Tech Brew Ride Home - Tuesday, Apr. 3, 2018 - Spotify's Stock Debut

Episode Date: April 3, 2018

Spotify debuts on the stock market, but it needs to depend less on record labels, Trump seems serious about Amazon, your favorite messaging app is changing, Panera has a data leak and Swedes turn against a cash-free future. Links:Spotify relies on the big labels for most of its music. It thinks that will change. (Recode)“Trump is Like, ‘How Can I F--k With Him?’”: Trump’s War With Amazon (And the Washington Post) is Personal (Vanity Fair)No Sympathy for Amazon (The New Republic) Credits: Produced by @brianmcc and the @techmeme staff Music by @jpschwinghamer 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. guys, Brian here. What follows is the podcast episode as originally recorded late this afternoon. But after recording at about 4.20 p.m. Eastern time, various channels began reporting that there was an active shooter situation at YouTube's campus in San Bruno, California. Police have since

confirmed that they were indeed responding to an active shooter, and several hospitals have confirmed they've received multiple victims from the incident. I obviously can't report much more since details are so thin at this time, but check techmeme.com for this developing story. The original episode, as recorded, begins in about five seconds. Welcome to the TechMeme ride home for Tuesday, April 3, 2018. Today, Spotify debuts on the stock market, but it might need to depend less on record labels going forward. Trump seems serious about Amazon. your favorite messaging app is changing.

Panera has a data leak, and Swedes turn against a cash-free future. Here's what you missed today in the world of tech. Spotify made its debut on public markets today, soaring as much as 28% above its reference price. Shares opened at $165.90 before falling below $160 in the first hour of the new stocks trading. The New York Stock Exchange had set a reference price of $132 on Monday night, and at its opening trade, Spotify was thus valued at around $29.5 billion, well above its most recent valuation of $19 billion,

and also above the reference price valuation of $23 billion. Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years. CEO Daniel Eck wrote in a blog post on Monday, So while today puts us on a bigger stage, it doesn't change who we are, what we are about, or how we operate, end quote. Spotify's debut on markets was actually an unusual one. Instead of the traditional IPO, led and underwritten by Wall Street bankers, as Eck noted in the blog post, Spotify did not actually sell any new shares to the public. Instead, it allowed its existing shareholders to sell shares in what is known as a direct listing.

The banks were not cut out of the process entirely, however, because they still earned tens of millions of dollars in advisory fees, but that's why we're not talking about an initial public offering and are mentioning unusual terms like reference prices. Here's why this is a big deal, according to Recode's Theodore Schleifer. Quote, if the direct listing is successful, then the push-and-pool power struggle between Silicon Valley and Wall Street would shift more towards the former.

More and more highly valued startups could think that they too do not need Wall Street's usual fare in order to become a public company, and investment bankers could have a tougher time pitching their services to CEOs, end quote. At the time of this recording, it does look to have been successful for Spotify, despite the shares trending down to the $150 level this afternoon. That still represents a 14% quote-unquote pop above the reference price level. as Wired's Aaron Griffith tweeted, quote, CNBC commentators, surprised at how orderly the pricing process has been for Spotify, aka Bankers, freshen up your resumes.

In a related story, also at Recode, Peter Kafka has a piece up that puts Spotify's strategic moment in context. Kafka points out that Spotify is 12 years old now and has never been profitable in all that time. He suggests that if you want to invest in Spotify with confidence, quote, you have to believe that Spotify has figured out a way to improve its margins, which it says it will do, end quote. The key to doing that, Kafka says, is for Spotify to decrease its reliance on the major record labels,

which currently account for 87% of the music it streams online. Apparently, Spotify believes that going forward, a growing number of music artists, especially those signed to independent labels, will bypass the major record labels and come to Spotify directly, for distribution. The hope is that Spotify will be able to sign better deals with indie labels and artists. It actually might end up being a good deal for the artists as well, since they won't have the big labels as middlemen taking their cut.

Quoting from the piece, Spotify doesn't plan on trying to convince giant stars like Taylor Swift or Drake that they should abandon their labels and work directly with them. Instead, the company is thinking about a mid-tail of acts. big enough to have fans, but small enough that big labels won't spend a lot of time pursuing them. If you're making a list of worldwide musicians, think about acts number 1,000 to 10,000, suggest the source, end quote. According to Kafka, Spotify's margins have actually been increasing of late up to 21% last year, and it has a long-term goal of achieving 35% margins sometime in the future.

