Tech Brew Ride Home - Thu. 10/12 – The IRS Wants A Word With Microsoft

Episode Date: October 12, 2023

That thing where the IRS says you’ve underpaid your taxes to the tune of almost $30 billion dollars. Adam Mosseri says Threads is NOT coming for the breaking news crown. Those kids today, they love YouTube and they REALLY love iPhones. And forget social chat with your friends. How about social chat with your friends, and your AI bot, and their AI bots? Sponsors: DrinkTrade.com/ride Links: IRS says Microsoft owes an additional $29 billion in back taxes (CNBC) Linda Yaccarino responds to EU: 700 Community Notes, 5K+ images shared on Israel-Hamas war, ‘thousands’ of pieces of content removed (TechCrunch) Instagram head says Threads is ‘not going to amplify news on the platform’ (TechCrunch) Google pays Apple $18B to $20B a year to keep its search in iPhone (The Register) PlayStation 5 cloud streaming launches this month (VGC) YouTube passes Netflix as top video source for teens (CNBC) iPhone Continues to Be Most Popular Smartphone Among Teens, Apple Watch Ownership Growing (MacRumors) Character.AI introduces group chats where people and multiple AIs can talk to each other (TechCrunch) 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 Thursday, October 12th, 2023. I'm Brian McCullough today. That thing where the IRS says you've underpaid your taxes to the tune of almost $30 billion.

Adam Osseri says threads is not coming for the Breaking News Crown. Those kids today, they love YouTube and they really love iPhones. And forget social chat with your friends. How about social chat with your friends and your AI bot and their AI bots? Here's what you miss today in the world of tech. Well, you know, whom among us hasn't been in a similar pickle. Microsoft has received notices of proposed adjustments from the Internal Revenue Service for an additional $28.9 billion tax payment.

Microsoft plans to appeal, a process expected to take years, but basically, the IRS says Microsoft has underpaid their taxes again to the tune of 28.9 billion. billion dollars. Quoting CNBC, Microsoft said the dispute concerns the company's allocated profits between countries and jurisdictions between 2004 and 2013. It said up to 10 billion in taxes that the company has already paid are not reflected in the proposed adjustments made by the IRS. Microsoft plans to contest the notices through the IRS's administrative appeal and is willing to go to judicial proceedings if necessary. Microsoft disagrees with, these proposed adjustments and will pursue an appeal within the IRS, a process expected to take

several years, the company said in its filing. We believe we have always followed the IRS's rules and paid the taxes we owe in the U.S. and around the world, end quote. Microsoft said that as of September 30th, 2023, it believes its allowances for income tax contingencies are adequate, end quote. Ex-CEO Linda Yakarino has written a letter to Tieri Breton saying that X has removed hundreds of Hamas-linked accounts, labeled tens of thousands of posts, and more. Quoting TechCrunch, a letter signed by ex-CEO Linda Yaccarino notes that the company has, quote, redistributed resources and, quote, refocused teams. The letter says in Yaccarino's words, quote, high level, which means that it is light on specific numbers. Shortly after the attack,

no exact timing in the letter, a leadership group was assembled to consider X's response. Quote, tens of thousands of pieces of content have been removed, and user-generated community notes are now on thousands of posts and hundreds of accounts linked to terrorist groups or violence or extremism have been removed. She does not give any estimate of how much content it's facing overall that still needs moderating and checking. She added that X is responding to law enforcement requests, but also said the company had not received any requests from Europol at the time of writing. Significantly, however, the letter does not acknowledge or address any of what many users had been seeing in plain sight on the platform since Saturday, which included graphic

videos of the terrorist attacks on civilians, as well as posts allegedly showing footage from the attacks in Israel and Gaza that had already been identified as false, end quote. Worth noting that Breton, who again is the European regulator, also sent word to Mark Zuckerberg, urging him to be, quote, vigilant about removing disinformation from meta's platforms during the Israel-Hamas war. Meanwhile, remember that suggestion from Casey Newton that maybe this moment would be an opportunity for threads to claim the real-time news platform crown. Well, Instagram head Adam Mosseri has thrown some cold water on that, quoting TechCrunch. In response to a post about threads position on hard news, Mouseri explained the company did not intend to, quote, amplify news on its platform.

