically. And it's a great line. I really like it. You said, we need a bias to action. We need to innovate boldly and move faster. How, in the last 18 months, how's that going? What changes have you made to, like, really deliver on that?

Well, I think I think the announcement cadence speaks for itself. So we've actually had three new products over that 18-month period. And we've ended in a good position where people are moving faster. And really, I think the demand was latent in the organization to really, you know, really put us in a position where we could unleash kind of people inside the company. And so it was one of those things where it was there and I was just kind of opening it up. And again, you have to think about the whole life cycle. of the company because really in the beginning, Sonos was quite ahead of its time and was in a position where if we were moving too fast, we actually would have been ahead of the customer.

And in some of those situations, you know, you can actually end up extending yourself too far in a situation where the company just, you know, is gone. Right. And so there was a little bit of making sure that we were working through it in kind of the right cadence and not getting too far ahead of it. But now, certainly, like, we've seen smart speakers and everything we've been doing kind of really hit with the mainstream. And so I felt it was really important to say, all right, now is the time to really unleash the team and, like, let's go and let's bring, you know, everything we got to the game. So the three products that you talked about that you've introduced, obviously Sonas one, which was probably the splashiest most mainstream consumer product. It's a smart speaker. That's a hot market. The play base, which was an extension of your existing home theater.

line, like a nice repackaging of the play bar. And then now the beam, which is another home theater device with speakers in it. Were all of those brought up under your watch, were some of them kind of products that were coming anyway? Did you say, we have to do this right now, start from scratch, release a product, or are they all kind of in the pipeline already? We always have a number of ideas we're kind of working on. And I think what, you know, I did with the team is really say, all right, it's time to move on these products. So Playbase was just a couple months after I took over. You know, that one was in the pipeline. And then the first, I was really the one that was pushing around the importance of voice control as making it even

easier, you know, for our experience, which is something we've always prided ourselves on, is that ability really for customers to get the music playing quickly and have a great experience. And so the Sonos One has been our fastest product to market. And obviously, it's leveraged everything we've, you know, learned in the past and built off the play one. But that is, I'm really proud of the team's efforts there because that's something that we brought to market faster than any other product. And with Beam, it was something that we had the ideas around. And again, with voice coming into it, just really needed to kind of need a bit of a push,

if you will, in order to get that in the right place. And so, yeah, so just been trying to make it clear, like, what's the right next one? What are the important attributes of the product that we need to bring to the market to keep building on the kind of experience we believe customers really want. So the beam, when it was, I think Dieter wrote a great profile of the beam and how you're working on it. I noticed that piece he said it started two years ago. Was there a moment when you pulled the ripcord and said, hey, add microphones to this? Absolutely.

Absolutely. No, that was important. So I really, you know, it wasn't too long after the Echo, original Echo came out that, you know, I try to get every product. to try to be experimenting and experience everything that's happening in the industry and even outside the industry just to see what's happening and have a feel for that. And I've been on the voice bandwagon for quite a while. And that's one where we said, no, this is, we need to get this in the product. It wasn't originally in the scope.

And we said, no, we've got to get voice into this product. Yeah. So the voice market's obviously very, it's hot, right? You're competing against all the big players. They've validated their approach, right? Google has a bunch of products out there. Amazon, obviously, you both compete with and work with. Apple has a home pod.

And, you know, the value of Sonos to me, I have a pretty big Sonos system, is that I can just use all the music services. You have Alexa on there now. You've been talking about adding Google Assistant. When is that sort of next stage coming where you have multiple voice services? When is Assistant coming, for example? Well, last week we demo the ability to use Siri to actually start the music on Sonos as well with AirPlay 2. And so, yes, you know, it's not directly on the speaker, but you're using your iOS device to be able to activate the music and move it around.

Yeah, that's not what I mean, though. And so, you know, we announced last year with Google that we'll be bringing Google assistant to our speakers. And we continue to work on that. And when it's ready to go, we'll roll that out. So we're working closely with them right now. and stay tuned, you know, on that one. Let me ask you a very leading question. Is the holdup a technical holdup or a business holdup?

Oh, it's all the technical work right now that the teams need to do to create a great experience. Yeah, that's what is taking. And look, like, even, you know, this is a repeat to the same questions I got last year at this time, which is, where's Alexa, where's Alexa, where's Alexa? You know, when we approach one of these things, and I think we built the reputation with these partners, remember, we've worked with Amazon, Google, Apple, Spotify for a long, long time and on the music service front. And now that we're working with partners like Amazon

and Google and Apple around voice, you know, they know how we approach this from a very, you know, holistic experience basis. And we do things, you know, in the experience like we're doing with continuity control where, you know, last week you could start the music with Siri and you could ask Alexa what's playing and Alexa would know. And so as we think about these experiences, we build them in a more holistic way because we're not thinking the way everybody else. is, which is kind of walled garden speakers, we're thinking about an open system which supports every service that you need, whether it's a music streaming service, a voice service, audio book service, podcast service, whatever, it may be anything from the Sonic internet

that you want to play out loud on Sonos, you should be able to. And that's what we're committed to. So I got to, I'm going to come all the way back around in this very specific question. You only have one assistant now when you've said Google assistance coming. Is there a timeline on that? we're working on it. So we always pride ourselves in bringing it out when it's ready. So we'll let you know when it's ready. I'm going to try again. Is it this year?

We'll launch the product when it's ready. All right. Well, I had to give it a shot. Of course. I know you do. I will say it doesn't sound like you're saying this year. See? The Sonic Internet fails at this question.

No sonics at all. Well, hopefully it will be this year. I'm sure you're going to let us know. Yeah, of course, we'll let you know as we. you know, go through that, but I also want to make sure that we get the experience, right? And like I said, you know, we, this is the exact same question we were going through last year. And so, uh, I would just say, stay tuned. Uh, so. All right. So then here's the, the natural follow-up question. You have Airplay two. Airplay two only on the newer devices. You just told me that it, you know,

you've got, you know, five-year-old devices, 93% of it still being used. Was there a specific reason you couldn't bring Airplay 2 to the older devices? You know, with the processor memory requirements, we had to look back and, you know, make basically a decision in terms of how far back we could support at this point. And so that was the guiding principle as we went through it. And then with AirPlay Airplay 2 is great, you know, but Apple, that's their open-ish standard for audio.

And they really want you to have a HomePod and control Airplay 2 through a home pod. But the bigger question is obviously Siri. And I know I was listening to you were on Two Bears Task with Kara and Lauren Good last year, and they pushed you on this. I'm going to do it again. Is there any update on that conversation with Apple or I'm bringing Siri to the Sonos platform? You know, I think at this point, Apple needs to decide if they're going to be, you know, opening Siri to third parties. But we have a good relationship with Apple and we've had some conversations on this and look forward to having more. Yeah, I mean, I think it's a coup that you, you know, I'm an Apple Music subscriber and I think it's a, it's a good.

The coup, Apple, let you have Apple music from the beginning. That's not usually how they work. And I think it speaks to the fact that a lot of very influential people have Sonos in their homes, and Apple would have never gotten anywhere if they didn't offer you the support. But do you feel like you have the leverage, that's similar kind of leverage to get Siri? Yeah, look, I think what the services we have kind of speak for themselves in the sense that we're in millions of the most desirable homes around the world. And so companies like Amazon, Google, and Apple want to get their services in front of those customers. And in fact, must.

And remember, like, their agendas are quite different than ours in many cases. Like, we're not attempting to build and ask anything voice assistant and try to own the search space, right? We're not looking to build a big e-commerce company and sell you everything. And we're not also going to go build a mobile phone, you know, and approach it in that way. And so I think as all these companies, from my conversations with them, what I've found is they love. the experience. We have a history with them, right, in terms of the work we did do on streaming music to your point. And then they're looking at saying, okay, we want to work with you on creating a great experience and bring our voice services together. And I think, you know, for the most part,

if we can continue to show them that we're good partners in that way and continue to build our household base in the kind of way we have been, then we're in a good position and it's the right thing for the customers and everybody wins. So when you say you can work with everyone, that's a lofty goal, but they also have cross-purposes as well, right? And, you know, I think Amazon's strategy with Alexa. Honestly, I feel like Alexa's Amazon's windows, right? They want it everywhere. They want everyone to use it. Virtually anybody can build an Alexa product. Google is doing something similar with Assistant, although it really feels like Google's first-party assistant products are where their emphasis is. Apple, obviously, is. very tightly controlling of Siri. But when you think about what you're doing with Alexa in particular, are you getting a deeper relationship with them and their team than sort of any other Alexa voice services vendor would get?

