Tech Brew Ride Home - Wed. 01/24 – Netflix’s Cheapest Ad-Free Plan Is Going Away

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 Tech meme right home for Wednesday, January 24th, 2024. I'm Brian McCullough. Today, Netflix kicks off tech earnings season and suggests it's taking its cheapest ad-free plan away.

Starting point is 00:00:45 The one chart that shows why Netflix is winning the streaming wars. Spotify demos how it plans to break out of Apple's App Store. Renders of the Pixel 9 have already leaked. Apple scales back its EV car plans and an interesting raise to help you pay your rent. Here's what you missed today in the world of tech. Netflix kicked off tech earnings season yesterday reporting Q4 revenue up 12.5% year over year. The all-important paid user number was up 12.8%, handily beating estimates, and almost a billion dollars in net income. Wall Street liked it. The stock was up over 13% this morning in trading.

Starting point is 00:01:24 But here's the big headline. Netflix plans to retire its ad-free basic plan in some countries where ad-supported plans are available, starting with Canada and the UK in Q2. of this year. So the cheapest ad-free plans are going away. Netflix continues to become cable TV faster than you can think it ironic. Quoting the verge, that leaves subscribers with Netflix's $15.49 per month option as Netflix's cheapest ad-free plan. Going from 1199 to 1549 per month is a pretty big jump and means there's really no middle ground for ad-free plans. Otherwise, subscribers will have to pay $6.99 per month for its ad-supported basic plan, or $2.99 per month for the premium tier. Netflix stopped letting new subscribers sign up for its basic plan in Canada last year before

Starting point is 00:02:13 rolling out the change to the U.S. and UK. In a video interview for investors, co-CEOO, Greg Peters, said the ad-supported offering is now at 23 million monthly active users and that Netflix's priority for it is, quote, scale. He said that included making it more attractive with upgrades like last year's changes to the cheapest version that bumped the resolution to 1080p, added multiple streams, and switched on downloads, and how Netflix is, quote, shifting our plans and pricing structure in other places, end quote. Netflix, of course, made that surprise announcement yesterday of acquiring the rights to WWE content and aired its first live sports broadcast event in November, a golf competition,

Starting point is 00:02:54 and then there's their foray into games. Netflix also said user engagement with games on its service tripled in 2023, and Grand Theft Auto has become its most successful launch to date. Speaking of Netflix, as the great Peter Kafka put it in his headline for this piece in Business Insider, this one chart shows how Netflix has basically won the streaming wars. Peter is not looking at raw subscriber numbers. He's looking at churn rate. How many people quit subscribing each month? Quote, this data comes to us via antenna, a company that tracks subscription services, and it shows that Netflix consistently has a churn rate of about 2%. That's way, way below all of its competitors who, at the moment, have a weighted average of 5.3%.

Starting point is 00:03:46 Churn, obviously, tells you how satisfied customers are with the product, and it's particularly important for streamers since their customers have become increasingly likely to quit over the last year. But even though Netflix has had blips, its churn rate has remained remarkably steady and well below anyone else. Meaning, no matter how often and you hear people say they can't find something to watch on Netflix, they must be finding something to watch, end quote. Stars is the worst when it comes to churn. Every month, something north of 10% of their subscribers cancel.

Starting point is 00:04:18 Second worst is Apple TV Plus currently sitting at 8% churn, then Discovery Plus, Hulu, Max, Paramount Plus, Peacock, all of them hovering in the 6% to 7% churn range. Second best performer in terms of churn? Disney Plus at only around 5%. and then way below all of them, holding almost eerily steady at 2% Netflix. Head of the EU's upcoming DMA rules change, Spotify has shared iOS app mockups with full-in-app payments, rolling out in part on March 7th. Apple has not yet shared details of the DMA changes it intends to make or allow,

Starting point is 00:05:00 but it looks like when they get the go-ahead from Apple, this is how Spotify is going to do it. Quoting the verge, how much of it comes to fruition depends on Apple's It is not clear whether Apple will have to freely allow developers to offer their own in-app purchases under the law. Apple has not yet shared how its policies will change. But in other countries where regulators have forced open exceptions in the app store, Apple has found ways to limit them as much as possible. If in-app purchases are freely allowed, the most obvious benefit would be for Spotify's core business. It's premium subscription, since it'll be much easier for free users to upgrade. Gustav Gillenhammer, Spotify's vice president of Market

