Sharp Tech with Ben Thompson - Spotify’s Royal Mess, Ford and GM Partner with Tesla, HBO Weighs Selling Content to Netflix

Episode Date: June 22, 2023

The Prince Harry "grifter" controversy as an object lesson in the internet content economy, what Spotify has (and maybe hasn't) learned from its adventures in podcast development, and the strategies on both sides of the announcement that GM and Ford will use Tesla's charging network for their EVs. At the end: A rumored HBO pivot prompts a victory lap live on the podcast.

Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing? I am great. I'm great. I actually yesterday was listening to Greatest Little Talk, your basketball podcast, just really relishing you, refusing to come to terms with the Bradley Bill situation. Just a great listen all the way around.

You know, it's always the most fun to listen to someone about things they are personally really invested in. passionate about, not just from a professional perspective, but from a, you know, growing up with the team sort of idea. You know, I feel that way whenever there's certain tech topics I sort of get into that touch, you know, on me personally. And in this case, the Wessers are terrible, so you never talk about them on the goats, but you guys got an expansive dive in, got to get your raw emotions and feelings. And I just wanted to let you know that I appreciated that. That's right. I think your takes were insane, but I did appreciate it. Straterea subscribers, go to your show notes.

There was a marvelous three-episode arc over the last 10 days as the Wizards made Bradley Bill available in trade talks. I talked myself into various pie in the sky possibilities. And then it all came crashing down for me on Father's Day. A hell of an emotional journey. Ben was there in my text messages every step of the way. So if you're not a good subscriber, check it out. For now, Ben, we do have a programming note at the top of this show.

Do you want to explain to people what the plan is for the next couple of weeks? Yes. So there was obviously a holiday this week. So we are here with our regularly scheduled episode. We'll be back with the regular schedule episode at the beginning of next week. And then we will be off for sort of the annual summer break. That's your checker takes every year, usually the week of the 4th of July. Sharp Tech is taking a.

break a one episode early because I will be in a locale that is not conducive to recording. And then we'll be back the week after July 4th where we will actually record an episode in person. So this is one episode today, one more next week, and then we'll be off for a week and back after that. There you go. And as for today's episode, we're going to be covering three very different stories involving Spotify, Tesla, and H. We'll kick things off with Spotify, and I'll read from CNN here. Spotify executive and popular podcaster Bill Simmons has hit out at Prince Harry and Megan, Duchess of Sussex, labeling them grifters after their multi-year partnership with Spotify ended on Friday. Quote, I wish I had been involved in the Megan and Harry leave Spotify negotiation, Simmons said on his self-titled podcast, The fucking Grifters.

That's the podcast. we should have launched with them. Simmons previously criticized Harry in a January 2023 episode of his podcast, saying that he was, quote, so embarrassed to share Spotify with him. Quote, what does he do? It's one of those things where it's like, what's your talent? Why are we listening to you? So you were born in a royal family and then you left.

You live in effing Montecito and you just like, you just sell documentaries and podcasts, and nobody cares what you have to say about anything unless you talk about the royal family and you just complain about them. And then another update from Pod News. Oh, it's amazing. The hits keep coming. Each update is better than the last.

It really is. It really is. On the heels of Simmons's comments off the cuff on a podcast with Joe House, my DC compatriot probably has his own complaints about the Bradley Beal trade. Pod News followed up and said, Megan Markle's podcast produced just 12 episodes in a $20 million contract. The Wall Street Journal suggests that she may not earn the full amount after not meeting productivity clauses. Pod News has heard from multiple sources that some interviews on the show were done by other staffers

with her questions edited in afterwards. Will Page, former chief economist at Spotify, suggests that Harry and Megan earned more than the most streamed song ever, blinding lights by the weekend. Not bad for 12 hours work, he told Sean Lee on BBC radios for the world tonight. Ben, you wrote about all this on Monday, and I thought it was actually pretty interesting.

In your daily update, you trace the different paths of Simmons and Prince Harry at Spotify, one of whom has been tremendously successful, one of whom is ending in disaster on pretty bad terms, And you made a profound point about the nature of success on the internet, both for individuals and businesses. So I thought we could unpack that take at the top of the show. And yes, this was all partly an excuse to just read Bill Simmons trashing. I actually enjoyed this the most of having you read it.

It makes it that much more funnier or that much that much funnier. I went back to listen to Bill's comments, which, you know, number one, I laughed at you saying off the cuff. Yeah, right. This is off the cuff, right? You just sort of randomly sticking it in. Number two, the comments are very funny. And then number three, the fact that this has become like a global news story and Bill keeps getting referred to as a Spotify executive is I'm just, it's killing me. I think it is so funny.

The entire thing is very, very hilarious to me. It's actually funny because on Monday, I'm like, or Tuesday or whenever I wrote this, you know, it is very dead right now as far as a news perspective to say the least. So I've got a scrounging around thinking about what am I going to write about? What am I going to touch on? And I actually've been wanting to come back to Spotify for a while as they've been sort of been, you know, refreshing their podcast strategy, I think is one way to put it. And this seemed like a sort of easy way in. So I sort of dashed it off. And it was kind of funny because I got a ton of responses to this.

And it's just a story that is a story that sort of appeals to lots of people. And I think that appeal gets to some of the fundamental nature of what's going on here, right? The appeal does not come from Bill Simmons. Like in this story, he is just a Spotify executive. It doesn't. It doesn't. But I used to work for Bill. I'm still friendly with Bill.

