Tech Brew Ride Home - Fri. 10/30 – Netflix Raises Prices

Starting point is 00:00:00 On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the TechMeme ride home for Friday, October 30th, 2020. I'm Brian McCullough today. Netflix raises prices because they can and maybe because they should.

Starting point is 00:00:45 Google wants to give you a free VPN. Samsung helps you find your galaxy of galaxy things. A rundown of yesterday's big day of tech earnings and, of course, the weekend long read suggestions. Here's what you missed today in the world of tech. We knew this was coming, but it still feels gutsy. Netflix has announced it is increasing pricing for its standard plan by a dollar a month. The standard plan is now $14 a month. If you're on the premium tier, it's going up by $2 to $18 a month.

Starting point is 00:01:20 But the basic plan is staying at $9 a month, quoting The Verge. Industry Insiders have long anticipated another round of price hikes at Netflix, which last increased subscription fees in the United States in January 2019. Recently, Netflix increased. the cost of some plans in Canada. Netflix rolls out price changes on a country-by-country basis, and the change, quote, in the U.S. does not influence or indicate a global price change, a Netflix spokesperson told The Verge. The price hikes also arrive at a time when people have more options for entertainment than ever before, especially in the United States. A few years

Starting point is 00:01:56 ago, Netflix's biggest competition in the streaming space was Hulu, and the company vied for people's attention being split playing video games, watching YouTube and sleeping. Now the U.S. alone has HBO Max, Disney Plus, Peacock, TikTok, YouTube, Twitch, and Fortnite. Oh, and sleep is still a factor. Netflix is aware of this. Prices are being updated, quote, so that we can continue to offer more variety of TV shows and films, a spokesperson told The Verge. As always, we offer a range of plans so that people can pick a price that works best for their budget, the spokesperson added. The price hikes also come as Netflix is looking to invest more heavily into its content slate and product features. features. Netflix has increased its annual content budget every single year over the last seven years, spending a once estimated $18.5 billion in 2020 alone, though that may have changed this year due to

Starting point is 00:02:46 the pandemic. Increased competition means Netflix needs to continuously step up its game to ensure it has both quality content and plenty of it, while also working to better the actual platform. That costs money, and price hikes come as a result, end quote. Yeah, so estimates are that a price hike like this along these lines for North American customers will generate an additional $500 million to $1 billion for Netflix in fiscal year 2021 alone. That's assuming this doesn't piss a lot of people off and they cancel their subscriptions. Netflix's recent earnings report was something of a fail, if you'll recall, as they didn't hit the subscriber growth numbers that Wall Street wanted.

Starting point is 00:03:26 As Nathan Tankus tweeted, quote, the demand for Netflix subscriptions just outpaced the supply of Netflix subscriptions, so prices have to increase to balance supply and demand. That's just how things work, end quote. Maybe not. And also, yes, we are in a pandemic. So maybe people won't look too kindly on any sort of price increases. But COVID times can cut both ways.

Starting point is 00:03:52 People need distraction and entertainment more than they did, say, a year ago. but they also have less money, and then consider the fact that movie theaters are closed. So maybe now is the time for Netflix to put the pedal to the metal because they're the biggest game still going in town, no new big blockbuster movies for a while, and consider the budgets that its streaming competitors have estimated to have set aside for content production this year. As John Ehrlichman pointed out on Twitter, Amazon set aside $8.5 billion, Apple TV, $6 billion, Hulu, $4.5 billion, Disney Plus, $2.5 billion, HBO Max, $2 billion, peacock, $1.5 billion, CBS All-Axus, $1 billion. Netflix, as we said, probably spent $18.5 billion.

Starting point is 00:04:39 So maybe no time like the present to spend to keep your lead if you do see the Peloton coming up behind you. Are you a user of the 2 terabyte plan on Google One? Well, surprise, you have woken up to a free VPN service. because Google has up and given you one. This is rolling out first to U.S. Android users with more countries, iOS, and web options apparently to follow, quoting 9 to 5 Google. VPN by Google One is pitched as providing an extra layer of online protection for your Android phone and peace of mind that your data is safe. This follows Google Fi offering a similar service to its MVNO subscribers.

Starting point is 00:05:21 We already build advanced security into all our products and the VPN extends that security to encrypt all of your phone's online traffic no matter what app or browser you're using. The VPN is built into the Google One app, so with just one tap, you can rest assured knowing your connection is safe from hackers, end quote. Google One starts at 100 gigabytes for $1.99 a month and 200 gigabytes for $2.99 a month of expanded drive and photo storage. But the VPN requires you to jump to two terabytes, which comes in at $9.99 monthly or $99.99 annually. It joins other benefits like Better Support, Pro Sessions, gold status, on Google Playpoints and 10% back on the Google Store. It's also available on the 10, 20, and 30 terabyte plans, end quote. Also, Samsung users, you now have a new app called Smart Things Find,

Starting point is 00:06:18 which will help you track down lost galaxy devices, your phones, your tablets, your buds, your watches, etc. Quoting and gadget, unlike Samsung's current Find My Mobile app, Smart Things Find can locate devices other than smartphones, including the Galaxy Watch and even individual Galaxy Buds. It can find them whether they're lost in your couch cushions or on the other side of the country. To do that, it uses Bluetooth low energy and ultra-wideband tech on top of cellular and Wi-Fi connections. If a device has been offline for 30 minutes, it sends a signal that can be received by other Bluetooth devices even if they're not paired. All data is fully encrypted, so only you can see your misplaced device. Once located, it uses AR with the Search Nearby Maps function along with sound to guide you to your device.