His position is not a surprise, though it's a disappointing one for those looking to exit X in favor of greener pastures. At Meta, both Instagram and Facebook have had difficult relationships with news publishers over the years, having battled fake news, clickbait, and accusations of political bias. Despite its past missteps, meta-owned threads, has the potential to pull in X users who are dissatisfied with changes Musk is making to the platform, including the most recent update that bizarrely removed news headlines in an effort to keep ex-users from leaving the app. But if Threads is hesitant to embrace news out of fears of turning into a negative-leaning network like Twitter became, it also won't ever be able to serve as a one-to-one Twitter replacement. At an Instagram creator event last week, Masseri laid out

Instagram's approach to news saying, quote, we want to empower creators in general. We try not to lean too hard into news. We're not anti-news, he explained, noting that news would always be on Instagram, but having worked on Facebook for a long time and leaning in really hard there, we want to be really careful not to over-promise and under-deliver, end quote. He then reiterated these same sentiments in a post on threads about the app's plans to tackle, or rather not to tackle news, wrote Masseri, quote, we're not anti-news, news, news is clearly already on threads, people can share news, people can follow accounts that share news. We're not going to get in the way of any either. But we're also not going to amplify news on the platform. To do so would be

too risky, given the maturity of the platform, the downsides of overpromising, and the stakes, end quote. We've been following the details coming out of the U.S. versus Google trial, a lot of which hinges on that search deal arrangement between Google and Apple. Well, this is worth noting and absorbing. Bernstein estimates that Google pays Apple $18 to $20 billion per year, which would be 14 to 16% of Apple's overall operating profit. This is simply to be the default search engine on iOS. The U.S. Department of Justice in the trial has been estimating that number to be around $10 billion, quoting the register. One of the major interest areas in the case which started last month is the information services agreement or ISA between Apple and Google. In the trial, it is being highlighted as one of

the primary examples of anti-competitive behavior. We believe there is a possibility that federal courts rule against Google and force it to terminate its search deal with Apple, said Bernstein in the report sent to the register. We estimate that the ISA is worth $18 to $20 billion in annual payments from Google to Apple accounting for 14 to 16 percent of Apple's annual operating profits, end quote. experts agree there is a chance Google could lose the case, and thereby the lucrative arrangement with Apple, as well as similar ones with Samsung and Mozilla, is unlikely to survive. Apple gives limited information on the sub-segments in its services division, yet Google reports the money it sends to Apple under its traffic acquisition costs to distribution partners. Bernstein says Google pays out 22% of total ad revenue on TAC and estimates Apple likely receives around 40% of this. A ruling in the the Google antitrust case isn't imminent. It'll be more likely 2024 before that happens, and then, of course, there is the lengthy appeals process, which can be expected to extend proceedings. Yet the economic impact on Apple is unlikely to be onerous. Quote, importantly, Google is on trial, not Apple,

and Apple could, in theory, partner with another search engine to be the default and or retain the agreement with Google outside the U.S. The report states, one more likely scenario is that Apple offers a choice screen. We note that Apple controls access to its installed base, which generates around $60 billion in advertising revenues, and accordingly, we believe that Apple would continue to command a commission in the 25 to 30 percent range for providing access to those search advertising revenues. Moreover, introduction of a choice screen could offer Apple the opportunity to potentially launch its own search engine as an option, something it could likely not do today without raising the eyebrows of regulators. The Bernstein report adds and