Or are you just taking what they're offering publicly and building your own sort of like middle layer to control it all? We're working more closely with them just as we did on streaming services. And that goes across the board as we engage with voice services. So, you know, working to make sure that the, that continuity control continues in the cloud so we know it's playing and that there's that there's good continuity between our app and like for instance the Spotify app and as well Alexa and so that takes work between our teams and so we have a good partnership with Dave Limp and his team over at Amazon and I

really think you know they're approaching it with Alexa yeah they absolutely want to get Alexa everywhere and they they look at the households we're in and say hey we want to make sure that those homes can experience Alexa and look also when I look at it you know, there'll be there'll be some rooms in the home that maybe do have an echo dot, let's say, and then there'll be others that are more appropriate for Sonos. And I think that may be the world, you know, that we live in. And if so, that's fine, right? We want to have the interoperability so that people can be using that.

But I think what happens longer term is that people look to different brands for different things. It just happens in apps. It happens in all these spaces where, you know, you'll ask one company for ordering something so Amazon for ordering something as part of Prime. You are going to ask Google for, you know, the general searches. And you might ask Siri to play Apple Music or to find your iPhone, for instance. And then maybe you're going to ask Facebook to do something. Maybe you'll ask Spotify to do something. I just don't see a world where you're going to have one assistant

that's going to do everything for you. And that's why we think it's important to be able to offer the whole host of services and kind of give customers that ability to, uh, be future-proof, if you will. Tell me about the IKEA thing. So that was really interesting. Just a little inside baseball. This wasn't your press release. You're free to laugh.

But IKEA put out a press release, and they sent us the wrong photos. So we had to, like, go back. So this otherwise, like, innocuous sort of story, like, became a fire drill for our international team, because they were pulling down all the tweets and Facebook posts and putting up the right pictures. So at least from my perspective, I suddenly was paying a lot of attention to this. But tell me, so you partner with IKEA, they're going to be. make their own speakers with your tech in them. That is a very new move for you, right? Absolutely. So I think the, I'm now curious as to what pictures you received, but I think

the, you know, we've been experimenting with them on a few different, you know, four factors, obviously, and they bring, it's been fun to work with them because they bring such an interesting home design mentality and kind of modular thinking to it and different price points, right, as they think about it. So we're working with them to help with some of the hardware platforms. but probably most importantly, the software setup experience and the services around it. And so this is what I mean when I talk about the fact that most of our product teams actually is software. And that experience for a lot of people has been, Sonos has made it super simple for me to experience music around my home. And we're bringing that to IKEA. And they'll have

other ideas about the ways to, you know, and what kind of form factors should sound really show up. But I think with our true play technology, right, which allows you to move the sound around the room and really tailor it to the room, plus their ingenuity on furniture and, you know, and then our combination around sound is all the software experience. There's some really interesting possibilities for the way you experience sound in your home that are very different than the way we've experienced it for the last 50 years, right? But you're not designing their speakers for them, right? Like if IKEA, is there like a minimum sound quality threshold that IKEA has to reach? Or do they just have your software and you're going for it? It's a much closer collaboration than that. So we both, you know, obviously we're very near and dear to the fact that anything that is part of the Sonos ecosystem needs to sound great.

And so we're working very closely with them and helping there as well. But certainly at the end of the day, they will be the ones, you know, selling and creating those speakers. But we're collaborating on that, collaborating on the form factors, collaborating on the ideas around the furniture. and then bringing our expertise around software. So you brought up TruePlay. Here's a simple question. You're now putting out speakers with microphones in them. Obviously, Apple's doing all this crazy tuning with the home pod.

Google's doing it with the home Macs. Are you thinking about having TruePlay just sort of automatically work instead of waving an iOS device around? Absolutely. No, that's the next step for TruePlay for sure. You know, everybody enjoyed the TruePlay dance, but I think we could take it a step further from simplicity, and we're definitely working on that right now. My, every time I go to a friend's house with Sonos, I can immediately determine how much of an AV nerd that they are by, by, you know, opening the app and seeing seeing a true play has been enabled.

Because I know, I know they spent the five minutes listening to beeps and like walking around. Exactly. Doing the dance. Yes. Doing the dance. But you're saying that that's coming, that the products with microphones, presumably only they're the only ones that could do it. They're going to start listening and tuning. Yeah.

Yeah, we're working on that now to actually do it without you needing to do. anything in the same way that look like one of the one of the things that we're also working on is the ability to do auto updates so that the software's updating the background so that you don't have to when you open the app you don't have to go through and do that which has been something that's been gotten the way of people listening faster if you will so it sounds like a small thing but at the end of the day it I really think it's a lot of these small things that ultimately add up to the great experience around sonos and what really matters Yeah, my favorite Sonos update of the recent months was it very much wanted me to update to the newest version so that Sonos won Alexis support would be available in New Zealand.

Australia. I'm sorry. I get it right. I'm sorry if I irritated anybody down under that. But it was just like one of those moments where I was like, I don't, I mean, I'll do it, but I don't actually want to stop. I've opened the app to listen to music. I don't want to shut everything down, right? And then you've got to remember to do it.

So you're saying that you can bring that. Can you, now this is like a 10-year product cycle question, right? Can you bring those capabilities to your older products? Yes. That capability we can. There's certain things that you can't, like all the time as you go through it, you know, from time to time. So we have to decide on which things we can. But we definitely, it's interesting because we're probably on the leading edge of the smart home as you think about that

and how long we've been in the home and connected to the internet and everything around that. and shipping products now for 13 years that are internet connected. And we have a pretty good reputation of being able to deliver the new functionality and help keep making those speakers better. But it does get to a point. We recently end of life the CR100, for instance, our controller, right? Because it was a 13-year-old mini-computer, basically, and it can only do so much. And so this is, it's one of those things that I think we do better than most,

but they still do, you know, eventually they come to some point where you can't keep going. So just staying on the 10-year timeline thing, can you, as these things get smarter and smarter and smarter, the connectivity gets more and more intense as you build out into, you know, more interconnections with smart homes, as assistants get, you know, the push and pull between what you're doing locally and what you're doing in the cloud happens among all these country companies. Are you, do you think these products now are going to last the full 10 years with the hardware that's in them? Are you building them out or are you saying this is our, this is what we can do right now. We're thinking in the in the kind of five to 10 year range. That's the way we think

about these products. So for sure, you know, in terms of doing that now, we'll see like is there some major leap in technology, either, you know, software hardware that then says, okay, this one's only going to live seven versus this one at 10. I can't, you know, specifically say for each product, but we definitely think in that five to 10 year, you know, timeline, which is so different, right, than most companies I find in consumer electronics because we believe if we do that, we do that well and make it better over time, people will add another one, right? And they'll tell their friends and family about it. And that builds like a great business for the long term. I just think people in the stand age are so impatient and so like all these disposable devices

and people that, you know, buy a Bluetooth speaker this year and then the next one next year or like in a couple of years and they all end up in drawers and all that kind of stuff is just, it's disappointing. It's just different than the way we approach the whole space and want people to use our stuff. Yeah, I guess I don't know if you listened to our show last week or somebody tattled on us, but we were joking that the Sonos business model, it almost demands that every Sonos customer becomes more and more successful over time so their house will have more rooms and so you'll be able to sell another speaker for every room. Like, is that how you think about the customer or is it, I'm going to tell my friend that

this was great? There's really, so two things happen. One is that, you know, every year, over a third of our sales, come from existing customers adding another Sonos product, which I think is unprecedented in the industry. So people engage in it. They listen to 80% more music once they buy Sonos. And then they engage in the system and they're using it all the time and they add another room because they love it so much. That's like one driver. But that, you know, two thirds of a revenue that come from new homes, the number one driver of that is people telling, you know, their friends and family.