Starting point is 00:07:05 You'll see more intense colors when you get close, turning your quests into a literal cold, warm, hotter game. The feature is limited to Galaxy devices unlike Google's Find My Device. That app can locate any missing Android phone, tablet, or Androidware watch, along with the latest pixel buds. Google also recently added indoor maps, helping you track down devices in places like airports, malls, or large buildings, end quote. Yeah, everyone announced earnings yesterday, as I told you they were going to do. But unlike recent earnings seasons when we were looking to see how the pandemic was affecting people's businesses, basically yesterday the story was all the same. Everyone's doing well. Everyone's doing well in kind of the way we've been seeing lately. There were no new or surprising

Starting point is 00:07:53 or interesting wrinkles, really. So let's just burn through this quickly. Facebook revenue was up 22% year-over-year, net income up 29%. Daily active users and monthly active users were both up 12%. Alphabet saw revenue rise 14%. YouTube saw $5 billion in quarterly ad revenue up 30% and also it reported more than 30 million paid music and premium subscribers. Amazon saw net sales increase 37% and they reported net income of $6.3 billion up from $2.1 billion a year ago. The days, the days when Amazon avoided banking massive profits are over, apparently. And finally, Apple reported Q4 revenue of $64.7 billion up from $64 billion year over year, of which $50.1 billion came from products, $14.5 billion from services, and that all added up to net income of $12.7 billion.

Starting point is 00:08:49 Apple also reported an all-time high of 585 paid subscriptions across its various services in Q4, growing by 135 million year over year. Apple's on track to reach 600 million paying subscribers by the end of 2020. I'd report on how all of this is causing the stocks of the various companies we've just mentioned to respond. But at the time of this writing, the entire stock market is getting crushed today, the NASDAQ especially. So, you know, me telling you Apple is down over 5%. While interesting, probably isn't noteworthy, at least today. Time for the weekend long read suggestions. The information talks about something that a lot of people in the VC world have been talking about for a while now.

Starting point is 00:09:41 Software startups have been feeling like can't miss investments recently, and that has led to really, really nutty valuations, like how Retool just raised at a $1 billion valuation or exactly 100x its annual revenues of $10 million. The idea is this generation of software companies are on such slicked skis towards growth that it doesn't matter when you get into them. Massive growth is baked in, so you're guaranteed to make some X return on your investment. The recent IPOs of things like Snowflake have only reinforced this. You're willing to pay a higher price thinking you're going to get a fantastic outcome, said Mary Dinoffrio, a vice president at Bessemer Venture Partners, a VC firm that specializes in cloud-enabled technology. Since 2016, the average valuation of the top 100 privately held cloud software companies has nearly tripled to $2.7 billion, which translates to 25 times annualized revenue,

Starting point is 00:10:39 estimates Bessemer. That's in part because of soaring public stock prices, which have vaulted more than five times in the same period, according to an index of public cloud software companies. Lately, says De Nafrio, she's seeing more rounds at higher multiples. The recent spate of steep multiples also has re-energized a Silicon Valley debate over whether high prices reflect a savvy bet on the future or an irrational gamble that can come back to haunt young companies. Among the risks, if growth fails to materialize, companies may find it harder to sell or go public, and employees may see the value of their stock options diminish. The question is, are prices really high because investors see tremendous growth,

Starting point is 00:11:15 or because there just aren't enough good startups, said Will Gornall, an assistant professor of finance at the University of British Columbia, who co-authored a paper estimating that unicorns, startups reported to be worth $1 billion or more, are widely overvalued. end quote. Next, you know I like to share tech history long reads with you every week, though usually I share stuff from the 90s or 80s or even earlier. So how about something more recent? How about the history of Discord and how, as David Pierce argues, after a painful pivot, it accidentally invented the future of the internet, quote,

Starting point is 00:11:47 almost everyone I talked to picked that same example to explain why Discord feels different from other apps. Voice chatting in Discord isn't like setting up a call. It doesn't involve dialing or sharing a link and password or anything at all formal. Every channel has a dedicated space for voice chat and anyone who drops in is immediately connected and talking. The better metaphor than calling is walking into a room and plopping down on the sofa. You're simply saying, I'm here, what's up? Add to that the list of things about Discord that turned out to be unexpectedly powerful. In retrospect, of course, it feels obvious. A feeling like a neighborhood or a house where you can move between rooms, which is a radically different thing than most online social tools. It had no game.

