Tech Brew Ride Home - Thurs. 07/18 - Netflix's Numbers Visit the Upside Down

Episode Date: July 18, 2019

Netflix's growth disappoints, but Stranger Things have happened. The Democratic National Committee tells candidates to avoid the photo-aging simulator FaceApp. Don't expect driverless cars any time soon, despite the hype. Can 5G networks give you cancer? No, no they can't. Finally, go ahead! Start that podcast. Don't listen to the naysayers. Sponsors: SVB.com/next Castro Links: Netflix subscription adds disappoint, stock drops (Variety) DNC warns candidates to stop using FaceApp, citing Russian danger (CNN) FaceApp developer describes privacy policy (TechCrunch) Tesla's plans for self-driving cars worry those who know best (Washington Post) Self-driving cars remains "way in the future" (New York Times) The 5G Health Hazard That Isn't (New York Times) Have we hit peak podcast? (New York Times) 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 tech meme ride home for Thursday, July 18th, 2019. Today, Netflix's growth disappoints, but stranger things have happened. The Democratic National Committee tells candidates to avoid the photo aging simulator, face-app.

Don't expect driverless cars anytime soon, despite the hype. Can 5G networks give you cancer? No. No, they can't. Finally, go ahead. Start that podcast. Don't listen to the naysayers. I'm Glenn Fleischman in for Brian McCullough, who is on vacation.

And here's what you missed in the world of tech today. The glow is off Netflix as its seemingly inexorable fast subscriber growth slowed in the latest quarter. The company announced its second quarter earnings on Wednesday, and while revenue hit expectations at nearly $5 billion and a 26% year-over-year increase, the company lost 126,000 subscribers in the United States, half a million below forecasts and the first drop in subscriptions in America in eight years. It gained 2.8 million subscribers worldwide, adding up to 152 million, a 22% increase year over year. But that was 40% off Netflix's predictions.

Netflix's stock dropped 10% in after-hours trading and held there on Thursday as we record. The company didn't try hard to make excuses. It raised its subscription prices significantly in the U.S. in the first half of 2019, slowly rolling out the new price to existing subscribers, charging $2 more per month in its standard and premium streaming plans. It's increasing prices gradually worldwide. In a press release, Netflix said, Our MIST forecast was across all regions,

but slightly more so in regions with price increases. That increase kept its revenue on target, however. It also said that Q2's content slate drove less growth in paid net ads than we anticipated. Translated, it didn't have enough new programs, that was compelling enough to drive subscriptions at its previous rate. It noted, however, that its record increase in subscriptions in the first quarter may have had a, quote, pull forward effect.

Again, translated, the company is saying that some people subscribed earlier than they predicted, so they want to effectively count some of the Q1 growth to Q2. Netflix faces fierce competition, but the financials press for these said they don't see that as a factor. Rather, they think a rising tide lifts all boats. CEO and founder Reid Hastings told analysts and reports, that, quote, the streaming wars are not a zero-sum competition. He noted, I'd wager that most Netflix employees are HBO subscribers.

We love the content they do, and that spurs us on to want to be even better. He went on to say, the advantage of having something catchy like the streaming wars, is it draws more attention, and because of that, consumers shift more quickly from linear TV to the streaming TV. Hastings seems to have it right on both counts. The Motion Picture Association of America noted in a report earlier this year that cable subscriptions globally had sagged somewhat to 553 million, while streaming subscriptions grew 27% year-over-year to 613 million, the first time they exceeded cable.

Other subscription TV categories remain flat or grew modestly, meaning the overall pie keeps getting bigger, but people are defecting from cable along the way. Netflix has a number of upcoming challenges. It loses the rerun rights for friends and friends, the American version of The Office in 2020, these are the two most watch programs on the service, but represent a fraction of a percent of all viewing hours, according to streaming observer. And Netflix pays enormously for them, $100 million to keep friends for 2019.

The company said in a statement that the money freed up from licensing other people's content could be invested in more original programming. The company says that in the past when it lost content from a provider, viewers don't watch less at Netflix. They shift to other programs in the catalog. Variety quotes Wedbush Securities Analyst Michael Paxter, who says NBCU, Disney Fox, and Warner Brothers programming represents 60 to 65% of Netflix's

viewing hours, however. There's a lot of transition ahead. Netflix also stated bluntly in its release. Over the next 12 months, Disney, Apple, Warner Media, NBCU, and others are joining Hulu, Amazon, BBC, Hot Star, YouTube, Netflix, and many others in

offering streaming entertainment. However, Netflix is no house of cards. By every measure, it's profitable with continued fast revenue growth as its executed its shift towards focusing on original programming. There's nothing hidden there. It's no series of Russian dolls. It's transparent and has good omens for the future. Oh, sorry, wrong network.