So existing customers telling their friends and family, I got Sonos, it's great. You should get it or buying it for them for Christmas, what have you. And so that's really the way that happens. And I think it's our job to bring additional products out and like what we're doing with IKEA and what have you to really reach a broader range of customers as we go through and just make it more accessible. And I think if we do that, then we end up being able to get it into even more homes. But right now, definitely the flywheel is.

engagement and love that drives repeat purchases from existing customers and them telling their friends and family about Sonos. Have you ever thought about like partnering with LinkedIn to do like Sonos career development so that people have to buy? They buy every Sonos customer is like eventually going to buy a bigger house? Well, it's interesting because then we get into correlation causation. So maybe it's because they bought Sonos that they became successful. And maybe that is, maybe that should be the marketing line, right? is that this is a, if you buy Sonos, you can expect a bigger career, a bigger house, and everything that comes with it.

I'm definitely calling you for royalties if you pull out a LinkedIn information. Actually, I have one more question about you expanding. There was another, this is way under the radar, compared to IKEA, but you partner with like Pioneer Morantz, and you're letting their receivers control some Sonos devices now. Are you going to, and that's like a big, you know, there's a lot of people with like full-on, crazy home theaters, they want to put Sonos, and then. Now it's a little bit more seamless than it was before. You still have to buy some hardware.

Are you ever just going to straight up license the underlying Sonos connectivity stack and just let them build it into a receiver directly or let, I don't know, Yamaha put it in a soundbar on their own? We've been thinking about it because I think in that space, you know, there's a lot of still great traditional audio companies that don't have the software expertise that we do. And really, I don't see many of them investing. and it's kind of a shame. And so there's these great audio brands and certainly it's something that we continue to look at like how deeply should we partner on that. So yeah, you've seen us dip our toe in the water there,

but much like we're also working with IKEA on how do we bring, you know, Sonos to more people through their, you know, kind of through furniture at home and all of that. We're definitely looking as well at the more high-end audio file space and how do we, you know, give that Sonos experience, but also give people the flexibility they want, right? Because there's a lot. are people that still will want these high-powered specific receivers or, you know, their tower speakers or what have you. And so we want to be there. And you know, I mean, we came out of that world originally, right, with Connect and Connect Amp in terms of really powering other people's systems. And so it's interesting you would raise it because it has been something that's been

more of a conversation around here lately. We've dipped our toe in the water. We're obviously extending the software platform. And so look for us to be doing more in that space for sure, because I think there's something there, and I think it's good for the industry. Yeah, I mean, I have a Denin receiver with a Connect, you know, plugged into it. Of course, I've only ever bought Pioneer receivers before, and I bought a Denon this time, and then you announced an integration with Pioneer, so that was great. But the second, you know, you, Denon's already because I have their own crappy heos thing, but the second a receiver with it all just tightly integrated comes out, like I would upgrade,

even though I literally just bought this thing. And I don't know, are you thinking about that as a market that's growing that's going to give you licensing revenue or are you just thinking about, you know, how to get this in more in more places? Both. And I think the approach is, you know, it's a niche still. So I wouldn't say that's like a huge driver in terms of what's there. But like I said, I think the, I think exploring some of these things makes sense. We'll see how it goes in terms of the work we've done with Pioneer Ankio and the others and like see what kind of demand is there. But I think for,

you know, customers like you, there is still a space for us for sure. All right. So we've, and entered the home theater zone, so I'm going to ask you this question. I'm sure you were prepared for it. But you just put out a new home theater product. There is a hot new home theater standard in audio called Atmos. I haven't heard of it. I've announced that they're supporting it. And you're not yet. And I sort of understand why, but I'm curious, why aren't, if you're increasing the innovation rate, you're increasing the bias to action, you're increasing the product cadence, and you want these things to last for a long time. Why not, you know, the big new standard that the Apple TV is now support? very prominently or, you know, every other streamer supports now. Yeah, look, we've always taken the approach of how do we create great sound, you know, for the room. And we look at the technologies that are out there. And we also look at the sources.

So, you know, it was good to see Apple pick that up. I point out that, like, for Netflix and a lot of the streaming services, and, you know, this Dolby Digital 5.1 is kind of the thing that is used primarily today. And we support. And so we're always looking at what's happening. And Atmos is fantastic in 7.1.4 today, right, in terms of that experience. And you probably know Giles or sound experience leader. He's actually mixed stuff for Atmo specifically. And we've, I mean, it sounds majestic in that kind of environment.

How you bring it into sound bars to really enhance the experience is something, you know, we're definitely looking at and thinking about. But I'd also say the primary driver at the end of the day is, hey, like, how do we create the best sound possible in the room and not get too caught up in like what's the flavor of the day from an audio technology perspective. And so sometimes we'll do things where, yeah, it frustrates some of the people that are like a little bit more into the space, you know, in terms of what are the standards and what's the new stuff. But look, if something emerges that's, you know, really experience defining, we have no hesitation about like building that into our products as we go through. But as we went

through this one, we said, hey, this is fantastic for 7.1.4. There's still some work to figure out how does it really enhance a soundbar experience? And so there's still more work to be done. Well, you know, it's funny. Last year, you put out the Playbase, Walt Mossberg and I, we were doing his podcast, and he was laughing at me that I even cared. He's like, no one cares. That's not what this product is for. And there's no content anyway. And all of those things were true at that time. But now you are in a world where a lot of your competitors, however you wanted to find a competitor set. But in soundbars, they're all. just putting out cheap atmosphere

and Apple in particular, you know, was on stage last week's WWC and they made a big splash and people clapped and bizarrely people tweeted at me congratulations, which is a,

I didn't intend to be Dolby's brand ambassador for object-oriented surround, but here I am. Is that something that you could add via software to something like the beam over time, you know,

a new decode support? Because it's gone from being pretty niche to, you know, one of the largest services supporting it. And by default on their, when people have their Dolby Vision TVs or whatever,

they're going to look for that next piece. Well, I think the question is up to Dolby a little bit too because they, as you know, have been changing what Atmos means in terms of like software, soundbars, all of that. And so they've been working on, hey, what does what does Atmos really represent as they go through it? And so I don't think, you know, from my perspective, I think the better thing to do is like approach it more,

like from a full sound. perspective, which is hardware and software and kind of integrated in it. But we'll have to see what Dolby decides to do at most around software. And do they, you know, do they change that up a little bit? But I would, I'd say I land on the, I'm doubtful. That is something that ends up being implemented via software versus hardware. But we'll continue to work with them and really watch it. And I think you're right. It has picked up some momentum. But I'd still say from our experience with consumers, for the most part, they look at it and they're listening to the sound and trying to determine does that things sound great, you know, maybe versus something else instead of does it have

Atmos or does it have this and that? So that's, that's been our experience so far. I definitely agree with you that Dolby has taken the word Atmos and they it's like they got a brand that anybody would remember. You know, it's like that only happens every so often if you're Dolby, I think. And they were like, now it's on headphones. You're a keyboard. Right. Is an Atmos keyboard. And I think that. Right. It's great. Now, you know, they've accomplished one goal of everybody knows this word, but no one actually quite knows what it means. It's interesting, you know, we've been, we've sent reporters out, there's a nightclub in Chicago called Soundbar that has an atmos audio system and the DJs can like swirl sounds

around people's heads while they like dance on drugs or whatever. And that is actually very different technology than what the movie side would do. And I think that is, it's interesting. At the same time, the basic definition is like you more or less add two upfire. hiring speakers to a 5.1 system and you're there. So when you think about the next play bar, right, because that product is several years old now, is that something your engineers are like fiercely debating? Or are you just saying wait and see? Oh, we're definitely debating that and looking at it. And, you know, and obviously we talk to Dolby as well. So on all of this stuff,

we try to be on the leading edge in terms of thinking about what are the right things that should be, you know, in future products, right, as we go through that. So and you're, you know, and then where will content be, right? Like, will it all be coming through Apple TV? That's a good sign, right, in terms of where it is. But what is it to the core of where you started? What does it really mean to a consumer, right? Like, is it a good housekeeping kind of CLO approval on sound or what it, what does it mean? Because today, for a lot of our customers, they just relate Sonos as good sound and the kind of sound that they want. And so I think if we continue to set the bar there and just make sure our products sound great in your home and you can do the module.