Starting point is 00:05:40 and subscriber growth says the new App Store rules could be game-changing for the company's audiobook and podcasting verticals too, since right now it's too difficult for users to make purchases from either, end quote. Reminder of what the Digital Markets Act is passed in the EU in 2022, the law targets tech giants, perhaps especially Apple, for anti-competitive practices. It restricts gatekeepers like the App Store from mandating fees, promoting their own products, or enforcing exclusive payment processors, addressing key concerns, raise by companies like Spotify and Epic Games and challenging fundamental aspects of Apple's app business model. Again, it comes into effect beginning March 7th, so Apple will have to reveal how they're handling this

Starting point is 00:06:20 soon. If you think rumor-mongering around Apple products is annoying, on the Android side of things, it's almost the exact opposite. Instead of rumors, we just get straight up leaks. We already have full-on alleged renders of Google's Pixel 9 Pro. The Pixel 9 lineup is probably eight to nine months away from even being announced, but instead of months of drips and drabs, here you go. This is probably what the Pixel 9 Pro will look like. An around 6.5 inch display, smaller than the Pixel 8 Pro, a refreshed camera island with three cameras and a flat frame. Quoting My Smart Price, which broke the news of the renders, quote, per the reputed leekster,

Starting point is 00:07:08 the Google Pixel 9 Pro will come with a circa 6.5 inch flat display, which is smaller in comparison to its predecessor, the search engine giant will equip the smartphone with a centered punchhole cutout to house the selfie camera. The renders confirm that the Pixel 9 Pro will sport thin bezels on all four sides of the display. On Leaks confirms that Google will equip the flagship smartphone with a flat frame, as the renders show. The power button and volume rockers will be present on the right side of the device. The left side of the device will be clean except for the antenna markings. USB Type C port, speaker grill, and SIM card tray will be present on the bottom of the device. end quote. Triple rear camera is notable. One has to assume this will include a telephoto camera

Starting point is 00:07:51 separate from the wide camera sensor, and if you look close enough, it certainly looks like it'll be a periscope telephoto sensor. More tech layoffs. eBay plans to cut around a thousand jobs or around 9% of its full-time employees and to scale back its contracts within what it calls its alternative workforce over the coming months, quoting Bloomberg. Ione, eBay's CEO, said the job cuts are necessary because eBay's, quote, overall headcount and expenses have outpaced the growth of our business. To address this, we're implementing organizational changes that align and consolidate certain teams to improve the end-to-end experience and better meet the needs of our customers around the world, Ione said. Shortly, we will

Starting point is 00:08:38 begin notifying those employees whose roles have been eliminated and entering into a consultation process in areas where required, end quote. eBay's recent fourth quarter revenue guidance came in under Wall Street estimates. While the company continues to blame macroeconomic headwinds and inflation pressures, one also has to assume that, like Etsy, they're seeing competitive pressure from the likes of Sheehan, Temu, and TikTok shopping. All right, as ever, it's hard to make heads or tails of the assumed Apple car project. Mark German's sources are telling him that Apple has pivoted to a less ambitious design for its upcoming electric vehicle from Level 4 autonomy to Level 2 plus, and put back its launch from 2026 to 2028 or later. Level 2 plus is basically what Tesla's autopilot feature

Starting point is 00:09:30 is right now. As recently as 2022, Apple was still confident in a 2026 release date for the car. Now not so much. Quote, internally, the shift is seen as a pivotal moment for Apple's car. Either the company is finally able to deliver this product with reduced expectations or top executives may seriously reconsider the project's existence, the people said. Still, it's possible that Apple reverse its course again and takes a new tack. The prior design for the vehicle called for a system that wouldn't require human intervention on highways in approved parts of North America and could operate under most conditions. The more basic Level 2 plan would require drivers to pay attention to the road and take over at any time, similar to the current standard autopilot feature on Tesla's EVs, end quote. Mark says Apple has been meeting with potential manufacturing partners in Europe about this change in direction, much like a smaller,

Starting point is 00:10:21 lighter, cheaper Vision Pro that Apple hopes to get to someday. Apple still hopes to release an upgraded system at level 4 autonomy someday, but that would be well into the 2030s at this point. Mark also says that internally Apple is thinking of this as a sort of Me Too product as in Me Too Tesla. And let's not forget what this is all in aid of. Revenue growth at Apple has stalled. The Vision Pro isn't going to contribute meaningfully to that for a while. A $100,000 high-end car would, but again, not until at least the end of this decade at this point. One more bit of Apple T-leaf reading this time in terms of their AI strategy. The Financial Times says Apple has quietly made 21 acquisitions of AI startups since 2017,