And it's entertaining to no ed to watch him introduce to this audience of royals obsessives that are like exercised over his treatment of Fritzery. On a personal level for you and I, it's very, very funny. Right. And Bill, as you might imagine, is completely unapologetic about any of this, right? But to the point that it's a big news story, again, I just found it striking like in our world, in the internet content world, in the podcasting world, like Bill. Simmons is the goat, right? Like, it's like, you refer to him as Bill Simmons because he is the guy who invented half this stuff. We're all sort of following in his footsteps. You know, I, we'll put a wink in the show notes to the interview I do with him. We're sort of like talking about his career path. You know, it's, as I mentioned in my

update, I do, I am biased in this case, not because I've appeared on his podcast, but because I find it very inspirational and a path that I've sort of sought to follow myself. So that's, that's sort of on one side or the other. But again, the nature of this story is such that he is a Spotify executive, right? It's just, it's like the nature of the royal family and the tabloid bit about this doesn't care in the slightest about who said XYZ. Now, perhaps it got traction because, again, the Bill Simmons podcast is still one of the top 10 podcasts in the world. But again, the framing that people sees on to is it's about the royals and they are being called grifters by a company you've heard of executive. The reason why I keep sort of leaning on that bifurcation between the way you and I

think about Bill Simmons and the way that most of our audience thinks about Bill Simmons versus the way Bill Simmons is being presented in this story gets to this different nature that I'm talking about. Like the royals are, they're a totem around which to hang tabloid stories, right? That's kind of arguably they're one of the greatest contributors to journalistic profits in history because simply by existing, they are something to write about. And every single thing they do, particularly if it's somewhat controversial, like this is, you know, to the extent they, I don't know if they are still technically royals or not

because they left, I don't follow this. They like, I thought they left the family. I'm very confused about how it works. You're not tracing the royal titles through all these different transitions for Megan. What this story says to me is they are still doing their job. Their job is to be the center of like attention, right? And that is, again, in contrast to the reason I am much more interested in Bill Simmons is because he has hours and hours and hours and hours and hours and hours and hours of podcasts this year alone, much less going back the last 20 years. He has thousands and thousands and thousands of words.

Well, I can't say this year alone because never writes anymore. But would you go back to sort of through his whole archive? And that gets at the distinction between the two that I was sort of trying to highlight. Right. Between the two worlds media-wise, you know, like in print media, the royals still have a ton of value if you're trying to sell tabloid newspapers. Yeah. Or in the quickbait media, right? Like, I'm sure this story went viral in five gazillion stories and five gazillion on every single platform, right? But it's just a fundamentally different nature of fame and value driving where they drive value.

And Bill said it in that second comment because of who they are. It's downstream from just existing. And it's wild to me in retrospect that anyone at Spotify thought that would have anything beneficial and useful to do with creating a good podcast. Right. And that's what's interesting to me about the commentary on the broader. ecosystem and using this particular comparison as sort of a microcosm of the differences in old media landscapes and new media landscapes like Spotify had this strategy to cultivate high-end podcasts with big names like Prince Harry and Megan Markle. I guess maybe she's Duchess of

Sussex, I believe, is the title. No, I thought again, I thought this was all renowned. So I actually made a point in my update. I just refused to give them any royal titles. It was just, God. Very fair. No, this is an American podcast, whatever. I don't, whatever. You're Harry and Markle or Megan or whatever. Yeah, well, what was interesting about Spotify is they were seeking all these big names,

spending a ton of money to host podcasts with people who were famous for doing things other than making content on the internet. And basically, the theory was these guys are such big names, whether it's Bruce Springsteen or Michelle Obama, Barack Obama. Obama, Megan Markle, Prince Harry. Like, everybody was so famous and important to, like, the larger culture that people were going to flock to these podcasts. And maybe I'm wrong, but at least as an outsider, it looks like basically every single

one of those projects wound up flopping. And the lesson that I took from what you wrote on Monday is that celebrity is less valuable in a media ecosystem where you have to compete with, like, 10 million other people. who are creating their own podcasts or their own blog posts or their own TikToks. And it isn't to say that celebrity isn't valuable, but it's not the Trump card that it used to be or has been in all these other industries where there's more scarcity in terms of what's being released to the public. Am I construing that correctly? Yeah, I think so. There's actually a few things going on here.

So number one, the whole celebrity push doesn't seem to have worked. I mean, I think Spotify will push back and say, I think the Michelle Obama podcast, in particular were quite popular. But even then, they left their deal and is unclear how many were ever produced, sort of XYZ. And so you have this celebrity driven where they're popular just for existing. Doesn't make sense. On the other side, you have these other acquisitions they made, like companies like Gimlet Media,

where it was the idea that there's a structure around producing shows and we can acquire that sort of structure and infrastructure and make new shows. And those don't seem to have worked out either. as far as I can tell the two acquisitions they made or deals they did in podcasting that worked out, that made sense that by all accounts today are still being invested in are Joe Rogan and Bill Simmons. So there's sort of two takeaways there. The one relative to the celebrity point, and this is sort of the bit I made in the daily update, is if you want to differentiate your podcasting, hire a podcaster.

Like that seems pretty straightforward, a pretty obvious thing. And the reality is the nature of internet media is if you want something sustainable, the most important quality is consistency. Like, and this is something that I talked about in the context of daily update. You all get feedback from readers. Oh, like, we just made a whole bit. I am next week, I'm going to be in a place with no internet access. I bought a Starlink and I am going to attempt to still write daily updates. And now people are going to hear that and they are going to say, oh, man, just take more time off.

It's fine. X, Y, Z. Number one, yes, you're probably right. Don't take advice from me on work-life balance, okay? No, no, no, no. I can't wait to hear how the Starlink experience goes. It's going to make for great podcast content. We go back to it.

I did hook it up yesterday. It's very cool. Like just the way it acquires a satellite. It's moving around and stuff like that. So it works. The area I'm in is supposed to have coverage. It's shockingly fast. So I am optimistic.

There you go. Preview of our Starlink review. So yeah, number one, I'm an insane person, so I don't let myself relax too much. But number two, I do think there is massive value and return to consistency and delivering what you said you're going to deliver. And it's one of those things that people don't articulate it. Everyone says, oh, I just want quality. I just want sort of X, Y, Z.

But I think the revealed preference, and not just with me, but with people like Bill Simmons, with sort of lots of other examples, is the way you succeed and build an audience that is sustainable in the long run is through consistency. And Bill's been consistent for 25 years. Joe Rogan is up to like, he has thousands of podcasts. He does like two to three a week. He's actually got one of the most insane output schedules of anyone.

And, you know, they're hours long. I don't know who listens to all of them, but obviously a lot of people do. And I do think when you look around and you can talk about YouTubers, right? These YouTubers are putting out videos. They're MKBHD, you know, amazing tech reviewer. He put some sort of stats somewhere I don't have it in front of me about like the number of, you know, how many videos he's done. Because he does them. Mr. B, same thing.