thing of adding two Sonos ones as rears if you want and adding sub and everything with that, then I think for the vast, vast majority of consumers, we're going to continue to be the right solution. So I want to end here on sort of like the future of where you're going. So you probably can't tell me yes or no. But there's a lot of rumors that you guys are going to IPO someday. The Sonic Internet remains quiet when I say that. Anyway, a lot of managed hardware companies, companies that build hardware that have cloud

components are starting to do premium services. A big story in the Virgilis Week, which we did not expect to be a big service story, was the plume Wi-Fi router. They've lowered the price of the hardware to like $39, but you have to pay a subscription fee every year to make it even work. And if you stop paying the hardware stops working, then there's Xbox Live, right? You can buy an Xbox, you can buy a premium subscription for an Xbox Live, you get a whole bunch of new features. Are you thinking about recurring revenue from existing Sonos customers? Are you thinking about premium services, subscription services, or you're going to tell your friend, we're going to buy new one, and that's how you're going to grow your revenue base?

We are after 16 years in business, 13 years of Chevy products, we are very comfortable with a model where we monetize really our investments in experience, software, everything that we do through hardware and a one-time purchase. And I think we'll always look at, hey, are there other revenue streams? to be open to other opportunities, but we're very happy with our business model and think it's built for the long term. And consumers are, you know, continue to be very happy with it. And so it's a little bit, I think sometimes the services question is a little bit of solution searching for a problem. And it's kind of the flavor of the day right now. And, you know, we've been at this long enough to know

that if you build a good business around these things and you're smart about the way you're investing, the way you monetize is secondary. Does that, not to get too, too, wonky here, but you've got to support, you know, 10 years of the past products. You've got to support 10 years in the future. Is there enough margin built into the purchase price of every product to let you support it for 10 years? Is that, is that how you model out the prices? Or are you just trying to win and get the scale? And, I mean, the competition's fierce. Like, winning is important. So how are you thinking about that balance? Yeah, we've been very thoughtful about the way we've scaled the organization and thought about our investments to be able to do that. And,

you know, we've, since the beginning, you know, the founders have really, thought about the long term and being in it for the long term. And that was part of the equation and thinking about the products. And so we remain comfortable that the way we monetize today allows us to continue to grow, continue to invest and continue to be profitable. Do you think every speaker needs to have a microphone? Where do you think the microphone's ultimately live? Oh, that's a, that's a really good one. And one that I think this is excellent because, you know, this is one where right now everybody is putting a speaker and mic into every product. And so I don't know if it's, you know, next year or three or four years from now, but there's going to be this

really weird scenario where your inner kitchen and you say something and your toaster, your refrigerator, your microwave, your speaker, you know, all this stuff's going to be talking to you. And it's just, I can see this potential nightmare scenario, right, where everything has it all and it's just people's minds are blown. And that, to me, is like a perfect spot where the sono simplicity comes into play. And you know, I mean, one of the reasons that it takes a little longer with us and it did on Alexa is because we're also working on that software that allows you to use an echo dot to control your existing sono system. And so we've done a lot of work already in software to be able to think about, hey, where, where, you know, how would we control

our system off potentially another mic, right, and be able to do that? Because I do really wonder, I don't believe that every product should have a mic and speaker. And I think in the end that there's the potential that every room will have a mic. and a speaker, and they may not be together either. And so, you know, I can see a mic potentially in a light bulb or a light switch, right, for each rim something really low cost. And then the key is, how are you using the software to actually be able to interface with it and control and make that a really simple and elegant experience for users?

So this will hash out probably over the next three to five years, but I think we're going to, you know, the consumer electronics industry, I think is in danger of potentially overwhelming customers and confusing them with all these mics and speakers in the midterm. So it's something we're thinking about. Don't have the solution yet, but it's something we're definitely thinking about. You know, you've got a couple of products in your lineup that are much older, right?

The Play 3 has been around for a while. The Play 5 was updated a few years ago. Obviously, you've got the Sonos 1, which is sitting right next to Play 1. Are you going to refresh the Play 3? You know, there's a lot of people I saw in our coverage when the Beam was announced. I'm just going to buy this to replace my Play 3. Are you going to replace all those other ones? Are you going to add mics to all of those?

Like what is your cadence with sort of the older products in your lineup, especially now that, you know, only the new world and support I play too. Well, you've seen with one with the Sonos One and Sonos Beam that we're putting mics into those products. And I think that's something that's important right now, kind of in the phase that we're in as we go through that. But also, I don't necessarily, we've always got, you know, a bunch of things that we're working on, a bunch of new products and new software stuff. And we're always looking at, like, is the right thing really to replace that product or is it to bring something else, you know, into the home? And so it's a balance in terms of do you actually go refresh versus do you do something like a little bit different, but maybe still in that price point? And that's the kind of conversation that we have as we go through it. And so I think it's important not to think as linearly as, hey, you've got to refresh that thing.

That's just very traditional consumer electronics. And instead it's like, okay, what beam is solid. for people that want a $400, amazing smart speaker that also creates, you know, great sound for their TV. And so, you know, beyond that, what's the next most important thing as we think about our portfolio? And so I don't get too caught up in what do we have today and then do we replace it? And much more, it's like, what's the next best experience for somebody in their home? Yeah. All right. Patrick Spence, thank you so much for coming on the Vergecast. I hope I didn't give you too hard of a time, but I am very interested in the new products coming out and very

interested on this Google Assistant timeline, which I know will be an exclusive news release with the verge when it happens. I enjoyed our conversation. Thanks, thank you. Thanks so much, man. So I will say this. We followed up with Sonos and said, hey, when I asked Patrick when Google Assistant was coming, and if it would be this year, he was just very quiet.

But anyway, it followed up and said, you guys have been saying it would be 2018, your Twitter accounts been tweeting it'd be 2018, but he didn't, he refused to confirm that. And they said, yeah, it'll be 2018. I think that puts it way more up in the air than before. Because I don't know, we'll see. But he did say the hurdle was not business, but technical, which is very interesting to me. Hmm. Anyhow, Paul. Yeah. Every week, my man. Never forget. Except last week when you were here. But every other week, yeah. You do a segment. It's called How Big. How Big. is the moon. So, you know, the bezelist phone, right? It's here at last, in China. It's like every time it's my time to do a segment, my like browser crashes. That's right. I mean,

you are trying to work on an iPad right now. Yeah, that's, you know what? That's my fault. Okay, Vivo announces next phone with no bezels, no notch, and a pop-up selfie camera. So we've been seen this phone for a little while. It's got the pop-up selfie. It's really happening. No buzzle, no buzzels or bezels. Wow. And the embedded fingerprint sensor behind the screen. It's coming to China. But what really grabbed me, and you know on this segment every week, I love to talk about photos that people can't see.

The press image, or what are the press images for this phone? Is the phone is on a moon-like landscape. But it looks like it's probably, like the phone is at least the size of a Boeing 740. So maybe the size of like a city. And it's like touching down on this moon. But then if you look in the background, there's like a planet that looks kind of like an icy earth with rings around it. So there's basically a whole sci-fi plot here to be unpacked. I would like to just go back to the size of the phone and the image.

747s and cities are dramatically different sizes. Depends on the city. There are some very small towns. What I'm trying to say is that we're looking at. at four to five orders of magnitude bigger than a phone. Okay. I'm with you. Right.

It's a logarithmic scale of, you know what I mean? I got you. What do you think the conspiracy is? Well, are they just too chicken to actually do the 2001 monolith on the moon? They want to say that it's a monolith, but they can't. Right. So it's like they wouldn't want to knock off 2001 entirely. So we can't have it landing on the literal moon.

