Amazon Spits Out the Apple Slice
FB/IG, a COVID Smell Test, Scorsese Deja Vu...
The news last week that Apple was allowing Amazon to do in-app purchases without using Apple’s payment system struck me as both overplayed and underplayed. Huge caveats aside — this is only if you are already an Amazon Prime member, for one thing, and this isn’t actually the first time Apple has done this, see: Altice One and Canal+, for another — this does seem like it could have major long term ramifications. It feels like one of those things that is the latest and largest, though perhaps not the last, straw which is slowly breaking the proverbial camel’s back.
That is to say, given the high profile nature of this deal and the players involved, it feels like it could add to the growing pressure on Apple (and to a lesser extent, Google) to change their in-app purchase rules. And eventually, perhaps, to finally revisit and revise the 70/30 cut (which has already been slightly revised with the 85/15 second-year-and-beyond-rule) for good.
Again, this deal is full of specific agreements between two of the largest companies in the world. Both sides are giving and both sides are taking — and as Ben Thompson notes, this is hardly the first such deal between the two, and this may indeed all stem from an agreement to get Apple Music on Alexa devices. (Seemingly lost in the shuffle was the move to let people “buy” books within Amazon’s Audible app several months ago — a most welcomed change, even if it was using “credits” and not cash, explicitly.)
But I disagree with Ben that this is unlikely to have broader ramifications. It’s entirely possible that it won’t — especially in our current world where this and all news will be forgotten in hours with everyone focused on more important matters — still, I suspect when the world stabilizes a bit more, the pressure will be back on Apple to make changes to their rules. And people will point to this example. At the very least, there will be immense pressure to allow all services that offer their own payment system to do so through apps. And eventually to finally allow for easy ways to sign up for subscriptions/services outside of Apple’s walls but still within Apple’s apps.
Apple will fight this until the bitter end, of course. But the reality is that what they should be doing here is the right thing: they should allow companies to offer Apple Pay/Apple In-App Payments/etc as an option and make it as seamless as possible so that customers choose to use it. At the same time, they should allow any other option and let the best option/experience win. If that’s Apple’s, they should get some sort of bounty for the process. If not, they should not.
A great excerpt from Sarah Frier’s forthcoming book about Instagram, No Filter. I particularly enjoyed this stat:
Zuckerberg’s purchase of Instagram, considered wildly overpriced at $715 million in 2012, is worth more than $100 billion today. Instagram now delivers $20 billion in annual revenue, more than a quarter of Facebook’s total. And Zuckerberg’s promise to leave the Instagram team largely independent inspired other founders to join Facebook, too. In 2014 he bought WhatsApp for a then-stunning $22 billion, solidifying Facebook’s dominance over modern communication, and paid $2 billion for the virtual-reality company Oculus, whose hardware he hoped would lead the way into the future.
It’s easy to forget now, but people were up in arms when this deal went down. Not because they viewed it as anticompetitive, or anything you mainly hear about today. But because they thought Facebook was absolutely insane to pay anything close to a billion dollars for Instagram. Of course, in hindsight, it looks like one of the greatest acquisitions of all time. But some of us saw that potential back then too:
People are looking at Facebook’s buy today and thinking “what the fuck?” I’m looking at it and thinking that Facebook is ingenious. They’re one of the few large companies that understands how to and when to acquire. You don’t buy at the peak. You buy on the ramp up to the peak. Instagram as it stands right now is awesome. It’s the tip of the iceberg for what they want to do.
We’ll see if they can execute within Facebook or not. Mark Zuckerberg is saying all the right things. And again, they’ve done great with their acquisitions. I have faith.
That faith proved warranted for six years or so… But given a long enough time horizon, the temptation to meddle proves too great for anyone, it seems. I mean, you get it, Facebook paid a billion dollars for the service now worth $100B (or more) and wanted to ensure it was in line with the broader goals. But as the reporting indicates, it had less to do with any such goals and more about the egos involved, and a concern that IG was overshadowing FB, certainly amongst younger and growing demographics. (Alongside other issues, perhaps.)
If FB thought they couldn’t monetize IG as effectively as they could the main News Feed, that’s one thing. But per above, it’s already a quarter of FB’s total revenue now. One would hope you could take enough pride in having made a brilliant business maneuver, even if you didn’t create the service you bought which was overshadowing your own. But apparently that’s not the case which is weird and more than a little sad.
Michael Lewis — yes, that Michael Lewis — digs a bit into one of the stranger apparent side effects of COVID-19:
The inability to smell was the first symptom many patients noticed; in some cases, it was the only symptom the patients noticed. “In the past it was once in a blue moon that we saw patients who had lost their sense of smell,” Kumar told me. “Now we are seeing it 10 times as often. It’s one of the things that happens with this virus.” The British doctors compared notes with doctors from other countries and gathered what data they could. They concluded that roughly 80% of the people who lost their sense of smell would test positive for the coronavirus, and that somewhere between 30% and 60% of those who had tested positive for the virus had also lost their sense of smell.