He's released a video like every week for like X number of years. And that's a tough life, right? You hear a lot about these folks burning out. Streamers, I think, in particular, because they're sort of on for hours a day, every day. And to me, like, as to me, the crazy person, that sounds insane because after a podcast, I have to like lay down for three hours because just being on for an hour is hard enough. But the reality is they do that because everyone knows in streaming that's how you succeed. It's just putting in the hours. And so that is just a reality of the internet is that's how you succeed. And in contrast to this, this is where the Gimlet part is interesting, the long sustained successes on the internet seem to not be

sort of frameworks or institutions. It's individuals. It's so there's this little bit. It's not an individual for being famous and it's not sort of an institution that can turn stuff out on a regular basis. It's an individual that can be consistent over time. That's who wins on the internet. And it's hard to think of, you know, it seems to matter across mediums. Yeah. Well, and Simmons is a great example of someone built for the new landscape. because obviously you can turn around and say he's a celebrity, but even now several decades into his career, he's made a ton of money.

He's still not only releasing three podcasts every week, but he's getting them up like the night before, timed for people's morning commutes. Like he still very much cares about winning and pushing to have his podcast be the first thing someone listens to after big news breaks. And that alone distinguishes him from like 90s, of normal celebrities where you'll have so many people say, oh, I'm going to start a podcast. And it's not that they can't do it. It's just that they don't necessarily understand the work it takes on the consistent schedule like you're describing there. Like step one is find the right host, find the topic. Step two is find a rhythm. But then step three, if you want to have a successful podcast is you just have to release it every single week for like years at a a time. Not years at a time, but like it can start to build momentum. If you don't have any

momentum after a year, you might want to give up. There is value to giving up. But it's interesting because it's the aspect of podcasting that can be frustrating for people. Like, you can't just throw money at the growth problem and expect it to work. You have to make a good product and do it consistently and trust that it will grow organically. And then on the back end, the growth, the growth that you're getting is more valuable because people wound up there organically and tend to be more loyal. They'll give you like an hour at a time, right? Or sometimes bored.

Exactly. Yeah. And it's just interesting that Spotify dove headfirst into this podcasting universe and at least in some cases was applying a lot of old world logic and it now seems to have sort of a better grasp on what actually works here. It's really interesting. because if you go back, you can make the case that maybe it actually is the case. And I was wrong because I was not a big fan of the exclusive strategy generally.

But maybe the case was the exclusive strategy wasn't the problem. It was who they went after that was the problem. Where actually what they should have done is they should have gone after, you know, like super niche players that are only going to bring, you know, 20,000 listeners with them. Again, that's still a pretty big podcast, to be totally honest. but and bring them on Spotify because the bond to your point the payoff of being consistent being there every week people putting you in their ears and just trusting I'm going to give away an hour of my time right now because I think it's going to be worth it why is it going to be worth it

because the last 15 were worth it they will go to another platform they'll grumble about it they'll be very grumpy but it seems like podcasts more than anything would have the power to actually shift people to a new player. Once it's in your ears, it's in your ears. It doesn't really matter what sort of what the player is. And so, I mean, this is sort of a real-time realization on my part. Maybe their strategy wasn't wrong per se. It was just, it was applied completely wrong.

And you mentioned before, you just said it in passing by I just wanted to double down on it. Yes, Simmons is a celebrity. He is a celebrity because of the work he put in. He was not a celebrity when he started writing his Boston sports guy. He was a bartender. right and and that's i think a characteristic that you see frequently with these sort of creators and it's one that spotify doesn't seem to get i it blew my mind so they they make this big

shift they cancel all these contracts they they move out the executive that was sort of in charge of it which was an executive from hollywood i think like she did her job right like it was it was the top very top sort of strategy that was wrong so like wow they're finally making a big you know understanding what podcasting is and actually changing their approach. And they announced a new podcast with Trevor Noah. It's going to be like he has 14 other things going on. And it's like not a professional podcaster.

A professional entertainer, sure. There's been and there's been the occasional sort of person in this role that has done well. I think like Conan O'Brien's podcast has been pretty successful. What, by the way, distinguishes Conan O'Brien if you were to ask someone about this thing, obsession, like just driving things into the ground. Right? Like you can just sort of, there's an aspect about it. He's like, yeah, it makes sense that he turned out to be a good podcaster. But by and large, there's something about the nature of success on the internet.

And the other, I was going through the top podcast. The other bits that do succeed are large media organizations can produce hit podcasts. Like the daily is a good example. But like, there's other podcasts that are basically the audio version of a TV show. Like I think like the Rachel Maddall podcast or whatever, I think was like very high. There's a couple other ones. I was just looking at the charts sort of yesterday. So I think they'd move around a lot, but that's what I saw yesterday.

And that is a bit where there is an institutional capability to produce content that does work. But I'm not sure that that works in a narrow medium. Like the Gimlet thing didn't work out. I mean, maybe the ringer is an example. But again, it's hard to, it's hard to peel apart the ringer success in producing content from the fact that Bill Simmons is part and parcel of that. So I don't want to make too definitive a statement here, but there is something, I think there is something here about the nature of success on the internet generally. Yeah. No, and I enjoyed the comment, the commentary on those dynamics specifically. I should note for the record that Dax Shepherd has a podcast that I believe is Spotify exclusive. It's called Armchair Expert. And it is my wife's favorite podcast. And I think he does pretty well. but also produces a ton of podcasts on a weekly basis.

So it's consistent with the themes here. Because I know nothing about pop culture. Dax Shepherd, I'm looking up his Wikipedia entry. Oh, and Chicks-O-N-Chic. So he was appeared in feature films. But he's not like a huge star, right? No, no, no. He's not a huge star.

He's been producing this podcast since 2018. So, yeah, I think it. Yeah, I started. He's become a star because of podcasting, actually. And I mean, like he was a bit actor. a guy that's been super consistent, has just sort of like been relentless. And yeah, so I think he fits the mold. There you go.