And it's like, what if the phone is enormous, way bigger than a monolith, not at all like 2001? And what if it's also happening in a different solar system that has a moon very much like our moon, but the Earth is an ice planet with rings around it? That's my thinking. I like it. So basically, this is the future phones. The future phones is gigantic. It's so futuristic that it is a complete fantasy. I mean, to be honest, that is most phones.

For example, my favorite rumor of the week, Apple rumor. to put USBC on a phone, which is a beautiful fantasy. No way. No. The rumor was so bad that we skipped it. We didn't cover it because in the middle of the little like rumor report from the Chinese supply chain, they were like, if Apple adopts USBC, it will accelerate the adoption of USBC and other phones.

And we're all just like, whoever wrote this has never seen a phone. Like they can't possibly know that every other phone uses USBC. Anyway, that's why we skipped it. I don't believe it will happen for one side. This episode, Vertcast, brought to you by IBM by 2050. The world population will reach nearly 10 billion in food production will need to grow by 70%. What if artificial intelligence would help? Farmers are already using it to help increase crop yields.

Watson and the IBM cloud provide access to weather data, analyze satellite imagery to help them monitor soil, moisture levels, and reduce water waste. So as a population grows, more food can be put on tables. Let's put smart to work is the inflection I'm using for that sentence this week. But anyway, you can find out how at IBM.com. Smart. Here are the things that Elon Musk did this week. This is a segment we should do every week.

Here are the things Elon Musk did this week. Liz Lapato went to the SpaceX parking lot and picked up a flamethrower to support the boring company. The flamethrower is hilarious. Not a flamethrower. It's not a flame. It's just a propane torch. It's not as dangerous as everyone's making it see. Liz and I are both people who in our regular lives just want to have flamethrowers.

Sort of laughing at all the hand-wringing because we're like, you're not going to stop the people who want flamethrowers from having them. Right. Because it's just a propane torch an airsoft case. Anyway, Liz has it. She's making a video. Very fun.

The boring company announced a deal with the city of Chicago to build a high-speed underground train from downtown to O'Hare Airport. She was very smart. Everything about this deal is like just wildly optimistic.

I hope it happens. But he thinks they'll get done for less than a billion dollars. He thinks that it'll take longer to get through security at O'Hare than it will to make the trip. And I think that the, oh, he's going to make money off it by, not by charging fares, but by selling you stuff while you're, oh, they'll be fairs, fine, by selling you stuff while you're in transit.

So it'll only take 12 minutes, but in that 12 minutes, you're definitely going to buy some headphones and then that will pay for this thing, which is, by the way, is going to cost less than a billion dollars. So it needs to go a pretty long distance. The current trip on the Blue Line on Chicago's O, a trip I've made many times, 40 minutes. He's going to do it in 12. You're going to sit in a modified Tesla Model X. It's electric. And it's going to shoot along the track at 150 miles an hour.

All this sounds amazing. It's my favorite. $20.25 a ride. The city of Chicago is paying no money. He's going to front all the cash, build the thing, and then collect all the revenue. Cash he raised by selling Liz a flamethrower. I don't think he raised a billion dollars by selling flamethrowers. Unclear where the billion is going to come from.

But it is true that in the plan, it's the revenue. new plan is the tickets, of course, ads and branding on the cars and in vehicle sales is specifically listed. And all I can think of, I swear to God, the only thing in my mind that you would need to buy in 12 minutes at 150 miles an hour is a headphone dongle. It's people going to the fucking airport and they forgot their headphone dongle and Elon's going to be like, that'll be $45 and you're just going to buy one. He's going to be like, I paid up on a $1. You could buy neck pillows too. You think Elon's going to put neck pillows in his beautiful repurposed model X.

I'm just saying it's a high margin item. Yeah, but it's too big. They're not beautiful enough. Also, the image, this was supposed to be quick. The image of the proposed station of O'Hara is, it looks like a space station. It's like totally stark and white. Oh, this is why everybody loves Elon. Everybody in the world loves this man because he promises the future that we believe should happen.

This is how it should be, and he describes it how we want it to exist. including all the ads that we clearly desire. Including the ads and the sales of the... It sounds so realistic, it will probably be delayed a bunch of times in rising costs, but we'll still love Elon. That's probably true. So, Andy's covering the hell out of that. There's coverage of that on the site, including a bunch of, you know, naysay-in transportation experts who are like, how will we build this tunnel cheaper? Which is the whole point.

But we'll see. Tesla laid off a bunch of workers, several thousand workers, part of company-wide restructuring. That is very, what's happening with Tesla is very interesting. We're covering the hell out of that. They've got to produce enough model threes. They've got to reduce the cost of companies. He's got a bunch of shareholders who are a little queasy. And they need to have enough yellow at their factories.

They need to have more yellow at their factories. We're covering that basically nonstop because obviously, A, I think we're all very interested in what happens with Tesla. And B, the gap between the Elon fans and sort of what is actually happening is widening. And I think that's a very interesting place to explore. And Elon says Tesla will rot a full self-driving package in August, which we'll see. Hmm. It's just an Elon deadline is a squishy construct. But you're right, Paul.

He does tend to deliver on these things. So we'll see if he hits it. He's already late. He tends to deliver descriptions of things that we want. That's what I was saying. Well, he's missed it. He said by now we would have a car fully drive from New York to L.A. Right.

that has not yet happened. Yeah, but it sounds like a good thing that would be nice to have. It sounds amazing. All right, that was Elon update, sponsored by Elon. No, it wasn't. My other favorite piece of Elon news, Gary Vaynerchuk bought a company called Pure Wow, and they're going to do radio,

and one of the channels is just called The Musk Report, and they promised it will only have positive news, which is amazing. It's so good. Anyway, Dieter, let's do gadgets. So Vlad did a review that. the HCCU12 plus and man, it's just they did everything right except the important things. The camera looks amazing. I've seen a bunch of... The camera looks incredible. The pressure sensitive buttons are a terrible idea and it's just like,

I don't know, like, HCC has been making really good phones and then just tripping right before the finish line. And this just feels like another example of like everything here is amazing and then you just missed it right at the end. Do you think anything has changed since Google took most of their employees? I don't know. Like, that's the thing. I'm sure that this thing was in development before Google took those employees, right? It must have been. That makes it.

Well, I will point out. We're going to see. On that basically existential note. I was going to read this to you. It's a tough task to review in HGC phone in 2018. Am I supposed to treat this company whose phone design team was recently gutted by Google as a sustainable and continuing business? How do I factor in the non-zero probability of HTC

no longer even having a phone division at this time next year? These are questions I don't have answers to. It's like, all right, I'm going to read the rest of this review now. But the camera looks great. Go for that. The one, HTC, the one thing they never could get exactly right. Well, they started getting it right about a year ago. But, yeah.

But they weren't industry leading right. No. They're at the top point in the curve, which I think is great. All right, what else? I should care about the Blackberry Key, too, but I don't. I'm fascinated that the Samsung Chromebook Plus, the new version, has a Celeron processor. They made a big to-do about the OP1 arm-based processor that they had custom made, that Google was working with Arm on. Because it ran way faster than I thought it ever would.

I was really pleased that I was really excited about it. And radio silence on that issue. So that may have been an experiment gone awry. For Linux, there is a lot of arm support on Linux, but it is not as good as it is for X86. So I wonder if that is a play to make. I mean, the Linux apps on Chromebook are very, very exciting to me. And if you could have a really cheap, like, here's the, the Samsung Chromebook Plus could be like the cheapest way to start developing Android apps. Interesting.

All right. Can I talk about the Eero and Plume thing? Yeah, I was just about to ask you to do that. Okay. So Jake covered some Plume. Plum is a Wi-Fi router, Ero's a mesh Wi-Fi router. I'm sure you're familiar. Plum is not quite as well-known as Eero, but they are a pretty big business because they

took a huge investment from Comcast, and Comcast actually sells the Plum product as the X-Fi. It's the whole thing. Plum is actually, their tech is really interesting. They do some neat virtual networking things. Anyway, Plum announced, hey, we are changing the pricing of our routers. We're lowering the cost of like the four pack or five pack to $39. But you have to pay either a $200 lifetime membership or a $60 a year membership. And if you don't pay, the routers don't work anymore.