Starting point is 00:12:26 amification systems, no follower accounts, no algorithmic timelines. It created a place on your computer and on your phone, Citron said, where it felt like your friends were just around and you could run into them and talk to them and hang out with them. You open up Discord and see that a few of your friends are already in the voice channel and you just hop in, end quote. The title of this one is exactly why I wanted to share it with you, the tech antitrust problem no one is talking about. Americans pay more for broadband internet service and have fewer choices than consumers in other countries. Yeah, when can we talk about that? Saan and other critics of the four companies that dominate U.S. broadband, Verizon, Comcast, Charter Communications, and AT&T,

Starting point is 00:13:08 argue that antitrust intervention has been needed for years to lower prices and widen Internet access. A Microsoft study estimated last year that as many as 162.8 million Americans lack meaningful broadband and New America's Open Technology Institute recently found that U.S. consumers pay, on average, more than those in Europe, Asia, or elsewhere in North America. The U.S. has suffered and broken up telecom monopolies in the past. AT&T had a government-sanctioned monopoly for much of the 20th century until it was broken up in 1984. The 1996 Telecom Act included rules for phone providers aimed at encouraging competition, but it excluded information services, leaving broadband companies freer rain.

Starting point is 00:13:49 Crawford and other industry critics say cable companies have used that freedom to erode choice through mergers and have deployed a deep bench of lobbyists to steer lawmakers to lighten oversight and ban cities from building their own networks. Cities that have done so, like Wilson, North Carolina, generally have higher speeds at lower prices and less restrictive terms, Crawford says. Comcast has spent more than $10 million on lobbying in Washington this year, according to data compiled by Open Secrets. Only two other companies Amazon and Facebook have spent more, end quote. Friend of the podcast, the great Julia Alexander, has a piece up in The Verge, looking at something that I only lightly touched on recently. It's not just Disney that has done a major reorg recently, as she puts it,

Starting point is 00:14:33 streaming was supposed to be part of the future, but now all of Hollywood seems to have decided it's the only future. Entire divisions are being eliminated. Reportedly, entire networks, television networks you've known and loved for decades might be on the chopping block, quote. Over the last several months, Disney, NBC Universal, WarnerMedia, and Viacom, CBS have restructured their teams to make streaming a primary focus. Longtime executives have been fired. Others have stepped down, aka fired, and departments merged in an effort to compete with the biggest competition in the room. The lingering question is,

Starting point is 00:15:07 will it work for every player in the game? How much of it is too little too late? If you're going to differentiate yourself every incremental dollar you can put into the development of that content becomes important, Greg Portole, head of global consumer industries at consultancy firm Kierney said, that means a lot of these companies that have gotten bloated over the years and they really need to stream that down, end quote. The bottom line is that if all of these companies want to be in on streaming, it means they have to slim down and abandon other parts of their businesses that have become dinosaurs. In many cases, that means shedding cable networks. In others, it's layoffs to target redundancy. Disney, WarnerMedia, NBC Universal, and Viacom, CBS have shown no sign of trying to fight

Starting point is 00:15:48 the future. Now they just have to determine if they can find a seat at the table. Portel calls it a true game of winners and losers. In the midst of great acceleration affecting every industry, Portel also said, it's adamantly clear, quote, we're about to see who those winners are much more quickly, end quote. And finally, space.com asks an interesting question. Are we due for a backlash to the whole billionaire-funded new space race. Quote, in the 2013 science fiction film Elysium, starring Matt Damon, Earth's wealthiest 0.01% moved to the ultimate gated community, a luxurious orbiting space colony, leaving a poverty-stricken humanity to fend for themselves on a ravaged planet. Interestingly, it is indeed some of

Starting point is 00:16:34 today's 0.1% who are leading the way into space to build communities beyond Earth. However, quite the opposite of the movie, their goals are of the highest order, from democratizing access to space by lowering costs, to creating new products and ideas, to helping to save the planet and opening space to future generations. Yet given the effects of the coronavirus pandemic, social justice and green movements, even as entrepreneurs like Elon Musk,

Starting point is 00:16:58 Jeff Bezos, and Richard Branson spend billions to support a human breakout into space, there is a backlash building that holds these projects as icons of extravagance, even as their work may help save the earth. This is the Elysium effect, end quote. That is all for this week. There will be no weekend bonus episodes this weekend. I'm going to just enjoy Halloween. Reminder that,

Starting point is 00:17:26 assuming everything next week isn't completely drowned out by the U.S. election, I'd like to record a listener call on episode next week, probably at around 9 p.m. Eastern on Thursday night, November 5th. So pencil into your calendar is that little, event. I'll share the Zoom link sometime later. Talk to you on Monday.

Tech Brew Ride Home - Fri. 10/30 – Netflix Raises Prices

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.