Tech Brew Ride Home - Wed. 07/20 – Netflix Earnings Not SO Bad

Episode Date: July 20, 2022

Netflix reported earnings that weren’t as bad as even they had been telegraphing. So that’s something. The court case is already going against how Elon Musk hoped it would go. What’s up with everyone leaving Neuralink? And a deep-dive look at BeReal. Is it the next big thing or just the latest fad? Sponsors: Storyblok.com/ridehome AthleticGreens.com/ride Links: Netflix loses fewer subscribers than expected and says cheaper ad tier is coming in early 2023 (CNBC) Twitter-Musk trial on $44 billion deal set to begin in October after Musk loses effort to delay (CNBC) A Neuralink cofounder left Elon Musk's brain-chip company, leaving it with just 2 of its 8 founding members (Insider) Google Begins Publicly Testing Its AR Glasses (CNET) Fad or frenzy, BeReal is having a real moment right now (FastCompany) Why BeReal is breaking out (Platformer) 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 right home for Wednesday, July 20th, 2020. I'm Brian McCullough today. Netflix reported earnings that weren't as bad as even they had been telegraphing.

So that's something. The court case is already going against how Elon Musk hoped it would go. What's up with everyone leaving Neurrelink and a deep dive look at Be Real? Is it the next big thing or just the latest fad? Here's what you miss today in the world of tech. Netflix leads us into tech earnings season, as they always, do, but this was maybe the most watch Netflix numbers report in years. The bottom line is Netflix didn't lose as many subscribers as they feared. Revenue numbers were roughly in line, but the company

was able to report it only lost 970,000 subscribers versus the 2 million subscribers they had projected they would lose. This has Netflix stock up, quoting CNBC. The company, which currently has 220.67 million subscribers said it expects net ads to reach one million in the third quarter, reversing some losses seen during the first half of the year. Analysts had predicted Netflix would guide for growth of around 1.8 million subscribers. Netflix also noted that it is in the early stages of its paid sharing plan. This is an effort it mentioned last quarter that would upcharge some members for sharing their subscription with family members or friends that live outside their home.

The company said it is looking at two different approaches in test cases in Latin America that can inform a wider rollout in 2023, end quote. Why this continued harping on account-sharing crackdowns? Because it's real money, people, and it's also probably low-hanging fruit. This is a tweet from CNBC's Carl Kintania quoting an analyst this morning. Bulls will point to the more than 100 million households on shared passwords as a significant untouched opportunity, getting half the value from this cohort, as the paying base would have added $1.8 billion in revenue this quarter, about 23% higher, and not a lot of incremental cost, end quote. But also remember, Netflix is also doing the break glass in case of emergency thing of adding an ad-supported tier.

The weird thing is they keep being fuzzy as to when and how this new ad tier is actually going to happen. On the earnings call, Netflix said it plans to launch its cheaper ad-supported plan in the early part of 2023, starting in a handful of markets where advertising spend is significant. Although earlier, they had hinted strongly that all of this would be rolling out by the end of this year. Quoting variety. Netflix said in its Q2 letter to shareholders, quote, like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering. so our advertising business in a few years will likely look quite different than what it looks like on day one, end quote.

Netflix has not revealed pricing for the ad-supported plan, but it's promised to be less than the streamer's most popular plan without any commercials, the standard package, which currently runs $15.49 a month in the U.S., which includes two HD streams. Ted Sarandos, co-CEO and chief content officer, acknowledged that Netflix is in discussions with some of its content providers on rights issues, as the streamer plans its advertising-supported tier. According to industry practice, such a move would be considered a second window event that typically comes with payments to studios and creative talent. The vast majority of what people watch on Netflix,

we can include in the ad-supported tier today. Some things were in conversations with studios on, Sarando said in the recorded earnings interview, we will clear some additional content, not all of it. I don't think it's a material holdback to the business, though, end quote. Netflix CFO Spencer Newman also downplayed the potential for higher costs to come with the ad expansion. We can launch today without any content clearance rights, he said. Discussions are underway with outside partners, but Newman assured analysts will be disciplined, end quote. So wait, is that the holdup? You're telling me that they were so sure they'd never charge ads that they never charge ads that they never.