This is edge computing. It's edge computing. This is your whole thing. Mm-hmm. Super managed thing. So we published this and they went back and forth in the story. The CEO was like, yeah, be fine. And then they followed up with Jake later to be like, no, it won't be fine.

This story blew up. It won't be fine if you stop paying. Yeah. They're going to stop working if he's not paying. Story blows up. It's like, I don't think a lot of people have plume routers, but the idea that we're moving to this managed device world, people just, they really cared about it.

Story blows up. So then we had Patrick Spence on. I was asking about Sonos, and I was like, you know, you probably heard this already, but you run a managed hardware business. Would you ever do a subscription product and then, you know, break your hardware if people don't pay the fee? He was like, no, never.

That's not how we do our pricing. And I was thinking, you know, we should just ask ERO. Like, we know them. So we call ERO. Nick Weaver, like, he's like, yes, I will make that basket and says, we're never going to do this with ERO. Where we have the same pricing model as Apple and Sonos. We price into the product, the continuing cost of support. Great.

Then he says some stuff about how it's better to do, this is Nick Weaver, the CEO of Eero, says to Jake, it's better to actually do some of this stuff all the time because it optimizes the network. and if you lose this, if you kill, the subscription stuff you want to have happen in the cloud is like security related, but network optimization, you want to push down the thing and leave them running all the time anyway.

So Jack's like, let me ask Plum if they're going to lose that. So it goes back to Plum CEO. Plum CEO is like, I changed my mind. This is true. This happened. They will work.

But when you don't pay the subscription, it'll work. Our fallback is really just as good as the other guys can get. So by hooker by crook, we have now gotten the CEO of Plum and the CEO of Eero fighting each other about the future of social shrouders. This all seems like a nightmare to me. I would not buy a plume. Also, Plume says their business is, as a quote, B2B2C.

So they want to sell to the broadband providers who will then give you a plume. So that's just called being an OEM? Yeah. Well, no, I mean, they're going to be branded and they're going to run the back end. But the goal is for them to snake some of that. You know that money you paid a Comcast for their garbage router that you don't want to pay? Their goal is to be that money. That's good.

That's a good goal. Yeah, it's a bad goal. If you ran a little mom and pop store that was, like, technically an independent business, but, like, you provided, like, Comcast services for, like, rural areas or whatever, you'd be an independent business. So then if you sold Plum browsers in your little independent store, then technically Plum's business would be B to B to C. My God. And then if you were the customer and you sold it back to the same. store because you were done with it because it wasn't working, you got to return. And then they'd sell it to another customer.

It'd be B to B to B to C to B to C. Yeah. Deeter was thinking, yes, I will sink that basket. It's just wild. The managed hardware stuff, every company now that does a cloud service, I feel like they're going to turn on premium pricing and get recurring revenue and they're going to cut down the I think it's OEM plus SaaS. Software as a service plus being an OEM, OEM, OPSSATs.

We got to move on. All right, let's talk about the thing. Obsess. Obsess. Well, here's things that happened this week. Big things. Yeah. On Monday, the net neutrality repeal order went into effect.

Hilariously, a thing that everyone, all the sort of proponents of repealing net neutrality said was nothing bad will happen. It'll go into effect. Nothing's going to happen. It'll be fine. On Tuesday, the judge ruled that AT&T could buy time Warner. On Wednesday, Comcast put in a $65 billion offer to buy Fox, which already has a $50-some-billion dollar offer from Disney to buy Fox.

So they're not correlated, but the timing is very, very funny to me because the goal of all these carriers buying all these content companies is to prioritize their streaming services. I just want credit for what I wrote on the show notes, which was I had these two things separate because they're not directly causal, but I did write, what a coinky dink. It is a coinky dink. It's a big quinky dink. So the net neutrality thing is over.

It's just over. It's done. Well, how about to Congress doing something about it? So Congress is, I think we believe, less than 50 votes away from sending the congressional review to Trump's desk. So the Senate has already passed it saying we don't like what the FCC did. Okay. The House is very close. Who knows what Donald Trump will do.

But the Democrats are certainly going to run on this as an election issue in the coming midterms. They feel it drives turnout. They appear to be correct. People are very fired up about it. A bunch of states are passing the euro net neutrality law, which is going to lead to a series of court battles because the net neutrality repeal order specifically prohibits them from doing that. It also is bad for the internet for every state to have a different regulatory regime. It's just difficult.

You can see, like GDPR, for example. Europe makes GDPR. A bunch of places are like, we can't reconcile this. Our website is no longer available in Europe. You don't want that. That's weird to do it in all the 50 states too. It's kind of the same deal. but they're doing it to force the issue.

You know, a bunch of service providers, platforms, what have you, are writing letters, rallying troops, doing things. But all of that is happening in the shadow of these two colossal mergers, 18T and Time Order and then whatever Fox and Disney or Fox and Comcast. I read the opinion from the district court judge in the AT&T case. Here is what I think. The government did a terrible job of arguing this case. and the judge did a terrible job of understanding what was going on.

So everyone's at fault, except for AT&T, which literally just is like gleefully, throughout the entire opinion, it's just gleefully getting away with it. So this is a quote from the judge in the opinion. To sum it up in the words of AT&T chairman's CEO, Randall Stevenson, the defendants view the proposed merger as a vision deal. And it's like that. Like the whole opinion's like that. What?

AT&T is putting forth its vision for the future of content. The judge is in love with it, and the judge is like, the government is stupid. And the government, for its part, was indeed very stupid. So the main character you need to know in this whole thing, the professor named Carl Shapiro, poor Carl, feel bad for him. It's the government's expert witness on antitrust matters. And he literally tore the government's own case apart through the trial. So he gets on the stand, and he testifies, this is another quote from the decision,

the government's own expert predicts that due to a standard benefit of vertical integrations, AT&T's direct TV and Uverse customers will pay a total of about $350 million less per year for their video services. Well, you just lost, because that's the whole. And this goes, like, on and on, the government

shoots itself in the foot. The argument that they never make, they do not make, which is the thing that AT&T wants to do that is anti-competitive, they do not say AT&T is going to preload apps from Time Warner like HBO Now and DirecTV Now

CNN and prioritize their traffic and exclude it from data caps which would give it preferential treatment to Netflix and YouTube and Google and Facebook and whatever else have you. The government, as near as I can tell, does not ever truly advance this argument. The judge does not take it into consideration and instead spends 90 pages talking about whether

T&T's sports programming will cause it to black out its channels as it negotiates for carriage and charter. which is not really the reason that this merger is happening. But that's 90 page of the decision is a point-by-point argument about cable blackout negotiations and literally nothing about what's going to happen on mobile phones. And that to me is like the government blew it and the judge didn't see it and now we're here. Do you want to get into this idea that's floating out there that the metric by which we decide whether or not something is a bad idea needs to be regulated?

Typically it's just like consumer harm or consumer is going to have to pay more money. money, but maybe that's like the wrong thing to be paying attention to. It's like it's around this, but it's not precisely what happened here. Yes, but can I read one more hilarious Carl Shapiro quote? Yeah. Can you read it like he loves, he loves this thing, this AT&T argument so much? It's so bad. It's like a romance novel. Can you read it as though you were dictating a romance novel? Yes. So, one of the government's other theories about why AT&T should be blocked from buying Time Warner, this is true is that they would enter into a coordinated conspiracy with Comcast to kill other video providers.

This is absolutely true. Which, fine. I'm just, here's our man, Carl Shapiro testifying to the government's case about coordination between AT&T and Comcast. When questioned at trial about the government's coordinated effects theory, Professor Shapiro conceded that he had no way of assessing the probability of coordination and thus had not attempted to quantify any risk whatsoever that the predicted coordination could occur accordingly.

