Tech Brew Ride Home - Mon. 05/15 – Media Day On The Podcast

Episode Date: May 15, 2023

After some news about Apple testing M3 chips, it’s media day on the podcast. Wither Motherboard, as Vice declares bankruptcy. Netflix is cutting spending on its originals. Is the pivot to ads going to define the next stage of the streaming wars. And ad supported television is one thing, but what if we took that literally? Would you want a tv that has a second screen to show you ads all the time? Sponsors: Ramp.com/techmeme go.tech/tm Links: Apple Begins Testing Speedy M3 Chips as It Pursues Mac Comeback (Bloomberg) Vice Media files for bankruptcy as ad business suffers (Reuters) Netflix Plans to Cut Spending by $300 Million in 2023 (WSJ) A Growing Number of Streaming Video Customers Watch Ads (Bloomberg) Telly’s wild idea: Free TVs with inescapable ads (Fast Company) Learn more about your ad choices. Visit megaphone.fm/adchoices

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 right home for Monday, May 15th, 2023. I'm Brian McCullough today. After some news about Apple testing M3 chips, it's Media Day on the podcast. Wither motherboard, as Vice declares bankruptcy, Netflix is cutting spending on its originals? Is the pivot to ads going to define the next stage of the streaming wars and ads supported television is one thing, but what if I took that literally? Would you want a television that has a second screen to show you ads all the time? Here's what you missed today in the world of tech. We obviously knew this was coming, but maybe we thought it had been delayed a bit. I'm talking about the M3 chips from Apple, which may be coming sooner than we all thought. After developer logs have

shown, Apple has been testing an M3 chip with 12 CPU cores, 18 GPU cores, and 36 gigabytes of RAM, quoting who else, but Mark Garman. The company has begun putting next generation Macs with the M3 chips through their paces, testing them with third-party apps to, sure compatibility with its software ecosystem. It's not the first time that we've gotten an early glimpse at new chips through this process. The company has previously revealed specifications of the upcoming 15-inch MacBook Air and Apple Silicon Mac Pro, as well as many of the prior M2-based machines. The company needs fresh ways to entice customers back to the lineup, and the M3 could help with that. Apple's Mac business suffered a 31% sales decline last quarter, missing analysts already

downbeat estimates. So what does the M-Sys? three look like? Well, at least one version in testing has 12 CPU cores, 18 graphics cores, and 36 gigabytes of memory. That's according to data collected by an app store developer and shared with power on. The CPU, the chip's main processor, is made up of six high-performance cores that handle most of the most intensive tasks and six efficiency cores that kick in for operations that need less power. The chip itself in this particular test is running in a future high-end MacBook Pro with the upcoming MacOS 14.0 and likely is the base level version of what will be the M3 Pro coming next year. My belief is the first Macs with M3 chips will begin arriving toward

the end of the year or early next year, while the first 15-inch MacBook Air with an M2 chip is set to arrive this summer. The company is already working on M3-based IMAX, high-end and low-end MacBook Pros and MacBooks, I'm told, end. Also, from the newsletter, this is weird, but quoting again. This past week, there were a few interesting developments surrounding meta platforms and the Apple Watch. First, Meta said it would be pulling its messenger app from the Apple Watch app store. Second, the company launched WhatsApp for WearOS, Google's own watch platform. Third, it refused to say whether WhatsApp will also come to Apple's watchOS. Pacing that altogether, it's clear how meta feels about the Apple Watch. It's not a platform that the social media giant

needs to be on a stance taken since 2018 when it yanked Instagram from the device. The same thing obviously can't be said for iOS, where meta's apps remain a fixture. I'd imagine the rationale here has a few elements. One, meta obviously isn't very happy with Apple. It blames the iPhone maker's anti-adds app tracking transparency feature for lost revenue over the past couple years. Second, the two companies are about to go to war over mixed reality headsets. Third, meta might not want to spend its thinning development resources on a platform that is no longer as welcoming to third-party apps. In the case of WhatsApp, the messaging service is more prominent on non-Apple devices anyway,

so it makes sense to have it on WearOS. Apple has acknowledged that its watch app store is just the shadow of the iOS version. In the European Union, for instance, it has fewer than one million monthly users, less than 1% of what the company gets on the iPhone. And the next version of the Apple Watch operating system will prioritize widgets over apps, a move that I see as an admission of the platform's app challenges, end quote. Remember that part in the Ben Smith bonus episode a couple weeks ago where I told him about people asking me if I was worried that someday I wouldn't have enough tech news venues to quote

from for this show? Well, worry about motherboard, the tech vertical from Vice, since Vice has filed for bankruptcy and agreed to sell its assets to lenders, including Fortress and Soros fund for around $225 million. Assets and liabilities at Vice Media are apparently $500 million to a billion, quoteing Reuters. Vice said the lender consortium that includes Fortress Investment Group, Soros Fund Management, and Monroe Capital will provide about $225 million in a credit bid for almost all of its assets and also assume significant liabilities at closing. Under a credit bid, creditors can swap their secured debt rather than pay cash for the company's assets. Vice listed both assets and liabilities in the range of $500 million to $1 billion. Creditors are taking it over