ever baked that contingency into all of their deals for all of the content they've created or licensed over the years, and now they're having to go back and run around and sign new deals with all of this talent. At best, that's incredibly short-sighted and basically stupid of them, to not have at least planned for contingencies. If I were the producer of a show for Netflix that came out, I don't know, three years ago, and they were suddenly calling me up and banging on my door to get me to sign something in order to show ads against it, I can promise you I'd be asking them for all the money, because I would know that I would have them over a barrel at this point. Speaking of, you know, foresight when writing up contracts, the first rulings are not bouncing Elon's way.

The Delaware Court of Chancery has granted Twitter an expedited five-day trial in October in its lawsuit against Elon Musk, who wanted the trial to get pushed all the way back to the early part of 2023, quoting CNBC. During the hearing, Twitter's lawyer Bill Savitt of Wachtell, Lipton, Rosen, and Katz, argued that Twitter's request for a September trial was well in line with the timelines for similar cases in the past. He added that a quick trial schedule is imperative to stop the ongoing harm Twitter has experienced from the uncertainty of the deal's closure and alleged disparagement by Musk. Savitt also alleged attempts by Musk, who's also CEO of Tesla and SpaceX, to delay the trial may be a ploy to, quote, run out the clock by leaving. little time for appeals before the debt commitments he made to finance the deal expire. Musk's lawyer, Andrew Rossman of Quinn Emanuel, argued the expedited timeline was far too aggressive for his team to review the massive data trove at Twitter, which Musk wants to review to verify

the percentage of spam accounts on the platform. Rossman charged that Twitter wants to, quote, continue to shroud in secrecy that number and failed to provide the information Musk asked of the company earlier. But Savitt said that determining the percentage of spam accounts is not necessary in this case, since, quote, nothing in the merger agreement turns on that question, end quote. Again, like the previous Netflix example, I'm no lawyer here, but when you do a contract, it's wise to write in all of the contingencies, right? That's basically the whole point of contracts. So if Elon signed a contract without inserting any outs for himself, that's his problem, right? Also in Elon news, sources are saying that Neurrelink co-founder Paul Morolla has left the

company in recent weeks, the latest in a string of departures at the Elon Musk-backed brain implant startup. Quoting Insider, Marilla confirmed his departure with posts on LinkedIn and his personal website saying he had left the company on June 3rd. He said he had decided to leave Neurrelink to pursue a new project which is still in stealth. Marola said it was a difficult decision to leave the company he helped found. Quote, I hope I get a chance to work with Neurolink again in some capacity and I look forward to seeing our work improve the lives of patients who suffer from brain injury, he wrote. Two sources familiar with the matter told Reuters, Neurlink has now lost six out of eight founding members, leaving just Musk and engineer Donjin DJCEO. Neurlink President Max Hodak left the company

in May 2021, and in February 2022, invested in rival Neurotechnology startup Syncron. Syncron has beaten Norrelink to human trials. It received the green light for human testing from the Federal Drug Administration in July 2021 and announced this week that it implanted its first device into a U.S. patient. Neurrelink is working to develop an AI chip that could be implanted in a person's skull with electrodes fanning out into the brain. Those electrodes would be able to monitor and potentially stimulate brain activity. The company has said the first use case it's working towards is allowing quadriplegic people to control digital devices with their minds. Musk has touted more far-reaching future applications for the technology, saying he believes it could

facilitate symbiosis between humans and artificial intelligence. Neurlink has yet to begin its own human trials. Musk said during a live interview in December 2021, the company hopes to begin human testing in 2022. He previously gave 2020 and 2021 as years when the company could begin human trials, end quote. Yes. Too optimistic with deadline predictions, as always, never change, Elon, or I don't know, maybe do change. Just mix it up for the rest of us. Google plans to test its forthcoming AR prototypes in public, in the wild, starting with a few dozen employees and trusted testers in August, and then ramping up to hundreds of testers by the end of 22. So get ready, Silicon Valley, the glass holes are back, quoting CNET.