Professor Shapiro confirmed that he was not in a position to say that coordination is more likely to happen than not. And indeed, Shapiro was not prepared to even say that there's a 1% chance that coordination will happen as a result of the merger. Carl Shapiro, just take it. He's like, I don't know. I give up. Do you know how the government, AT&T's expert witness, responded to that?

I don't know what I'm supposed to rebut. I mean, antitrust is so hard to, it seems like it's so hard to prosecute before the fact. Like with Microsoft, probably the most famous antitrust case, you could say, hey, Microsoft did these terrible things to real and did these terrible things to Netscape. They used their market position to bully other people out of the market. But here you're conjecturing. And so something I've been reading is like something that happens sometimes in these cases is like, okay, this is all conjecture. They're worried about these harms and this stuff. So get rid of these businesses or like sell off these businesses or like here are some rules that you should follow for 10 years or something.

But none of that happened here. This was everyone's expectation. Everyone's expectation was the judge would say, I'm allowing this. on these list of conditions. You cannot collude with Comcast. I mean, it's just insanity. I mean, there's one good argument about the Comcast exclusion. It doesn't really come up.

But if you think about AT&T and Verizon, or effectively a duopoly, their pricing rates basically mirror each other. Their sponsored data plans and prioritization and zero rating stuff, they all tend to just be the same, right? And it's only in response to T-Mobile being a challenger from the outside that they ever do anything different. And it's because they're effectively a duopoly, right?

They're the two biggest. They own most of the market share. It's very hard. They don't really need to compete with each other. They can just be the same. Government didn't make that argument. They're literally red and blue. Anyhow, everyone is expecting conditions, no conditions.

This judge is also the judge who approved the Comcast's NBCU deal upon which there were significant conditions placed. So, night neutrality is over, but Comcast is still operating under the FTC consent decree that effectively imposes net neutrality on a net neutrality on. network for a period of time. Well, in Comcast's just came out with a thing they're saying they're not throttling anymore. Yeah. They stopped throttling about a year ago, and they said it was all technical reason. Sure, it was. They need to, like, show off some good news after neutrality is over.

Yeah. By the way, the disclosure, Comcast owns a significant state, or Comcast's NBCU division, owns a significant state in Voxpian, which is the parent company of The Verge. I assure you, they don't love us. Here is my exciting theory. So, obviously, we're segueing into the fact that Comcast, is trying to outbid Disney for Fox. And everybody knows if Disney gets Fox, they can merge the Marvel universe with the X-Men.

We have a story about this coming. But if Concast buys Fox, then we basically have the X-Men. I don't know about that. They can merge the minions with X-Men. I don't think that's how this works. Batman with X-Men. I think I could be one of the X-Men. Yeah, that's how it works.

You're going to jump the corporate investment letter. the next ex, you're Deadpool now. I'm basically becoming Deadpool if this goes through. So I'm really rooting for Comcast. So that's actually a hilarious thing. So literally Comcast's board was waiting for the AT&T decision to come down to see if the government was going to allow mergers of this type. Obviously, AT&T, the judge says you should buy them.

There's a really interesting wrinkle here. This opinion is crazy. I'm going to have a whole long thing that we'll publish ideally by the time that this podcast is at. There's like a bunch of exclamation points in it, which is not usually what you get out of a judge. The word poppycock is used. What? It's crazy. But at the end of it, the judge points out that AT&T and Time Warner set a deadline on their deal.

So it doesn't close by June 21st. The deal's off. And Time Warner has to pay AT&T a bunch of money, which is like a standard thing. Yeah. The judge says, I'm instructing the government to not appeal this ruling because it will extend the, it will extend the trial or the legal proceeding, past the deadline and the deal will be off. So literally it's like you've had your day in court. That would be mean?

Manifestly unjust was the words he used. Wow. He said it was going on for a year and a half. Is that long the court case has been going on? Yeah, 2016. There is a right to a speed trial. I just want to point that out. Yeah.

I'm just saying. One of the biggest mergers in corporate history. This is pretty speedy. That's actually one of his points. He's like, I did a good job. It was real fast. Because I had to do like millions of pages of document production. Right?

Anyway, but he says, you've had your day in court, and the court has spoken and the defendants of one. Just an incredible decision. But the government could still appeal. It's shocking to me that Donald Trump has not tweeted about it yet because he hates CNN. This is a thing that Time Warner wants and thus a thing that CNN wants. Is that the whole reason?

I try to look up like why does Donald Trump not like this? I don't understand his dislike of this merger. He hates him. He's not a complex man. But it's also true. And I think you know this about me. I'm a more liberal gentleman that the Obama, D.O.J would have likely never brought this case. There has not been a vertical merger antitrust lawsuit like this for 40 years.

Yeah, it just doesn't seem like straight. really strong grounds for the government to oppose. So this is what Deeter was mentioning earlier. That we need a new doctrine for this? Yeah. So there's this classic sort of way you measure. So the reason you don't do vertical mergers is because they typically don't reduce the number of competitors to market. Right.

Right. So you've got, think about a supply chain. You've got suppliers. You've got distributors. You've got marketers. Something at the top. If you combine two companies at any level, you increase market power for that new entity and you decrease the number of competitors, that's bad. So horizontal mergers, that's what's usually called, get blocked all the time, good challenge.

Vertical mergers, where the distributor buys the supplier, it's pretty normal. So great, that happens all the time. For 40 years, there's not been a lawsuit of this type for vertical merger. One of the new things that is happening is the typical way that you measure the harm is whether consumer prices go up. So you say, okay, you're going to have decreased competition in the market. We see the prices will go up for consumers. That's a consumer harm. Reduces competitiveness. We're going to block it. In the new world that we live in, many products are free.

There are huge companies like Amazon that just relentlessly undercut their pricing. So it's actually very hard to measure pricing effects. It's also very hard to measure effects like net neutrality and like prioritizing of traffic. So there's literally it's called hipster antitrust. You can look it up. That's the term people use. And there was just a big, the Open Markets Institute just held a big conference called Breaking the News, where they talked about how they would apply a new idea about antitrust to basically internet platform company.

Matt Honan wrote a great piece and BuzzFeed about it. Well, and so Comcast buying Fox would be vertical or more vertical than Disney buying Fox. It would be both horizontal and vertical because they owned. universal. So they own one major studio, they'd be buying another one and they would go up vertically. Disney is obviously like right there. But Fox

is splitting up. They're not buying all the Fox. So Fox broadcasts, the Fox Network, Fox News, they're all going to end up in a new company called New Fox, which is amazing. And then 21st Century Fox and movies studios and all this stuff would either go to Comcast or Disney. But literally, they were waiting on the AT&T decision, the Comcast executives, to make this offer. We'll see. So I'll put it to you.

Would you rather have $50-some billion worth of Disney stock, or would you rather just take a $65 billion check from Comcast? That is the decision in front of the Fox Board. I hate these kinds of decisions. Right? Or I'm so rich, or I'm so rich. Well, I mean, that's how they've got to decide. So I feel like I personally, I don't know what I would decide.

I'd go with Comcast so that I could become an excellent. So I like these words. vertical mergers a lot. Because I feel like there's like a new kind of company that's emerging. Even Apple's trying to do it a little bit. I feel like a lot of it's been influenced by Netflix, which weirdly is the least vertical of all of these companies. No, in the decision they call them the most vertical.

Everyone's so confused. They're like, everybody, Netflix called it. Netflix is like, we're going to do DVDs by mail until we can stream. And then they just, they just called the whole progress of how we would be entertained in the year 2018. All these companies want to be like Netflix, but they're like, we could do more than Netflix. We could own a consumer, not just for $10 a month. We'll get, you know, in Comcast's case, they could have them as a mobile subscriber and a TV

subscriber and an HBO subscriber. And a consumer of advertising. And an advertising. Yeah. So like we could be, we could be getting like $200, $300 a month in revenue per customer. Whereas if you're a movie studio, you hope like someone like sees two of your movies in a year and you're doing great. So let me take all these things and like you're right about the new business model. I think that the thing that we're going to be talking about in 2020 is loot boxes but for cell phone service.