quote. And that's why I'm sharing this. That's an interesting angle that this might be an opening for Apple to jump into search. We've discussed how Apple probably has the capability to do its own search product right now, but why should it right now when it's pocketing $20 billion a year and pure profit for doing basically nothing? Why have a whole division stood up with costs and infrastructure when right now they make that much money just for having one option in a drop-down menu, but maybe their hand will be forced sometime soon. Sony plans to launch PS5 game cloud streaming for PlayStation Plus premium members in Japan on October 17th, in Europe on October 23rd, and in North America on October 30th,

quoting Video Games Chronicle. Supported titles will include game catalog offerings like Marvel's Spider-Man Miles Morales, Horizon Forbidden West, Ghost of Tushima, Mortal Kombat 11, and Saints Row 4. Some PS5 digital titles that players own will be available for streaming two, including Resident Evil 4, Dead Island 2, Genshin Impact, Fall Guys, and Fortnite. Game trials for PS5 titles like Hogwarts Legacy, The Witcher 3 Wild Hunt, and the Calisto Protocol will also be available. Sony says, DLC and in-game purchases will be available for PS5 game streaming two. Streaming resolution options will include 4K, 1440p, 1080p, and 720P with 60p, 60p, and 720P, with 60 frames per second and SDR or HDR output.

PS5 game streaming will support all PS5 audio capabilities, including 5.1 and 7.1 as well as Tempest 3D audio tech. Players will be able to capture screenshots and record up to three minutes of video, which will be downloaded to the media gallery on PS5 and will be available on the PS app, end quote. A couple of data points here about what the kids are up to these days. A Piper Sandler survey of more than 9,000 U.S. teens claims that 29.1% of their daily video consumption time is now on YouTube. This is surpassing Netflix for the first time. Netflix is at 28.7%. And Hulu is at 7%. Quoting CNBC. The data point shows that the streaming business is getting more competitive and highlights YouTube's strong position as a free provider of online video, especially among young

people. We wonder if this is a push or a pool in regards to the changing consumption habits, as content on YouTube appears to be improving over time and the streaming industry becomes more and more competitive. Piper Sandler analysts wrote, Piper Sandler has published a survey of American teenagers twice a year since 2001, focusing on their favorite brands, gadgets, snacks, and restaurants. This fall's survey pulled more than 9,000 teens across the U.S. in September, who averaged just under 16 years old. Some investors believe, understanding how young people spend their money can help spot trends in the broader economy.

Netflix and YouTube were the two clear leaders in terms of daily video consumption by platform. Hulu was in third place with a share around 7% according to the survey. Prime Video and Disney Plus both gained timeshare. The analysts found teenagers indicated they were spending less of their time on cable TV, HBO Max, and Hulu versus the spring, according to the survey. The Piper Sandler results don't compare YouTube and Netflix to TikTok, though. Instead, the survey compares the Chinese video-based platform to social media apps such as Instagram and Snapchat. The survey found that 38% of teens polled said TikTok was their favorite social media platform,

while Instagram leads in self-reported monthly usage. Teens polled by the investment bank said they spend about four and a half hours per day on social media up from previous surveys, the Piper Sandler analyst wrote, end quote. And that same survey reiterates another data point we've discussed before, quoting Macrumers. Apple's iPhone continues to be the most popular smartphone among teens, according to data shared today by investment firm Piper Sandler in its bi-annual teen survey. 87% of teens surveyed own an iPhone, while 88% expect the iPhone to be their next phone. Teen iPhone ownership numbers have not shifted since last year, but over the last decade,

interest in the iPhone among teenagers has soared. Back in October 2013, 55% of teenagers reported owning an iPhone, while 24% percent of teenagers reported owning an iPhone, while 24% had an Android device. Apple watch ownership is also growing, albeit more slowly. 34% of teens surveyed own an Apple Watch up from 31% last year. 10% of teens said they planned to buy an Apple Watch in the next six months, down from 16% in the fall of 2022. Apple was the favorite watch brand, beating out Rolex, Cassio, Garmin, and Cartier. Apple did not dominate in the streaming music category coming second to Spotify.