It's clear about its future prospects, expecting to be back on track in the third quarter with the recent release of the third season of Stranger Things and the upcoming final season of Orange is the new black. Netflix has looked into a dark crystal. Okay, okay, I'll stop, and predicts that 7 million new subscribers in the third quarter will arrive, 800,000 of them in the United States. I had no interest in finding out with an app what I'll look like when I get old. I can just look in a mirror.

But millions of people have been using features in an updated face app, a smartphone app that uses AI-based algorithms to take a photo you provide and make you look younger or older, or worst of all, add bangs. The Democratic National Committee doesn't think the Russian developed app, is funny. It's sent an alert to candidates in the 2020 presidential election yesterday, advising them to stop using the app. Bob Lord, the DNC's chief security officer, wrote, this app allows users to perform different transformations on photos of people, such as aging the person in the picture. Unfortunately, this novelty is not without risk. Face app was developed by Russians. The DNC is particularly cherry after a massive trove of email,

most innocuous, but full of backbiting and risota recipes, was leaked, allegedly by Russian agents during the 2016 presidential election cycle. Some analysts believe it was one of the many factors that ended up to Hillary Clinton's popular vote win and electoral college loss. FaceApp appeared in 2017 and prompted a round of warnings at the time with previous features about uploading images of yourself to an unknown third party, especially one with ties to Russia. One of the Russian government's techniques in attempting to influence the 2016 presidential election,

as well as elections and political opinion in several years, European countries was the use of faked social media accounts that had real people's photos attached. New York Times security reporter Nicole Perl Roth tweeted, good job submitting millions of faces to a St. Petersburg-Russia-based app with a horrific privacy policy that will likely pass this on to state facial recognition databases, everyone in my Twitter feed. You have learned nothing. The AP reports that Senator Chuck Schumer has urged the FBI to investigate the app. However, some technologists and reporters think concerns about nation-state involvement. involvement in Face App are overblown, but remain concerned about the privacy policy.

TechCrunch editor-in-chief Matthew Panzerino tweeted, we're at the dumb stage now. Sadly, there are actually some interesting and perhaps even positive things that I believe will come from asking the right questions about Face-Ap. Are you Russian spy? Is not one of them, though. TechCrunch interviewed FaceApp's CEO about privacy concerns raised by its terms of use and behavior, which includes accessing an image from an iPhone's photo library, even if the app hasn't been given permission.

He said, and security experts have confirmed that the access is permitted by Apple and limited to uploading a single image chosen by the user. However, despite the CEO's assurance that it uploads images to Amazon Web Services and Google Cloud, and that no data is, quote, transferred to Russia, there's no way to ensure that. The app also says that the company gets perpetual rights to the image and can do nearly anything at once with it, though the CEO says most images are deleted within 48 hours. You can ask that your image be removed and never used in the future regardless, but it's a complicated sequence to make that request that the company promises to improve on. At best, it's an amusing app that lets a company acquire images it can use for free forever to train its deep learning algorithms. Remember, if you aren't paying for the product, you are the product.

Daily Beast reporter Lackland Marcade joked. Nice try face up, but I'm not going to give some anonymous AI developer permanent access to my likeness for anything less than carries the one, multiplies by follower count. 63 retweets. The next great thing is always just a few years away, but when a few years passed, it's still only a few years away. Self-driving cars increasingly find themselves in the eternal coming in three to five years category. While we've seen a number of stories lately

about the difficulty of unleashing self-driving cars on regular roadways, Elon Musk's Tesla car company said recently, it would do just that. It would upgrade its autopilot software to work on city streets on hundreds of thousands of cars later this year. The feature currently assists with highway driving and requires a driver remain alert and behind the wheel. Drivers will still need to remain in place with the new addition, but Tesla says they expect a 2020 update that makes the car fully autonomous, even to the extent of driving itself, with no one on board. Tesla just released its latest safety data for both autopilot and unassisted driving, which seemed to trigger articles that must have been days or weeks in preparation at both the Washington Post and New York Times about how bad an idea it is to go full self-driving.

driving this soon, and how unlikely any other company will follow Tesla in the near future. The post-Faiz Sidiqi talked to a number of people across the transportation world, including past and present regulators, safety advocates, and people at competing firms, and summarized it thusly. Quote, in interviews, they expressed worries that Tesla's plan to unleash robocars on the road on an expedited timeline, likely without regulated vetting, could result in crashes, lawsuits, and confusion. He notes that with the current autopilot software, which is supposed to recognize,

if a driver's hands remain on the wheel and use alerts to make sure drivers are paying attention, people still bypass or ignore the controls and warnings. He writes, The Internet is filled with videos of Tesla drivers acting recklessly in extreme cases taking naps or otherwise driving with their hands off the wheel as they marvel at the system.