Starting point is 00:11:14 far and away more than any of their peers. Microsoft has only made 12 AI acquisitions, meta 11, and Alphabet only 8. And FT is positing that they're just, getting warmed up. Quote, the most recent of those acquisitions was Apple's purchase in early 2023 of California-based startup Wave 1, which offers AI-powered video compression. They are getting ready to do some significant M&A, said Daniel Eyes at Wedbush Securities. I'd be shocked if they didn't do a sizable AI deal this year because there's an AI arms race going on, and Apple is not going to be on the outside looking in, end quote. According to a recent research note from

Starting point is 00:11:53 Morgan Stanley, almost half of Apple's AI job listings now include the term deep learning, which relates to the algorithms powering generative AI. Models that can spew out human-like text, audio, and code in seconds. The company hired Google's top AI executive John G. and Andrea in 2018. Apple's goal appears to be operating generative AI through mobile devices, which would allow AI chatbots and apps to run on the phone's own hardware and software rather than be powered by cloud services in data centers, end quote. As I told you recently, In December, Apple researchers revealed a significant advancement in on-device operation of large language models by utilizing flash memory, enabling quicker and even offline query processing. Earlier in October, Apple and Columbia University jointly launched an open-source LLM named Ferret, currently used for research.

Starting point is 00:12:41 Ferret functions as an auxiliary visual aid identifying and describing objects within images to the user. So, you know, you could be on a FaceTime call with somebody, admire their shirt, have the air, have the I tell you what brand of shirt it is and order it for you without having to even open an app. Finally today, an interesting raise. If you, like me, try to funnel all your spending through credit cards that give you reward points, you've probably been annoyed that your biggest monthly expense, your rent or mortgage payment, can't earn you rewards. Well, New York City -based built rewards solves that problem by converting rental payments into points. They've raised $200 million led by General Catalyst at a $3.1 billion valuation, which is basically doubling their

Starting point is 00:13:29 valuation since their last raise in October of 2022. Built says users spend $20 billion on their program annually, quoting Bloomberg. Cities with the most built members include New York, Los Angeles, Dallas, Washington, and Seattle. Members earn points for certain spending, which they can redeem for rent credits or rewards with certain merchant partners, as well as transfer to outside loyalty programs like those operated by major airlines and hotel chains. Ken Chenult, the chairman of General Catalyst and the former chief executive officer of American Express, will join Built as chairman, according to Built CEO, Anchor Jane. With Chenult, Billet, Bilt is getting an executive who helped build American Express into the payments giant it is today,

Starting point is 00:14:11 with more than 130 million cards in force. Under Chenult, Amex spent years persuading millions of mom-and-pop businesses to finally begin accepting the credit card giant's products, end quote. Yeah, my Delta rewards, is where I try to spend all my money. That's how we did that trip to Ireland last year. I'm thrilled. The kids after-school payments are now on credit card. Apparently, some of the country's largest landlords, including related, Grey Star, Willowbridge, Avalon Bay, communities, and invitation homes have committed to using Built as their sole payments platform. Built says it's profitable and has no debt. Quoting TechCrunch. With the new capital, Built has raised $413 million in total funding since the launched in June 2021 out of Cairoos, the startup studio led by Built founder and CEO Anchor Jane.

Starting point is 00:15:01 It launched its rewards program in April of 2022. At the time of its last raise, the company's loyalty program and payment platform had been rolled out to more than two and a half million apartment units. Today, that number is up to nearly four million units. Users can earn points and improve their credit by simply paying rent each month. Built points can be used in a variety of loyalty programs, including major airlines, hotels, travel, fitness classes, Amazon.com purchases, credit towards rent or future down payments. Built said it plans to use the new capital toward expanding its rewards alliance, which partners with multifamily, single family, and student housing operators nationwide. It will also go towards bolstering its neighborhood rewards program, which aims to

Starting point is 00:15:42 help local merchants, quote, connect and build loyalty with new and existing residents in their community. The company also plans to expand into mortgage payment rewards. built also offers a co-branded master card issued by Wells Fargo that can be used to pay rent and earn built points with no transaction fees, end quote. You don't have to be a spreadsheet genius to see how this grows from here. Built can go town to town, state to state landlord by landlord and just sign them up, like how Zuckerberg took Facebook college by college. Nothing for you today. Talk to you tomorrow.

Tech Brew Ride Home - Wed. 01/24 – Netflix’s Cheapest Ad-Free Plan Is Going Away

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