70% of teens surveyed said they used Spotify. as their music service, while just over 30% use Apple Music. 46% of teens that pay for a service pay for Spotify, while just 30% pay for Apple Music, end quote. Finally, today, one of my big takeaways from the AI Engineer Summit was that a lot of people are expecting an explosion of autonomous AI bots out in the wild quite soon. Imagine a scenario where my bot interacts with your bot, sort of like how in Hollywood you hear that phrase, have my people talk to your people to.

set up a meeting or maybe even attend meetings on my behalf and report back to me like so many personal assistants. Now, that fits into the narrative we've been discussing of the obvious use case for AI, basically an AI intern, an AI Butler. But this could also fit into that other narrative developing about how AI might upend the entire social media ecosystem, i.e., why chat with your friends when you can chat with your AI companion, like in that movie Her? This is that, but taken to the next order of effects. Quoting TechCrunch. Character AI, the A16C-backed AI chatbot startup from ex-Google AI researchers, is out today with a new feature for its subscribers. The chatbot platform, which offers customizable AI companions with distinct personalities

and tools to make your own, is now offering a group chat experience where users and their friends can chat with multiple AI characters at once. The character group chat feature, as it's called, allows users to create a group chat with their favorite AI characters only, or it can feature a mix of both human and AI companions, the company says. The idea is that users will be able to create social connections with friends or share ideas and collaborate in real time, as in any other group chat experience, but with their AI companions now in the mix. The company suggests users could try out having AI scientists and thinkers chat together,

like Albert Einstein, Marie Curie, Nicola Tesla, and Stephen Hawking, for example, or create a group chat with mythological gods like Zeus, Hades, and Poseidon. For more practical use cases, you might start a group chat with friends around a topic or theme like traveling, gaming, book clubs, or roleplaying, then invite an AI companion to help facilitate and augment those conversations. The idea of adding AI chatbots into a group chat is not unique to character AI. Snapchats, My AI chatbot can be added into group chats with the command at My AI, while Meta recently introduced the ability to call up a host of new AI-powered bots across its apps, including WhatsApp, Messenger, and Instagram's DMs, including those that are based on celebrities like

Mr. Beasts, Paris Hilton, Tom Brady, Charlie DeMelio, Snoop Dog, and others. The latter announcement made at Meta's Connect Conference in late September was a potential threat to Character AI, which raised a whopping $150 million in a Series A funding earlier this year for its concepts around AI companions. However, Character AI's new group chat experience won't be offered for free. Instead, the feature is first being made available to the CAI Plus subscribers in order to gain feedback and make improvements. CAI Plus is the startup's $999 per month subscription plan that offers the ability to access faster message generation, as well as an exclusive community channel for feedback and support, among other things.

The company says it will later open up the feature to the general public. At launch, character group chat is also only available on the character AI. mobile app on iOS and Android, but we'll later roll out to the web. The company's app initially topped half a million installs in its first six days and is said to be catching up with chat GPT in the US. Third-party data from market intelligence provider data AI indicates the app has close to 30 million monthly active users globally and around 7 million in the US. The firm also estimates its lifetime gross in-app purchase revenue is 1.3 million, but CAI Plus is sold on the web, so this is not comprehensive look at its overall revenue, end quote. The reviews of the new pixel phones and

pixel watches are out, but instead of reading other people's reviews for you, as per usual, I'm going to do something different this time. Google was kind enough to furnish me with review units, so this weekend, the bonus episode is going to be my impressions of the Pixel 8 pro and Pixel Watch 2. But, since you know, I'm not an Android person. really, I'm also going to include a discussion with a devoted Android Stan, my cousin Kev. So this weekend's bonus episode is my take on the current state of the art in Android, balanced with a take from someone deep within the Android ecosystem. So look for that on Saturday.

Talk to you tomorrow.