One can never be sure if these sorts of things will, come to pass or blow over. But over the last several days, we've seen plenty of indications that President Trump's animosity towards Amazon, or at least its CEO Jeff Bezos, is real and possibly consequential. Yesterday morning, the president tweeted, quote, only fools or worse are saying that our money losing post office makes money with Amazon. They lose a fortune, and this will be changed. Also, our fully taxpaying retailers are closing stores all over the country, not a level playing field, end quote. And this morning, another tweet, quote, I am right about Amazon costing the United States Post Office massive amounts of money for being their delivery boy. Amazon should pay those costs plus and not have them borne by the American taxpayer.

Many billions of dollars. Post office leaders don't have a clue, or do they? end quote. Over in Vanity Fair, Gabriel Sherman has a piece up with details from four sources that say Trump is looking to escalate his attacks on Amazon. One source told Sherman, quote, he's off the hook on this, it's war, end quote. Another reportedly said, again quoting, he gets obsessed with something, and now he's obsessed with Bezos.

Trump is like, how can I F with him? According to sources, Trump wants the post office to increase Amazon's shipping costs. Sources also say that advisors are encouraging Trump to cancel Amazon's pending multi-billion dollar contract with the Pentagon to provide cloud computing services. Amazon's stock was down 5% Monday, but was up nearly 1% at times in today's trading. An interesting perspective on this kerfuffle comes from David Dyan at the the New Republic. In a piece published this morning, Diane points out, quote, Amazon might be in trouble because their business model is so dependent on the government.

Amazon obtained its market share through a simple pricing advantage. It never charged sales tax on online purchases for close to two decades. Diane notes how, with all of the warehouses Amazon has around the country, it has successfully won subsidies from cities and states. Diane says to the tune of $1.1 billion since the year 2000. Again, quoting Diane, And the warehouse workers are paid so little and given such limited hours that they often turn to government benefits

with Amazon effectively outsourcing their payroll to the feds too, end quote. And as for that so-called sweetheart deal that the president is concerned about, Diane discusses the parcel select contract that Amazon currently has with the Postal service. Quote, Amazon got the post office to deliver on Sundays using non-union, low-paid city carrier assistance. It has put the agency into high-stress situations, prioritizing Amazon packages over even priority mail.

It's hard to know what Amazon pays, but one report puts it at as little as $2 a package with the volume enabling a better subsidized rate. This grants Amazon yet another advantage over rival retailers. The more it ships, the cheaper the access to the government's universal public infrastructure. End quote. Diane ends the piece by noting that Amazon's current contract with the USPS expires in October. So this story might be coming to a head sooner rather than later. Intel today announced its first core I-9 chips for laptops,

with what it claims is the best gaming and creation laptop processor Intel has ever built. The Intel Core I9-895HK can reach speeds of up to 4.8 gigahertz with Turbo Boost and is the first mobile Intel processor to offer six cores and 12 threads. Intel also announced I-5 and I-7 processors for laptops, which will also be based on the Coffee Lake architecture. This is all part of Intel's efforts to bring all of its chip lineup under its eighth-generation Intel core branding. According to Anand Tech, quote, So far the 8th Gen Intel Core family has processors built on Cabby Lake, CabiG,

Cabi Lake Refresh, the U-Series, and Coffee Lake for desktops. The Verge rounded up the slew of primarily gaming and high-performance laptops that OEMs announced today alongside Intel's own announcement, including the Acer Nitro 5, the Gigabyte Arrow 15, and 15x, the Samsung Notebook Odyssey Z, the Asis Rog Zephyrus M, and the Asis Rog G703. Never change, you namers of gaming computers, you. There were several changes to various messaging apps announced today. First, Snapchat has introduced group video chat for up to 16 people, as well as a mentions feature that will allow you to tag friends in snaps.

that are uploaded into stories. According to The Verge, you tag a friend in the usual way, quote, start typing in the at sign, spell out the username of the person, then tap on the name you want tagged. People who see the tagged snap will be able to swipe up and add the person as a friend or watch any public stories they've posted.