A decade after Google Glass, Google is getting back to testing smart glasses in public again. The company announced its own smart glasses initiative earlier this year at Google's I.O. Developer Conference, a project that's aimed at assistance rather than entertainment. Google's now starting to publicly test those smart glasses the company announced today, beginning with dozens of pairs in-field use and ramping up to several hundred by the end of the year. Google's glasses are AR of a sort, relying on audio assistance that can use built-in cameras to recognize objects in an environment through AI, similar to how Google lens can recognize objects and text with phone cameras. The glasses will not, however, be able to take photos or videos.

Google's limiting those features on its field-tested glasses. focusing entirely on how the glasses can train their AI to recognize the world better. The glasses based on glimpses Google has shown in videos and photos look nearly normal, but unlike meta's publicly available and normal-looking Rayband Stories glasses, which are designed mainly for taking photographs and listening to music, Google's focused on utility and assistive uses for its smart glasses right now. The specific early test cases, Google lists at the moment are translation, transcription, visual search, and navigation that will work with heads-up overlays,

to how Google Maps uses heads-up AR directions on phones. Google's AR glasses prototype testers are prohibited from using the glasses in schools, government buildings, health care locations, places of worship, social service locations, areas met for children, e.g. schools and playgrounds, emergency response locations, rallies or protests, and other similar places, or while driving or playing sports. Google hasn't revealed where in the U.S. specifically these glasses will be tested. According to Google, quote, an LED indicator will turn on if image data will be saved for analysis and debugging. If a bystander desires, they can ask the tester to delete the image data and it'll be removed

from all logs. The glasses don't take photos or videos, but use image data for its assistive AI. Google promises that, quote, the image data is deleted except if the image data will be used for analysis and debugging. In that case, the image data is first scrubbed for sensitive content, including faces and license plates. Then it is stored on a secure server with limited access by a small number of Googlers for analysis and debugging.

After 30 days, it is deleted, end quote. Finally today, once again, people are talking about Be Real, that social photo sharing app launched in early 2020 in France, because BeReal is currently the number one free app in Apple's U.S. App Store. Censor Tower estimates that BeReal now has 20 million plus installs, quoting Fast Company. In fact, the United States is currently B Reel's top market representing about 35% of its user, Sensor Tower says, followed by the UK was 17% and France with 10%. In total, B-Real has been installed more than 20 million times, and this past Saturday was its best day ever. Whether it can

sustain that growth trajectory, of course, remains to be seen. But if nothing else, it's refreshing to hear about a popular Gen Z app that isn't TikTok for a change, even if TikTok influencers have already discovered it, end quote. So what's going on with B-Real? Here's Casey Newton's assessment from his platformer newsletter, quote, Be Real is a photo sharing app for iOS and Android. Every day at a random time that varies by country, the app sends out a push notification. Time to be real. And users have two minutes to take their pictures. The camera snaps a selfie and a rear-facing photo simultaneously in a fashion reminiscent of the mid-2010s app front-back. If you post after the two minutes expire, your photos are marked as late. You can't view your

friends posts unless you post first. The post-to-view gimmick has also been used before. I remember when Facebook used it for Slingshot, one of its Snapchat clones. All in all, it's a fairly unassuming set of features, but it's resonating. On Monday, BeReal became the number one free app in the iOS app store and remains there today. Market Search firm Censor Tower estimates that it's now been installed 20 million times. Another firm, Aptopia, estimates that its total downloads are 29.5 million, a spokesperson told me about 33,000 people downloaded BeReal on Sunday alone, Apptopia said. But BeReal is no overnight success. 18 months after it was founded, and amid some traction with college students, Andresen Horowitz, and a sell led a $30 million round in the company, newcomer