All right. Think about it. I hope. Yeah, I just the thing is you're going to pay five bucks and then you're going to open up the thing and it'll be gamified about whether you get like, like 50 minutes of talk time or like two gigs of data. I think my, my principle is, look, I was very small as a kid. And so I developed a mantra, the bigger they are, the harder they fall. And I like these companies just getting disgustingly large and convoluted because I feel

like at some point they just lose total sight of what they are trying to accomplish and they completely fail. Yeah. And that's what I'm rooting for. So I'm rooting for these mergers because I want to live in a world where there's like five, maybe five more years of a content gold rush where people are spending billions of dollars creating new shows like Westworld. And all these companies were trying to be Netflix. And then they all ultimately lose sight of actual customer interests and ultimately fail. Yeah, big things are funny.

Yeah. They're like, do do, do. I'll pop over. Exactly. I will say that that is, there's like a, it's like a very nihilist view of the world. We're like, we are just, we are just particles in the breeze of AT&T breaking up and recombining and eight, breaking up and recombining. And those winds will just blast us around the world until we're dead. I mean, just to be clear, Paul, the future that you just said you're hoping for is like almost word for.

word how Karl Marx described the collapse of capitalism. He didn't make the big things are funny jokes. If Carl Marx is right and capitalism will actually dethrone itself, good for Carl Marx. If it doesn't take a violent revolution of, yeah. It just takes putting the X-Men in the MCU. Yeah. I mean, that would be, that would fuck some shit up right there if you did that. I will say that we, I found it very, the amount of Twitter standing.

for Disney to win the Fox deal and not Comcast. That's all X-Men-based? It's all X-Men-based. Devin Maloney, our inner culture writer, is writing a piece on it. It's like the funniest thing. If Disney said, okay, Comcast, go for it, we just want X-Men. Yeah. What would they pay?

30 billion. How much are the X-Men worth? Well, nothing anymore, because Fox has blown it time and time again. There's two good X-Men movies. But Disney has a clear... Bedpool and Logan. A method of... A day the future pass was good.

Of getting a billion or two a year out of each of these properties. Do you think Bob Eiger's like, I just want those goddamn X-Bet? I just want the X-Men. He's just strolling around his palatial villa. So many good ones. Everybody hates Cyclones, but still he's like really important as a character. Can I read you one more insane line from this? Yes, please.

I just don't understand. The judge does not know the difference or the similarities between Netflix. Netflix and HBO Now. Don't really read this to you. HBO content reaches consumers in four ways. I'm going to expand the acronyms for you. HBO content reaches consumers in four ways. Through cable companies, through virtual cable companies like

DirecTV Now, through subscription video on demand, you can buy it through Amazon Prime, and through HBO's proprietary over the top product, HBO Now. In each case, the end customer accesses HBO by way of a distributor, even for HBO now, which is sold by digital distributors, like Apple and Amazon. Wow. I read that a dozen times.

What is he talking about? It's nonsense. You can get HBO Now on the web, first of all. Apple doesn't sell iPhones because you can buy iPhones at Best Buy. What are you talking about? Netflix, HBO Now Netflix are the same product. And the idea that to make HBO Now better, you need to stuff it full of location data from AT&T, consumers is nonsense. That's what this whole decision is like. It also, I think, presages the

fall of capitalism through corporate pollution and merger. Yeah. I want them all to fail miserably and be so sad. We thought we were so rich, but we were wrong. Well, they're going to be so rich. Don't you worry about that. All right. We've gone way over an hour and a half verge cast. I'm sorry that we... I'm not that sorry. I'm not that sorry. I love. of antitrust law. Hipster antitrust. Hipster antitrust. I'm here first.

Wait. I want to actually start covering it more because I think the only way that you're going to effectively regulate a company like Amazon is to change antitrust law and that's the way it's going to be. What is a generic argument against vertical integration? There isn't. That's actually why this case fell apart. The government put on a very conservative case that used sort of the standard model and there's a reason that the standard model has been used to block a vertical merger. in 40 years. Right.

And the judge was like, nope, that's not it. But you don't, what's the hipster argument? The hipster argument is that there are other ways to reduce competitiveness by measuring different factors

in the environment or by talking about platform dominance and control. So like Google never raises prices because everything is free. If the only way that you're going to impose antitrust law is by saying prices went up,

well, now you've just, you've literally cut yourself off from that. Amazon rarely raises prices, right? They try to lower the price and everything. They sell so many goods that they can sell some things at cost. You can never really say Amazon buying this thing is going to raise prices. So you need to find some new ways of measuring competitiveness in a market. And one of the ways that I think is very interesting to both the right and the left is like access to distribution. And that's like, who knows how that will work. But if you have these dominant platforms, they get bigger and bigger and bigger because of network effects, then you

need to, and they're free, you can never say the price of participation is going up. So that's like very, who knows. It's just out there. And I think the fact that both the right and the left are kind of like into it is like very interesting. Oh, we're going to do a thing on it. Hubris is what I enjoy in this. Yeah.

Because that hubris leads to downfall. There's a great article in the Wall Street Journal about what happens now with 18T and Time Warner. And literally the thing it points out in like the second paragraph is that AT&T is a very stayed, like, it's a phone company, and all but nine executives at AT&T fly coach and, like, everybody at Time Warner is Hollywood and they all fly first class.

And they have, like, greeters at the airport and butlers who take them through security. Culture class. And they got to glue these cultures together. And that's like, it's not easy. Do you know what other companies try to buy, try to merge at Time Warner? Had a culture class and failed? AOL!

I was waiting for that. We used to work there. Remember, we worked there when they spun it back out. Man. Thomas Ricker, our international editor, used to be so embarrassed that he worked for AOL. They told everybody he worked for Time Warner. He was really sad when they were unmerged. He was like, ah, shit. Uh-oh.

But AOL was a big distribution network, right? The dial-up service. They bought Time Warner to glue Time Incs print properties into that distribution because you couldn't do video yet. And the culture clash destroyed the company. I knew it. AT&T. You know, Time Warner and Time Inks. have split so the magazines are there anymore.

AT&T is buying Time Warner to glue its video onto its distribution network and the culture clashes there. A lot of lessons there. You know who wrote great books about AOL Time Warner? Carra Swisher wrote two of them. One of them is called There Must Be a Pony in here somewhere

because that's what they used to say. It's true. You can get me by it's a great book. Highly recommended. Speaking of Caras Swisher, that's the end of this podcast. So now I'm going to plug her podcast. You can listen to Kara Every week, recode, decode. Our friend Peter Kafka, there's Recode Media, both excellent podcast, and Casey Newton, Silicon Valley, editor at the verge, do and Converge every week. It's so good.

It's so good. So good. He has a CEO of Pocket on this week. Last week, he had the guy who fights spam at Google. They played a game called Spam or No Mam. It is the best. Check out Converge. I'll let you know.

I think that show about buttons. Oh, really? Yeah, we're talking about it. Some button questions. Some button questions might be coming up. You can follow us everywhere. Paul's at Future Paul. Teeters at Backlon. I'm at Reckless.

Let us know how you want us do more interviews. I really want us to do more interviews. So if you like the Laura segment and you like the interview, I would love some feedback on how we should package us off in the Vergecast. We should have more episodes, edit interviews. Let me know. I'm just curious. And this is true.

A little surprise. One of our producers asked me to plug this on the Vergecast. I'm doing a very end, a quiet voice. The Verge and Curbed have built a house. There's an actual house in Austin that we have, made. We made it. But it's not South by Southwest. It's not South by Southwest. We built a smart home. Okay. So Curbd

helped us. They helped us build a cool prefab house because that's the future of houses. We stocked it full of cool smart home stuff. Shooting a video series. Grant Imhara from Mythbusters is the host. That stuff is coming. The house is open next week in Austin. It's going to be super cool. Keep an eye up. Home of the future. This whole thing.

Brands. Brands. Brands. Working together. Hand and hand and. Okay. We're done. That's it. That's a Redcast. Thank you very much. Rock and roll. Paul. Promocode.