The person you tag will be notified in the chat window that they've been mentioned in your story, end quote. And 9 to 5 Mac is reporting that Instagram has abandoned its Apple Watch app as a result of Apple beginning to require native apps in updates starting this week. If you update to version 39 of the Instagram app on your iPhone, the Instagram for Apple Watch app disappears.

Several high-profile apps have either left the Apple Watch recently or have not been updating their apps, including Slack, Whole Foods, eBay, Amazon, and Google Maps. According to 9 to 5 Mac, quote, For Instagram, the issue is likely a new requirement put in place by Apple. WatchOS app updates must be native. Instagram for Apple Watch was built during the original cycle of WatchKit 1.0 apps, where functionality relied completely on the paired iPhone.

Also involving Instagram, TechCrunch is reporting that this weekend, the app has surprised many developers by reducing how much data they can pool from the Instagram API, shrinking the API limit from 5,000 to 200 calls per user per hour. According to TechCrunch's Josh Constine, quote, Instagram is refusing to comment on what's happening. All it would confirm is that Instagram has stopped accepting submissions of new apps, just as Facebook announced it would last week, following backlash over Cambridge Analytica.

Developers tell me they feel left in the dark and angry, that the change wasn't scheduled or even officially announced, preventing them from rebuilding their apps to require fewer API calls, end quote. Finally, Facebook Messenger today gained the ability to send 360-degree panorama photos, as well as HD video. To try out these new features, update your Messenger app to make sure you have the latest version. Another day, another report of consumer data getting compromised. Krebs on Security was reporting yesterday that PaneraBred.com, the website of the fast casual dining chain Panera Bread,

leaked customer records, including emails and the last four digits of credit card numbers. An estimated 7 million accounts might have been affected. Krebs on Security learned about the breach yesterday after being contacted by security researcher Dylan Hulahan, who said he notified Panera about customer data leaking from its website back in August of last year. Panera told Krebs on security that it had fixed the problem within less than two hours of being notified. And indeed, the Panera website was down briefly yesterday. But Panera did not explain why it appears to have taken the company eight months to fix the issue after initially being notified by Houlihan back in August. Last night, Panera gave a statement to Fox News saying only 10,000

customer records were exposed, but in a late update, also last night, Krebson's security speculated that the date of breach might be larger than the 7 million accounts initially reported. Quote, the vulnerabilities also appear to have extended to Panera's commercial division, which serves countless catering companies. At last count, the number of customer records exposed in this breach appears to exceed 37 million, end quote. As I say, another day, another data leak. Over the weekend, department stores Sacks and Lord and Taylor reported that up to 5 million customers had their data compromised, and of course over the last year, there have been

major security breaches reported at Yahoo, Equifax, and Uber. In what is very possibly a related story, the Guardian is reporting that there is a growing backlash in Sweden about an increasing reliance on digital payments. Sweden has apparently been at the forefront of a move toward a completely cash-free society. Shops and cafes in Sweden increasingly refused to accept banknotes and coins because of the costs and risks involved. And many Swedish consumers seem to have been fine doing away with cash altogether, at least until recently, when concerns about security have started coming to the forefront. Until very recently, the backlash against the move to digital payments

was, quote, dismissed as the voice of the elderly and the technologically backward, end quote. But the head of Sweden's central bank, Stefan Ingviz, called for new legislation to secure public control over the payment system, arguing that being able to make and receive payments is a collective good, like defense, the courts, or public statistics. Most citizens would feel uncomfortable to surrender these social functions to private companies, Ingviz said. Quote,

it should be obvious that Sweden's preparedness would be weakened if, in a serious crisis or war, we had not decided in advance how households and companies

would pay for fuel, supplies, and other necessities, end quote. An opinion poll this month showed that seven out of ten Swedes wanted to keep the option to use cash,

while 25% wanted a completely cashless society. The Swedish Parliament is reviewing central bank legislation concerning the use of cash versus digital payments.

The debate is increasingly centered around national security concerns, said Christian Engstrom, a former member of Parliament for Sweden's Pirate Party, quote, If you have control of the servers belonging to Visa or MasterCard, you have control of Sweden. That's all for today. I'm your host, Brian McCullough, bookmark techmeen.com, if you need a news fix before I'm back at you tomorrow afternoon. In the meantime, be safe getting home. Thank you.