One final question. Tony wants to know, why isn't Spotify consistent with the distribution of the Bill Simmons podcast, which is available everywhere, and the Joe Rogan podcast, which is exclusive to their platform? What's the correct strategy for Spotify when it comes to distributing Rogan and Simmons? Do you have a take? I do think this is a very interesting question. I mean, I think there's a bit where,

The relationships are different. They're contracted with Rogan to be sort of exclusive. They don't own Rogan. They do own Simmons. And so you would think maybe that'd go in the opposite direction. But number one, I don't think Simmons would allow his podcast to be Spotify only. Now, there is a bit where if you paid $280 billion or whatever for it, you can do whatever that you want to. But I agree with Simmons, generally speaking.

Like, I think that you want first and foremost podcast to be. large and popular because the larger the market gets the, I think that accrues to Spotify's benefit. And if they're the only company that can actually build a sustainable business model on that with their sort of investments in targeted advertising and things like that, then that broad ecosystem of podcasters will be incentivized to push people to Spotify, at least that's sort of what might work in theory. But then you get into the actual reality. And it does seem from the outside that making Rogan,

was a pretty successful sort of approach. Like, and it goes to my bit before about the issue with all these celebrities might not have been the exclusive bit. It was that they just sucked at podcasting. And they should have actually gotten real podcasters. I actually think this is a bit of an open question. I don't know the right answer to this. I do know that there's always-

And it could depend on the talent in question. It could. I do think Bill appeals to a more casual audience that is less likely to obsessively flock to one platform. I don't know, but I don't say that definitively. Yeah, yeah, I mean, I think it's hard to say. I'm not, I'm not a Joe Rogan sort of listener, but the people who are like swear by Rogan and are like locked in for his three and a half hour podcast multiple times per week. And so that type of person might be more likely to say follow. Yeah, I will sign up for Spotify and follow you wherever you go. Yeah, maybe. I don't know. I mean, I don't know. I would I would follow, you know, I would go to Spotify to listen to Bill if that was the only place he was. was he was available. You know, maybe I would, I don't listen to every episode. So maybe I would miss more because it's not in my regular player. I don't know.

I actually, I honestly don't know the answer to this question. Because like I said, broadly speaking, whatever Spotify was doing the podcast was wrong. But was it wrong again because of the exclusive bit or because they didn't understand the nature of what makes a good podcast and who they should actually prioritize if Bill Simmons were only available on Spotify. And if lots of others of your favorite podcasts were only available on Spotify. Spotify, would Spotify really dominate the market to even greater extent than they do today? There's a good chance the answer is yes. Interesting. Yes.

Well, thank you, Tony, for a good question. And thank you, Bill Simmons. I'm going to read his quote one more time. What does he do? It's one of those things where it's like, what's your talent? Why are we listening to you? So you were born in a royal family and then you left. You live in fucking Montecito and you just like, you sell documentaries and podcasts and nobody

cares what you have to say about anything. unless you talk about the royal family and you just complain about them. So great. So where's the lie, right? Yeah, exactly. It's really the essence. It's nothing about their celebrity is about what they do. It's about their existence, right?

Yeah. And their tabloid value has the effect of perpetuating their cultural impact. Right, but I mean, there's the other thing about the internet is because the barrier to entry is so. low on the internet. Anyone can start a podcast, right? Anyone can start a blog. Anyone can post a picture on Instagram and try to become like an influencer or whatever it might be. That is a big part of why it's so unbelievably competitive that you

can lose your spot so quickly because anyone can do it. Like there is just, it's there's a real tradeoff between access and ability to do something in the level of competition. And, It seems very trite to say so. But I think it's still underrated. What a difference it makes, right? To get into a printed newspaper was a significant barrier to entry.

To get on a radio show was a significant barrier to entry. Like our mutual friend Spike Eskin has been all this big tizzy because one of their hosts left WFAN and they have to rejigger their lineup and X, Y, Z. It's big news in the papers. Why? Because that's very valuable ground. There's 24 hours in a day on the biggest sports network in New York City, and it's big news who's there, who's not. Not big news about who started a podcast last week because there's literally infinite podcast listening space. That's right.

Yep. Well, I agree that it's underrated. And I think Spotify would agree in retrospect that they've underrated the different dynamics on the internet than in traditional media. Right. Overall, I'm still supportive of a Spotify's overall podcast approach. but the payoff here is leveraging that fact that anyone can start a podcast. Not only that, Spotify has clearly learned some valuable lessons and pivoted in smart ways. Then why did they hire Trevor Noah?

Well, that's true. I forgot about the Noah news. I'm sorry. It kind of blows my mind because it does feel like the payoff here is you have to lean into the long tail aspect. So the smartest acquisition they made in their podcast pivot was anchor. The site that makes it super easy to get started because you, want a lot of people to get started. A lot of people starting podcasts is good for Spotify. And implicit in that is a lot of people quitting podcasts is good for Spotify because that's a function of

a lot of people starting them. And this math is very, very hard for people in the non-internet world to internalize. These sort of platforms, these aggregation platforms, high amounts of churn is a good thing. This goes back to like the advertising bit I made about Google and Facebook. A decreasing price per ad is a good thing. because that is evidence of increased inventory, of increased opportunities, right? Like, when you're dealing, every assumption people make is in a world of scarcity. Like, and their assumptions all derive from that. The internet is all about abundance.

So many things that seem intuitive are actually totally wrong. This idea we're going to get the celebrity. The famous person is a mistake. It's going to always be completely outweighed by the long tail. And if you can capture that long tail, and that is your sort of what you benefit from, and then you monetize them because you build an advertising engine that works across the long tail. You don't need to sell ads on a per podcast basis. You can actually have an engine that inserts them all the way across.

It actually targets listeners on a unique basis. You basically do what Facebook did. Then you, it's such a powerful position to be because not only are you creating huge value for yourself, you're creating huge value for this entire army that is only possible because of you. And you go back to Facebook. I included that clip when they had the boycott of large CPG companies, compare the boycott of big companies on Twitter to the boycott of big companies on meta. Twitter's like, screw.