at a steep discount, and we will find out whether they can become viable with a much slimmer capital structure coming out of bankruptcy, said Thomas Hayes, chairman at investment firm Great Hill Capital. VICE was among a group of fast-rising digital media ventures that once had rich valuations as they courted millennial audiences. It rose to prominence alongside its co-founder Shane Smith, who built his media empire from a single Canadian magazine. Vice has received commitments and consent from the lenders to use more than $20 million in cash, which it said would be more than sufficient to fund its business through the sale process. The company had on April 27th said it would cancel popular TV program Vice News Tonight as part

of a broader restructuring of its news division. A week before that, BuzzFeed said it would shutter its news division, end quote. At its peak six years ago, Vice was valued at $5.7 billion. This is what I was speaking about when at the height of the BuzzFeed News era, as discussed, with Ben Smith, people thought things like BuzzFeed and Vice were the future of media, and so the money faucets were wide open for these companies. It's a weirdly media-heavy day today. According to the Wall Street Journal, not only has Netflix trimmed the flow of its money faucet, at least when it comes to content creation, it's doing so imminently and bigly, quoting the journal. Netflix plans to reduce its spending by $300 million this year, according to people familiar with the matter, as the streaming

giant continues to push to improve profitability in a competitive market. The company is looking to cut costs in part because its plans to crack down on password sharing broadly in the U.S. and elsewhere were pushed back from the first quarter to the second quarter, the people said. That change is expected to generate new revenue. In an internal meeting earlier this month, company leaders urged staffers to be judicious with their spending, including in relation to hiring, but said there would be no hiring freeze or additional layoffs the people said. Netflix raised its estimate last month for how much free cash flow it aims to generate this year to at least $3.5 billion from an earlier target of $3 billion. The move was

shared when the company announced its first quarter earnings. The company said it delayed its password-sharing crackdown to give it time to learn which approach was best for members and its business. As a result, the revenue from the change is now expected to come in toward the second half of the year, according to the people familiar with the matter. The reduction in spending represents a small percentage of Netflix's overall expenses. Last year, the company's operating expenses were about $26 billion, end quote. One of the things keeping streaming going as it struggles to make the math work on the economics of streaming, as we've discussed, has been this pivot to ad-supported streaming.

So how's that going? According to Antenna, around 25% of U.S. subscribers to Netflix, Disney Plus, and HBO Max in February opted for the version with ads. Around 58% of U.S. subscribers pay for at least one ad-supported service. Given the choice, Americans are choosing ads, Jonathan Carson, co-founder and chief executive officer of Antenna told me this week. That's welcome news for marketers who have worried that the shift from cable and satellite to streaming would omit advertising. Netflix, the world's most popular paid streaming service attracted tens of millions of customers by offering them a vast library

of programming without advertising. It was a central part of its sales pitch. Competitors that sought to replicate Netflix's success, including Disney Plus and HBO Max, did the same. Hulu was the big exception and more than half of its customers watch ads. But advertising is now one of the only potential growth areas for these media companies. The customer base of almost every major streaming service has plateaued. The five biggest streaming services, excluding Amazon, added a total of just four million customers globally in the first quarter. Disney Plus was the worst of the bunch, losing four million. CNBC's Alex Sherman declared the end of the streaming wars recently. While the thrust of Alex's piece is bang on, I would actually argue the opposite.

This is the beginning of the battle. In the early days of streaming, everyone could grow at the same time. Streaming wars was a misnomer. As the services got bigger and competition intensified, they hit a ceiling. There are only so many people willing to pay for several services at more than $10 a month each. Now it's a battle. You need to cut costs, eke out incremental subscribers, and turn streaming into a profitable business. It's going to lead to attrition and consolidation. Whether advertising can reverse this trend remains to be seen. TV has for decades offered a mix of free channels, channels that cost money, and include ads, and channels that cost even more, but don't have advertising. While streaming's early adopters were wealthier, younger, and willing to pay to forgo ads, there are still tens of millions of

people who are willing to sit through commercials if they can save money. The people who use Netflix's basic tier with advertising are older, poorer, and less educated than the average consumer for its premium tier, according to Antenna. Three out of four subscribers to advertising tiers from Netflix and Disney Plus are also watching ads on another service if they have another one. By the end of this year, pretty much every media company is going to have a free advertising-supported service like Pluto TV and Tooby that they can use to generate extra revenue from older shows. They will have a subscription streaming service with ads for cost-sensitive customers who still want to see new programs. Some companies call these ad light because