Those numbers might turn out to be a bit off — maybe even way off. They are a heroic guess, given how little testing has been done. But it’s precisely the scarcity of tests that makes the observation so intriguing, as it offers the possibility of a crude alternative to a test. Lose your sense of smell and you know to isolate yourself, even if you feel great.
At first, this sounds like a cute hack, at best — or a loony one, at worst. But given where we are with testing (read: still not doing nearly enough of it), perhaps it’s not the craziest thing in the world to use as a rudimentary measure.
I also enjoyed this simple risk management idea from a former banker named Peter Hancock:
His background in risk management was relevant here. He saw an analogy to pandemic risk in his early days at the Wall Street bank. “Those were the days when risk was being quantified in all sorts of new ways,” he said. The bank’s traders organized their risks into buckets — there was one bucket for credit risk, for example, and another bucket for market risk. But there were all sorts of risks that didn’t fit neatly into any particular bucket. Hancock watched a rival firm lose $300 million in a day on its equity derivatives portfolio after an obscure court ruling involving corporate dividend withholding tax. He asked: How would you ever uncover such a risk? His answer was to crowd-source the problem.
And so he created a program — which exists to this day — in which everyone in the bank was encouraged to alert the traders to risk. “There were two rules,” Hancock said. “Your note had to be two sentences or less. And your boss was not allowed to edit it.” The general idea was to make it simple and painless for everyone in the bank to share their thoughts. These thoughts often wound up improving the bank’s risk management. Even though the people who supplied them usually knew nothing about risk management.
Sort of a VP of Devil’s Advocacy idea. I like it.
So why not do a similar sort of thing with the virus? Encourage everyone in the world with access to the internet to report whether they can or cannot smell. Make it easy for them to do so. Find widely admired people with big social-media followings to make short videos on the subject — at the bottom of which there’d be a simple button that allows anyone watching to report their sense of smell. Go viral with the virus. Before long you’d have a pile of data that smart analysts could use to map it, and evaluate its risks. The results might not be perfect, but they were far better than what we have now in any rich country and far better than what they might ever have in countries with fewer resources.
Why not, indeed?
R.T. Watson and Joe Flint on the latest Scorsese film:
The project, “Killers of the Flower Moon,” had been slated for production at ViacomCBS Inc.’s Paramount Pictures, but then the movie’s cost ballooned to more than $200 million, another person familiar with the matter said.
Paramount Pictures agreed in 2019 to make the big-budget drama, starring Leonardo DiCaprio and Robert De Niro. Even before the coronavirus pandemic upended the global economy and brought Hollywood productions to a halt, Paramount executives expressed concern over the film’s rising projected cost, according to this person. They gave the Oscar-winning filmmaker’s representatives the go-ahead to offer the project to other studios, the person said.
Martin Scorsese’s representatives have been holding talks with Apple Inc., Netflix Inc. and others, as they seek a new company to produce or distribute the director’s next big-budget film, according to people familiar with the matter.
If this sounds familiar, it’s because it’s nearly the exact same thing that happened with Scorsese’s last film, The Irishman, which went to Netflix after Paramount balked at the cost. I’m not sure which is more wild: that Scorsese would run the same playbook twice in a row — insanely highly priced historical drama — or that Paramount would effectively spurn him twice in a row. I mean, cost aside, it’s Martin Fucking Scorsese.
Not only that, but while it was crazy that Paramount did this the first time around with a Robert De Niro/Al Pacino-led film, they’re doing it here with a Leonardo DiCaprio/Robert De Niro film. DiCaprio is perhaps the last of the truly traditional movie stars, maybe alongside Tom Cruise. That is, every movie they make is still a huge deal (even if not a huge production necessarily) that is assured to play in theaters. No TV, no Netflix, no streaming. Movies in movie theaters, period.
If Paramount really does pass on this, and certainly Apple if not Netflix will pick it up, is it the first DiCaprio movie that doesn’t hit theaters? Perhaps an excuse can be made in our current environment, but this movie also isn’t shooting yet, it’s going to be a while before it would hit theaters. (And presumably if it’s Apple that greenlights it, they’ll figure out a way to get it into at least some theaters. Netflix? Maybe not so much. So I’d bet on Apple here, as it’s not clear Scorsese was thrilled with the way The Irishman played out.) Regardless, this is the way.
Apple has told the big music companies that it intends to aggregate its media services, but the two sides have not yet settled on the details of a media bundling plan, according to people familiar with the matter.
Microsoft is reportedly postponing their weird dual-screen “Windows 10X” devices. No mention of COVID causing the delay, but it’s sort of implied. Still, you have to wonder if part of it is the realization that such devices are products in search of a use case…
Some thoughts on GV’s latest investment in the mobile website creation tool Universe.