Because they never actually built out this sort of capability, right? And it's sort of all Twitter is still. all about celebrity in many respects from, you know, who's on the platform to their advertising approach. It's all sort of brand advertising. Meta is not. Meta is highly diversified in that it's not just that they have a huge number of advertisers, but the vast majority of advertisers on meta exist because of meta. They are a function of meta being there. You can't run a Shopify store if meta doesn't exist. You like, have you bought a, a, a bill related wizard's t-shirts yet if you haven't you know it's coming right like i you know

screw tommy shepherd or whatever it might be that's going to exist it's going to show up in your instagram feed and that entity that created that exists because of facebook is that entity going to boycott facebook no it's ridiculous right and so this is such a powerful sort of place to be and that's what spotify needs to aspire to and and that's you don't get there by renting celebrity you get there by creating an infrastructure and platform. Yeah. Exactly. Well,

best wishes to Trevor Noah at Spotify to borrow a phrase from Bill. Nobody believes in you. Nobody on this podcast believes in you that Trevor Noah podcast. But he's been successful in all this other areas. What's lesson to Spotify learn? No, it just doesn't make any sense. It seemed like they learned their lesson, though.

It seemed like they had. They did pivot. They shuddered Gimlet, right? I know, but the Trevor Noah podcast is going to be available. across platforms. So you'll be able to listen to it in Apple Podcasts, which suggests that, okay, they buy the idea of we benefit if the broader ecosystem is large. But why are you paying for that? Like, you don't need to pay for a large broad, it's very weird. It makes no sense. Yes. Well, you mentioned Twitter earlier. We're going to shift gears here from CNBC. General Motors will follow Crosstown rival Ford Motors in partnering with Tesla to use the electric

vehicle leader's North American charging network and technologies. Under the deal, GM vehicles will be able to access 12,000 of Tesla's fast chargers using an adapter and the Detroit Automaker's EV charging app starting next year. GM, like Ford, will also begin installing a charging port used by Tesla known as NACS or the North American charging standard instead of the current industry standard CCS in its EVs starting in 2025. GM CEO Mary Barra told CNBC's Phil LeBoe on Thursday that as a result of this deal, the automaker expects to save up to $400 million of a previously announced $750 million in investment to build out EV charging. So, Ben, I want to get into why this news is interesting, but as a baseline, I'll read this Tesla blog post.

on the charger Tesla's use. With more than a decade of use and 20 billion EV charging miles to its name, the Tesla charging connector is the most proven in North America. It has no moving parts, is half the size, and twice as powerful as combined charging system connectors, parentheses, CCS. Am I correct in taking Tesla's word for it and assuming that they're just better than everyone in the world at this? So I am not an expert in this area at all.

I thought the network effect implications or what this says about networks was very, very interesting. That's why I wrote about it. But to be clear, I'm not an electric vehicle expert. I generally avoid Tesla in part because you can't take seriously anything Tesla says in either direction. It doesn't say they're not successful. It's just, you know, this is an Elon Musk sort of phenomena sort of in general. What I hear from friends who do and have had both is that the Tesla one is drastically, superior. You go online that is sort of the consensus. There's always the person that goes

like, oh, no, I think it's totally fine. The other one. And then there's like 47 comments that are saying, stop it. It's obviously much better. Right. Yeah. So for what I understand is Tesla's is purpose built for their vehicles. There is the locking contraption is on the car, not on the connector. So the connector is less likely to break. The car might break, but the connector is less likely to break. And it's just way lighter and easier to sort of like pop in. You see the pictures from like a size perspective. Whereas the other one, and again, I'm just going off stuff I've read, not personal experience, not an expert in this space. But the other one was, number one, it was like backwards compatible with another connector that started out.

So that sort of constrained it to start with. And they wanted to add on all this other capability. Like what if you want to use your car to charge your house or like, or like lots of different things? All of which sound good in theory, right? And let's make sure we engineer our product for the future. The problem is if you don't make it to the future, you don't get it to find the future. It's actually a beautiful example of how design by committee can go totally wrong and you can over-engineer something and you end up with a bad product that you just lose in the market. Now, interesting enough, that in people like, oh, but it's an international standard.

Well, number one, it's not the standard in China. It's funny how people, you know, international standard is basically European saying you should listen to us. Massive market. Yeah. Yeah. So this is CCS or some version of CCS. Actually, it might be slightly different is the case in Europe. And again, because Europe loves to regulate, right?

So they were pretty quick on to order standard. organization. This is an example of where regulation via the free market, though, I think, again, I'm saying this as someone who's doesn't experience both, but can be actually beneficial, where it may turn out we have a standard in China, we have a standard in Europe, and we have a standard in North America. The North American one was not dictated from the top. It was one in the marketplace, and by virtue of that, it's going to be the best connector, and the one that's sort of like easiest to use and sort of like pops right in. At the end of the day, like, from, you know, Tesla just, they were first. They built out lots of.

of things. They're consistent. They always work. You can leave in a Tesla and assume that the supercharger along the way is going to work. You have this situation with a third-party connector where not only are they bulky and hard to use, they often just don't work. And if you're driving a GM car, you're not looking for a GM service station. You're looking for like an Electrify America service station or it's some sort of third-party thing. And that's the, and again, this is, I almost could have written like a whole article. There's so much going on here. There's a bit about like from Clayton Christensen about, you know, when a new market starts, it has to be integrated because it's not good enough. You're just trying to solve so many problems.

It's easier if you do the whole thing. That was Tesla. Like Tesla doing it all from, you know, top to bottom, including the charger network. And it was a fully integrated sort of package. And it worked and it worked well. Whereas the other works. And in the long run, you do want to be sort of modular because there's real returns that come from that, right? At the end of a Tesla can't build every gas station in the world, right?

to the equivalent for electrical vehicles. Having a different entity and a different, you know, sort of approach to that does make sense. But the problem with starting with the modular approach from day one is you end up in a situation where you don't buy a GM car because you don't trust the chargers that are not made by GM. They are made by somebody else because there's no, you don't have the proper incentives and investments in place to get it off the ground. And so what actually happened is Tesla by virtue of being integrated. They not only made a better charger, they had the incentives in place to do chargers that actually worked and were dependable because they're trying to sell this entire promise of electric.

And so GM's here and they've been in the market for a while and they're like, look, we're getting killed by the fact we don't have a reliable charging story. And there's more superchargers and they work better. And the connector is better as well. It's better for us instead of spending hundreds of millions of dollars to build this up, which we should have done years ago. but we didn't, to just pay Tesla whatever it takes to adopt their charger. Now, this is super unknown. Are they paying something? Are they not?