Neil Bedet at the New York Times summarizes the regrouping and new expectations across the automotive and car service industry from both startups and established players. The CEO of Argo AI, which will support supply Ford and Volkswagen said driverless cars that could go anywhere are, quote, way in the future. As with many tricky problems, the CEO says 80% of the tech is there, but the last 20%, well, that's the harder problem to solve, such as software that can anticipate what other humans

in cars, on bikes and by foot will do. This is a retrenchment from last year. The Times quote, Sam, abuse amid an analyst at Navigant Research who said there was this incredible optimism. Companies thought this was a very straightforward problem. You just throw in some sensors and artificial intelligence, and it would be easy to do. But the death of a woman in Arizona walking her bike across the street at the hands of an Uber test vehicle staffed by a distracted driver helped lead to a reset. Should you be worried about health risks resulting from the deployment of new,

faster 5G networks that will require denser installations of cell towers and use a broader range of frequencies? No. No, you should not. The New York Times hops on a story that's decades in the making in which a small amount of inaccurate information about a potential health risk becomes a dominant narrative, and it persists long after it's been debunked, and high-quality research has fully discredited it. This might sound familiar because it happens again and again. Andrew Wakefield's journal paper that was purported to link vaccines and autism was retracted

many years ago, and there's no supporting biological, statistical, or epidemiological evidence, yet we have measles outbreaks in the United States because of it. Times reporter William Broad finds Patient Zero in the wireless radiation causes cancer story, a physicist, Bill Curry, with no biological research background, who created a faulty chart in a report in 2000 when advising a school district in Florida about the risks that might be associated with Wi-Fi. The report and chart were never vetted by outside parties or subject to peer review, but they appear over and over again. Bill Curry's chart inspired an existing proponent of the idea that power lines and wireless

networks are dangerous, David Carpenter, a medical doctor who spent most of his career leading public health schools or programs. Carpenter wrote a book in 1989 that claimed high-voltage power lines could increase the incidence of leukemia and children who live nearby. Despite many studies conducted since, no causation has been found, and the disease is rare enough that statistical noise and factors not consider in the study's drown-out correlations. Carpenter used Curry's chart as recently as 2011 in a Portland, Oregon lawsuit

in which a parent tried to get the public school district to drop Wi-Fi, and again in 2012 testimony before a state board in Michigan. He was interviewed on RT America, the Russian government control news outlet, stating that 5G networks represent, quote, a dire health threat. RT has consistently pushed a message that 5G networks are dangerous, even as Russia attempts to move forward without dissent, in deploying a 5G network of its own. As another time story noted earlier in the year,

quoting the chief of a firm that tracks disinformation, it's economic warfare. Russia doesn't have a good 5G play, so it tries to undermine and discredit ours. The trouble with Curry and Carpenter's allegations, however, is that over decades of increasingly dense cellular and Wi-Fi network deployment, and increasingly powerful cell phones used by ever more people, there's no big uptick in cancers, especially in the particular kinds of brain cancer they predicted. Large studies that have tracked users and usage find no connection

between use and an elevated cancer risk. The Times Broad does a great service, too. He challenges Carpenter, and Carpenter backs down. Quote, he conceded after some discussion that the increasingly high frequencies could in fact have a difficult time entering the human body. Subquote, there's some legitimacy to that point of view. Curry, meanwhile, told Broad he didn't make an error, but he refused to defend his work with any facts. Finally, put down that microphone, stop making podcasts. At least that's a message from Jordan Harbinger, who has a podcast with 250,000 downloads

per episode that brings in, quote, multiple seven figures annually, unquote, in advertising revenue, according to the New York Times. having reached this pinnacle routinely gives a talk called, For the Love of God, please don't start another podcast. Now, to be fair, he also says that more shows are better. If they're done by someone who cares, it isn't simply seeking easy income or influence. And the article looks largely at the problems of people expecting to start a podcast

and have bags of cash flung at them. Wirecutter editor Andrew Cunningham tweeted, this piece tries to suggest that podcasts are over, but the real message is, if you put no thought or effort into a thing, it won't succeed, which is true of most things? From my perspective, the worst thing about more podcasts is that I'm already facing podcasting bankruptcy. I have a hard time listening to more as my feed is already overflowing.

With so many voices unrepresented and underrepresented in podcasts by culture, ethnicity, race, gender, orientation, identity, age, and much more, it's a bad time for a successful podcaster to even joke about closing the door. It's hard to get traction and making money from podcasts remains difficult for all but the most popular. But like blogs let a million, million people write, even if it was sometimes for an audience of 10 or 100 or 1,000, the more podcasts there are, the more voices that get heard. And that's the news. I've been your host, Glenn Fleischman, in for Brian McCullough. He told me he was retreating to a distant island, and he will return next Wednesday. Thanks for letting me drop my voice in your ears today, and you'll

hear from me again the next three weekdays. If you're interested in printing and typographic history, you might like my latest project, the TinyType Museum and Time Capsule, which you can find at tinytypemuseum.com. You can also find me on Twitter at Glenn F. Thanks to the editors at TechMeme, who tweet out every headline they post every hour of the day at TechMeme. It's a great way to keep current. Have a great evening.