they only average a couple of minutes of advertising per hour, and then there's the OG that is ad-free. just like TV only without the bundle, end quote. Finally today, ad-supported TV. What if I took that phrase literally? Speaking of Pluto TV, Pluto TV co-founder Ilya Pawsens got a new startup called Tully, which has opened a wait list to give away 500,055-inch 4K HDR TVs in 2023. Why is he giving away TVs for free? Because these TVs come with an attached second screen,

that constantly shows ads. Quoting Fast Company. Would you take a free TV if it constantly ran banner ads beneath everything you watched? That's the proposition for Telly, one of the most intriguing and unusual hardware startups in recent memory. Telly has designed a 55-inch 4K HDR TV with a built-in soundbar and a second screen mounted underneath that. On that extra screen, users will see a mix of informational widgets and advertisements which can't be disabled. Janko Rockers broke the news of Tele's existence earlier this month, but now the startup is making it official. We're giving the device away for free and the entire business model is supported by our advertising

data and affiliate revenue streams, says Tele founder and CEO Ilya Pausen, who previously co-founded the free streaming service Pluto TV. Tele plans to ship out 500,000 free TVs in 2023 and is opening up a wait list today. While the idea might seem outlandish, it's really just... taking the smart TV business model to its logical end. TV makers already sell their hardware at slim margins while relying on revenue from targeted ads and data brokering to boost profits. By inventing a new kind of TV around that model, Tully believes it can eat the entire hardware costs and still come out ahead. Telly's bottom screen isn't just a vessel for ads, though. In demos and product images,

the ads cover roughly a quarter of the bottom screen with the rest being used for information and interactive features. You might use it to glance at the weather or a news sticker, for instance, or to quickly control music playback. The bottom panel also stays lit up when movies or TV shows are playing, albeit at lower brightness than when you're browsing around. That's a non-negotiable part of the deal, though Telly hopes you'll want access to the bottom screen more often than not. Even when your main screen is off, you can leave the bottom screen on

and it becomes the main device in your home, Cousin says. We believe that's what a TV in 2023 should be. Oddly enough, Tele isn't building any actual smart TV software into the television. Instead, Tele will ship with an Android TV streaming, dongle, which users can plug in to any of the TV's three HDMI inputs. Telly's own Android-based OS will only control the TV's ads and interactive features. Alongside the extra screen and built-in soundbar, Tully's TV also includes a camera and microphone. These will allow for video chat on either screen. Zoom is an initial partner, along with Hey, Telly, voice commands. Telly has a lot of other

ideas for the second screen, too. Pazen mentions smart home controls and security camera footage as examples, though Tele has no partnerships yet on these fronts. And it's also working on a software development kit for app makers. The plan is to constantly upgrade the TV's capabilities over time. Don't be fooled by the fact that it's free, Paus and says, what we're building here at Tele is by far the most feature-rich smart TV on the market. Implicit in the free TV concept is that you're surrendering some data privacy in return. The waitlist sign-up alone requires a five-minute survey with a gamut of questions about your personal life. Telly says it will use this information to decide who gets a TV in the first place and to fuel its ad-targeting efforts. We know where you live,

what your income bracket is. Obviously, it's all anonymized, but we know what car you're driving. We know when your lease is up. We know where you shop. We know what your favorite sports teams are, et cetera, pos and says. Automakers can then use that information to target people whose leases are coming due, while food delivery companies could show ads around dinner time to people who often order in. Like many other smart TVs, Tully will also detect what's playing on the TV with automatic content recognition or ACR, which it may sell in anonymized form for use for targeted ads. The difference with Tully is that you can't opt out of this data collection. At best, you can ask Tully not to sell your data in states where that's an option. Perhaps it's a bit out of tune

with an increasingly privacy-aware society, but it's not as if Tully is hiding the nature of its business. We're very upfront and transparent, Pazin says. Everyone knows what they're getting into, what the value exchange is. Tully has already shipped a small number of TVs for private beta and aims to start fulfilling waitlist orders this summer. Its goal is to ship 500,000 sets by the end of the year, end quote. So, Zelda Tears of the Kingdom Report. We all had a blast playing that all weekend, but I need to concentrate on grinding for a while.

Need to hunt for some food to protect Link's health, and Max has been yelling at me to do more shrines so we can up our hearts, and I think he's actually right about that. It's about time. We've only got five hearts right now. We started doing the bird campaign first, so we're up there in that sky archipelago above Rito village, and this is dumb, I know, but it's literally giving me vertigo.

It's so high in the sky, like activating my actual physical fear of heights. I know, it's just a dumb game, and it's not even in VR, but I can't shake that pit in my stomach that I'm about to fall all the time we're doing it. Anyway, stopped at the second shrine in that campaign because, as I say, our food was low, We can't replenish our hearts when we fight bosses, and we need some warm armor, apparently. Anyway, about to start grinding, but it's such a fun game. Not filled with the same sense of wonder as with the first time you did Breath of the Wild, but so many new levels and elements, and it's fun seeing old NPC friends.

It's really great. Talk to you tomorrow.