Tesla, it's free and open. There's lots of standards that are free and open that in the tail licensing payments, right? Like, like, there's a whole category here called Fran, fair and reasonable, blah, blah, blah, whatever. Like, be a 5G phone, for example, or like the USB standard. Like, there's lots of standards that you have to pay a licensing fee. the licensing fee has to be reasonable because it's a standard, but we rightly, appropriately so, want a return to go to the companies that invested that standard.

That was the other bit about the story that I really liked, is there's a lot of people very upset about this, because I think this is going to mean that Tesla is going to win in North America. This is going to be the standard. And people are very upset that one company is going to own this standard. I completely disagree. It's hard to imagine a better example of where a company deserves to own the market, deserves to get paid a licensing fee from now until eternity, then Tesla.

The market only exists because of Tesla. You talk about, oh, there's way more NCAS chargers out there than there are. Why? Because there's more Tesla's out there. Because Elon Musk was sleeping on the factory floor getting these out the door 10, 15 years ago. And yes, it's easy to look now and say, oh, yeah, They have all these advantages. No, they have those because they earn them.

It's like Bill Simmons. Bill Simmons is famous and a celebrity today because in 1999 he was going home from his bartending job and writing a column for his buddies and sending via email. Like, and you get the payoff over time. And that's a good thing. It's fine that Tesla is going to win this market. Again, we have regimes in place to make sure the license fees are not extreme, right? Like, and you can go to court and say, look, it's unfair, XYZ.

It seems, it sounds like the fact that GM signing up, Ford is signing up. Now, Rivian signing up. Clearly, they see the fact that whatever they're having to pay is not extreme. It's not abusive. Yeah. It's not abusive, right? Well, and so what, what is the advantage for Tesla? No, no, no.

About a topic I claim I don't know anything about. Tesla's calculus. Well, it's interesting to be because we just never really talk about this market. And so I like, I don't understand like the cars, but I do think a lot about network effects. So that's sort of the angle that that's why I sort of jumped on this one. And to that end, what's the advantage for Tesla? Because when you look back and describe the EV market over the last 10 years or so, one of the things that distinguished Tesla is you could buy their products and feel good

that the charger was going to work. You weren't going to have the reliability issues. And all of it was just a leap forward from where the rest of the market seemed to be. at least that's my understanding of it is Tesla was just sort of a cut above. They were Apple relative to everybody else's crappy smartphone. And so are they seeing that advantage?

They were also Apple in the brand. Like actually I've written about Tesla once. It's one of those things where I feel like, look, I made my point. I don't need to come back here again. Which was it was an article called It's a Tesla. And the bit about what made Tesla's, the Tesla's story so fascinating

and must roll in it so interesting is the extent to which they made electric cool. It wasn't an electric car. It was a Tesla. And you had to build the brand to pull this entire market into existence. The market was downstream from the brand, which is a very sort of unique sort of internet sort of phenomena where it sort of went in the opposite direction.

And so that's Tesla sort of as a whole. But to your point, it is interesting they made the choice now because the reason to buy a Tesla is because you get access to the better charging network. But if you assume that the entire market is going electric, again, thanks to Tesla, sort of kicking it off, by definition, Tesla will at some point that will actually become a downside. If you could only ever charge on the sort of Tesla network, if all the cars in the U.S. are electric, Tesla is not going to have 60% of the cars sales in the U.S.

There's going to be infrastructure that is going to be, they'll figure out the standard eventually, they'll get it to work. GM would spend the money if they had to to actually make sure their cars should be out there. Plenty of government subsidies along the way. Right of government subsidies. The government continues to be ridiculous

in the way they deal with Tesla in this case also, but whatever. And so you have this bit where in the long run of time, being fully integrated can be a downside, right? And so you saw this with Apple. Like Apple loves to be differentiated, but they would have these like crazy connectors

that they would invest in. And it ended up just making stuff expensive. Like, because you're a smaller market. You don't have as much competition in that market. You have fewer features, fewer sort of things that you can plug in. At some point, it is valuable to be a part of a broader ecosystem. And something like charging stations, where ideally you want charging stations everywhere.

That's a great example of where everyone wins from a usability perspective if there's charges everywhere and anyone can use them. And so what was very clever, I think, by Tesla is there is going to be a short-term hit to their cars differentiation. But I think it's an investment in making sure their cars in the long run are actually harmed by not having access to everything. And then presumably taking some sort of licensing fee from basically the entire market in the long run. It's going to be much less revenue.

You make a ton of revenue on a car, but it's like 100% margin. It's all pure profit. Whatever money Ford and GM and Rivian are paying Tesla is going straight to the bottom line. And to the extent that this can help grow the EV market over the next 10

years and help some of those companies expand. They now have a stake. They have an investment in the market as a whole. It doesn't matter. Anyone who sells a car is now going to be beneficial to Tesla. Again, I don't want to overstate the financial benefit. Like, they make hundreds of billions or billions of dollars in revenue from selling cars versus this is not going to be that much.

It is going to be like pure, pure margin. The analogy here is to Qualcomm, where Qualcomm, all their revenue traditionally comes from selling chips, but the best majority of their profit comes from licensing because they invented CDMA, right? And so they're deepened the cell phone standard. So every cell phone, a portion of that price goes to Qualcomm. And so that's, it's pure margin, right? And so they, that's where they actually make their profit, but it's, you know, but even if they make most of their revenue from, from sort of chips. Right. And I learned that about Qualcomm back in the fall and was like, holy crap, that's a pretty good deal. So not bad if you could get it. And maybe that's what Tesla is after here. To what extent, though, was this Tesla recognizing?

that interoperability was going to be an EV requirement, like, written into law at some point. Right. There was also, there's been a huge amount of federal subsidies for building out this infrastructure. And one of the requirements is that it has to support, you know, multiple, multiple cars. And so the, I think in response to this, I saw the White House is trying to say, oh, this doesn't qualify because it obviously qualifies. Like, there's this, this weird grudge of the White House against Tesla is, is very, I don't understand it. Yeah, in a pretty day of the Twitter, I don't think it's a Twitter thing.