reported at the time. Growth spiked earlier this year, as young people began discussing the app heavily on TikTok, with many posts about Be Real garnering half a million likes or more. In May, Insider reported that Be Real was raising a fresh $85 million in capital, led by Facebook investor Yuri Milner's DST Global, that would value the company at $600 million. That's a significant milestone for a company with no revenue at a time when venture capitalists are becoming much more cautious. What kind of business does Be Real hope to be? I'd love to ask its founders, but the company told me they're not doing interviews at the moment. Instead, they sent along a two-page fact sheet laying out the company's backstory and basic ambitions. Be Real is, quote, a candid and fun place for people to share their lives with friends, the company said.

We want to make people feel good about themselves and their lives. We want an alternative to addictive social networks, fueling social comparison and portraying life with the goal of amassing influence, end quote. The fact sheet ends with a section labeled Warning, which advertises, among other things, that Be Real can be addictive, Be Real will frustrate you, and Be Real won't make you famous. If you want to become an influencer, you can stay on TikTok or Instagram, the company ads. I can only imagine how withering that must have sounded in the original French.

Why is all of this resonating? On one level, BeReal is simply applying what we have learned about kick-starting new social networks over the past two decades. A creative constraint is essential. Think of Twitter's 140 characters or Vine's six-second loops. And BeReel's two-minute countdown timer has inspired similar ingenuity. The company's early focus on making inroads with college students is also straight out of the growth marketing handbook. BeReal is also nostalgic in the way that every new social network is nostalgic. You're earning for a time when only your closest friends were on it when you felt free to be a little more authentically yourself. That feeling, combined with the pride in being an early adopter of the next big thing, can take a new network a long way.

At the same time, I think all of this undersells just how weird Be Real can be. Your individual experience may vary. I've been out of college a long time, and most of my friends on Be Real seem to never leave their houses, but I don't think I've ever seen such a mundane collection of media in my entire life as I have while browsing Be Real. Here is a friend typing on a laptop. Here is a friend feeding his dog. Here is a friend staring at a wall of faces on Zoom. The old joke about Twitter was that it was a bunch of people posting about what they were having for breakfast. In 2020, people are posting their breakfast on Be Real, and there is no sense in which it is meant to be a joke. The mundanity is intentional, of course. That two-minute time

limit arriving randomly throughout the day is meant to discourage you from rigging up your ringlight and capturing yourself from the perfect angle, though, of course, people are making good jokes about doing just that. One friend who was an early adopter of BeReal told me that ugliness is the heart of the app's appeal. He has accepted fewer than five friend requests, he said, for fear that the app would become Instagram stories all over again. I love how shitty the content is, he told me of Be Real's feed. The key ingredient is adding people you're happy to look shitty in front of, end quote. That makes sense to me, though. I must say that I rarely even glance at what my friends are posting. By now I've seen all the rooms of their homes and I'm bored by them.

So instead, I simply post my own shitty content, elated for the rare days when the notification arrives when I'm not just sitting in my office chair typing. There are other theories about why Be Real is taking off now. It seems notable that the app is on the rise at the same time. I'm seeing more and more viral angst about what Instagram is becoming, end quote. Yeah, it seems to be a social network only sticks around if after the gimmicks fade into the background, it has accidentally taken over some of your common everyday communication or entertainment needs. Like, come for the gimmicks, stay because that's how you keep up with your friends, or how you prefer to kill time for hours a day.

That's how Snapchat did it, basically. So it seems to me, Be Real needs to be iterating quickly to take advantage of their popularity, or else they're going to go the way of all the rest. Nothing for you today. Hat tip to that recent New Yorker article. about super yachts that reminded me of this Hemingway quote. Do not think about sin. It is much too late for that, and there are people who are paid to do it.

Talk to you tomorrow.