It seems to be maybe a union thing or something like that, you know, downstream from that because all the automakers are unionized and Tesla isn't. But, like, again, there should be no objection to. And it's actively bad to object to companies that create something getting paid licensing fees. Like, like, no, I have an issue with software patents specifically, which we can get to, in. in sort of, you know, at another time. But in this specific case, we're talking about a physical good. Infrastructure, yeah. Infrastructure that there's just no denying the entire market exists today to the extent

exists because of one company. And yes, we would probably transition to electric eventually, but transitioning 20 years earlier than we might have, you think any of these car companies wanted to go electric? They were dragged into electric by Tesla. because they were getting their rent kicked in sales, particularly in sort of higher end, the higher end segments.

And it is totally reasonable that because of that, they have to pay some amount of money to Tesla going forward. Right. And Tesla's doing it better than they did or have been. And to the extent they do better now, like, like, again, I can get on a, this is one of those things you have to look at systematically. In a narrow sense,

we're going to be in a case in 10 years. It's like, why are we paying Tesla? But we want to incentive. incentivize that sort of thing. We want to incentivize the creation of new things. Now, there is a fine line. You can get to the case where companies are just trying to, and this is a huge problem with the patent system in general. People just patent everything because they think they can just figure out how to collect rent in sort of X, Y, Z. This is one of the reasons why I'm against software patents because software is infinitely malleable. At the end of the day, it's just taxed, or ones and zeros if you really want to get pedantic about it. And you can create, you can create. create a million things. It's just patent at all and doesn't mean anything. I'm much, I'm a strong supporter of patents in the physical space and, uh, completely against them in the software space, but the overall reasoning for patents is a legitimate one. Right. Yes. And again, from a systemic standpoint, it makes a lot of sense to incentivize great innovation and allow people

to continue to realize that profit as more people benefit from it. Um, Again, this isn't to deny all the shenanigans that take place to leverage these systems into tax collecting, rent collecting sort of apparatuses, right? Like a biotech or a pharmaceutical company slightly tweaking something so now they can extend sort of the patent or like take something off the market to XYZ. There's a million games that are played with this. And this is, there's a lot of tradeoffs that are entailed. By definition, a patent is a government granted monopoly. That's what it is. And so there's a lot of,

there's a lot of stuff that sort of goes into this. Oh, by the way, people are going to be like, oh, I thought Tesla opened their patents. Again, this is classic. You can't really believe what Tesla says. Tesla opened their patents as long as you use them like a fair, they use some sort of language around it, one of which was don't make what we make exactly, right?

And so that's why, yes, they open their patents. they will not sue you, they will not for making a charger connector that utilizes their patents, they will sue you if you make the exact same charger connector. Right, which sort of makes the point, right? Well, the whole idea is it needs to be identical if you want to have a sort of a network effect. So again, this is a classic example why it's hard to talk about Musk. It's hard to talk about its companies because you have to actually look into the details and see what's going on. But that's why, that's how you square the fact that they talked about open sourcing their patents.

and how they're almost certainly having some sort of license fear. Now, the license fee is not disclosed, but it's kind of like if GM just like what is GM stopped all advertising on Twitter when when must took over, right? Which I forgot about that, yeah. I don't think it was a political statement is a, this is a funding a direct competitor sort of statement. And now the GM CEO is on a Twitter space announcing this partnership, like, which is I don't think that number one, they don't need to. announce a partnership where they can just take the technology. Number two, she's not going on to

Twitter's faces unless that's the price of getting this sort of done. So I needless to say, I'm pretty confident there's some sort of licensing fee involved here. Okay. Well, I promised HBO discussion at the very end of this show. So with a hat tip to Peter Kafka at Vox, here is Ted Sarandos in 2013. Quote, the goal is to become HBO faster than HBO can become. us. And then they'll end up selling us their shows because they desperately need cash and don't care about the long-term implications. And from Deadline today, in a hugely surprising move, Deadline understands that Warner Bros. Discovery is shopping some of its HBO library titles to rival Netflix. Such a deal would mark the first time in nearly a decade that HBO shows would

exist on a rival SVOD service in the U.S. The first title that deadline understands is set to be part of the arrangement is Issa Ray Comedy Insecure, which ran for five seasons on HBO and finished in December 2021. We hear there are other titles being discussed. According to sources, this is a financial move. We hear HBO veterans push back against the plan, but corporate financial consideration won out. Insiders stress the deal is not closed and may still fall.

apart, but regardless, it marks a major strategy shift across the premium pay landscape. So, Ben, you have been in front of this move for years now. In the rundown, you wrote down your question was going to be, what do you think of this move? I was getting a joke prepared in response to that question. Oh, I'm so sorry. I'm so sorry. I'm never going to deviate from the rundown again. What do you make of this move?

What do you think of this move? and I was going to delay, as I had my voice be far away and it was going to come closer and closer to the mic and say, sorry, I was just doing a victory lap. Okay,

that's why I included it. I wanted to give you room to just run. In this particular case, I don't want you telling me I'm right. I want to dance around and say, I told you so. There you go. We can take 90 seconds.

You can do a victory lap around the bedroom you're in right now. I think we just did. I think we just did. Yes. We're here. Yeah. Like Netflix has the financial wear.

withal. HBO has all this debt they're carrying. I am kind of surprised is HBO that would crack first. But there is, there is a bit where this is also kind of consistent with Zazlov's approach. Like at the end of the day, he's been very pragmatic about lots of stuff, right? Like he's pulled the plug on stuff,

those movies that he pulled the plug on, you know, just sort of like, we're going to, you know, Discovery and XYZ being glom together. He's not been ideological about, this sort of space.

And so to that extent, it's not surprising. It is surprised, though, because you did feel like, and I wrote this, and this is one sort of streaming article I really regret, because I think I got a lot of this right. But you did feel like HBO Discovery was going to be a valid contender. And the mistake I made that article is I was too stuck in theory and didn't look at the bottom line. The reality is they were so in debt. They had these financial issues.

The whole problem with the studios doing streaming was always going to be financial. You're bearing two costs. Number one, the cost of building out the service and acquiring customers and stopping churn. And number two, the opportunity cost of not selling your content to an entity like Netflix that has a larger consumer base, has already spent the money on tech. And it is just so much more leverage on your content than you do yourself. This is obviously what was, or sorry, I'm getting a little over my skis here, but this was going to happen. And yes, to your next question on the rundown, this was and always has been the bull. for Netflix. The bull case for Netflix is not that they become the best content makers in the

world. The bull case for Netflix is that they survive long enough that the best content makers in the world wake up and realize we should have been selling the Netflix all along. Yeah. Well, and HBO, you talk about the ideology. It seems internally one of the core ideologies was HBO as a Walt Garden with premium content. And shout out to Zazlov. I'm not sure. That is the part of that. HBO, it's, that's a real destruction of a brand that has happened, right?

You can, like, anything that's HBO should, it feels like should be HBO. And Zalov, at the end of the day, is a discovery guy. He's a cheap reality content guy. Not cheap is the person, cheap content to sort of sort of be clear. So do you think there's merit to the concern that HBO is forfeiting some valuable sort of. Absolutely. Absolutely. Absolutely.

But I think this is, This is something that to extend it's the right or wrong move. It's downstream from AT&T making an insane purchase. And then I think, again, I think Warner Brothers Discovery makes a lot of sense as an entity, but it probably needed to be in a much better financial situation to make that theory sort of play out. You know, again, the company that I've mentioned again and again that played this right all along with Sony. They didn't try to build their own streaming service. They've been the bell at the ball, the ball, getting paid tons and tons of money.

money to sell their content to other services, which is the way it's worked forever is content companies sell their content, this idea, this bit, the whole problem with the internet being so easy to get started is it's so tempting for everyone to get started, right? How hard can it be to succeed at podcasting, right? This bartender from Boston did it. Why can't Prince Harry? Yeah. How hard can it be to build a streaming service? These tech guys built it. Like we have, They succeed because of our content. We can do that. No, you can't.

It's actually, it's not just that you're not good at it. It's actually much, it's arguably, I would say, I'm a tech guy. It's much harder. Building a successful at-scale consumer internet company is so hard that there's arguably only two companies that have done it, Google and Facebook. Every other company barely seems to barely make money that is like the pure sort of services space. Netflix seems. their way to join that, but that's been at the cost of billions and billions of dollars

and losses of, of, and a massive first mover advantage as far as scale is concerned. Right. And I think they're going to make it, but we're talking about a 35 year journey, starting with DVDs and all kinds of ups and downs to pull it off. And these clowns in Hollywood thought they could just walk in and do it. It's, it's, they're a bunch of Prince Harry's. just to confirm it's a 25 year journey, not a 35 year journey, maybe 35 until Netflix is really like masters of the universe. Yes, yes. For the record, that is what I met. I'm not that old. But yeah, well, I'll be curious to see what happens at HBO because I don't necessarily think of them as being distinguished because they're premium cable. I also look at them and their editorial standards and the way they produce

shows is different than most anywhere else in Hollywood. And maybe that's enough to differentiate. Yeah, it feels like HBO should have always stayed small, right? It should have been its own sort of thing. Like, they actually had the model. They had the premium TV model. I think that that could have shifted seamlessly to the internet. They were already an add-on, right?

The problem with ESPN going over the top is ESPN, all the cable companies are like, why should we charge $10 a subscriber to people who don't watch ESPN when you're going over the top and competing with us. Right. Right. So that's the problem. Whereas HBO was always an add-on. Like what's the worst that can happen? Comcast won't sell you anymore.

Like there's, they were, they had, it's a real tragedy because HBO, the hard part is, is that business model shift. And they already had the business model. But all it speaks to is how difficult it, like the tech stuff seems so easy. And it's not. It like, like, and. I mean, the max. also sucks. The HBO Max app sucked. The Max app sucked. But I still use it because HBO's content is good.

That's right. That's right. And it does seem like even though this is inevitable and selling stuff is a good thing, that idea that you're going to open up Netflix and you're going to see the gray fuzz and it's going to say HBO. It's going to be really weird. Yeah. I would have sold some other Warner Brothers stuff first. Yeah. Yeah. Well, Zazlov has managed to blaspheme in like a dozen different. ways to piss off various creatives in Hollywood. And we'll see how it works out. For now, one final question. Jan says, recently I watched the first episode, Joan is awful of the latest season of Black Mirror on Netflix.

It looks like they created that episode out of ideas Ben has discussed in the past. A white collar worker's life is scripted on a Netflix TV show and the whole show is filmed slash generated by a quantum computer using an AI model. If Ben or Andrew watched this episode, could you talk about the legal aspects and the possibility of the future this episode and the possibility that the future in this episode will play out? TBD Yan, we received a request to watch and discuss Black Mirror episodes on the show this summer. I am going to be making the executive producing decision in the next week or two as to whether we'll actually go forward with that. I got to check out some of the Black Mirror episodes first. mainly the appeal is that I could assign you homework to watch five hours worth of TV on Netflix,

non-property brothers TV. No, to which I can and will probably say no. Okay, so co-executive producer there. Yes, well, Black Mirror, amazing in 2012. I feel like it may come off as a little bit more heavy-handed now that all these issues with tech and dystopian tech themes have been mainstreamed. we'll see, but I appreciate the question, Yon, and maybe we'll get around to discussing Joan is awful in the future. Or maybe this will just become a Property Brothers podcast in August.

You know, who could say? David Zazlov for the win. There you go. It's all coming up Zazlov these days. Until then, Ben, we will come back next week. We'll be pre-recording next week's episode. As we said at the top, we'll be off for the 4th of July. But we'll keep it rolling all summer.

consistency is the key to podcast. So we're going to be here. It's very ironic that we opened this podcast by saying, we, yeah, we took off earlier this week or taken off the next few weeks and the key is consistency. That's the big takeaway. Let me tell you something. We do have Megan Markle, Duchess of Sussex beat. We've recorded more than 12 episodes and I'm confident that we can clear that bar the rest of the summer.

We have not, however, made $20 million. Exactly. Tell your friend, subscribe to Stratory Plus. Ben, I will talk to you soon. Talk to you later.