Tech Brew Ride Home - Wed. 07/31 - Apple: What, Me Worry?

Episode Date: July 31, 2019

Apple isn’t selling as many iPhones, but they want you to know that that’s just fine. Samsung isn’t selling as many high end smartphones as they’d like, but seemingly no one is. There’s a new Galaxy Tab, Facebook hasn’t given up on their Portal ambitions and the rise of the livestreamed funeral business. Sponsors: WeWorkRemotely.com DataDogHQ.com/ridehome Links: Apple Reports Third Quarter Results (Apple PR) Samsung's Q2 profit halved from low memory demand (ZDNet) Samsung’s Galaxy Tab S6 is its latest volley against the iPad Pro (The Verge) Spotify Grows to 108M Paid Subscribers Compared to Apple Music's 60M (MacRumors) Facebook Approached Netflix, Disney to Support TV Chat Device (The Information) Amazon concedes market share in battle for online consumer goods sales (TalkBusiness.net) NOW EVEN FUNERALS ARE LIVESTREAMED—AND FAMILIES ARE GRATEFUL (Wired) CLASSIFIED: There is a great new podcast on venture and startups. It’s Called LA Venture and it’s all about the Los Angeles venture and startup scene. It's useful if you're looking for funding or just interested in getting to know the LA investors. Admittedly, it's hosted by two VCs interviewing other VCs and everyone is talking about themselves. But, we're all avid TechMeme listeners so perhaps we've picked up some of Brian's ability to make our stories snappy and enjoyable listening. (ooh… flattery will get you everywhere)… Search for "LA Venture" hosted by TenOneTen. Great place to get venture insights if you're already caught up on TechMeme Ride Home listening. Again, LA Venture by TenOneTen. 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 31st, 2019. I'm Brian McCullough today. Apple isn't selling as many iPhones, but they want you to know that that's just fine. Samsung isn't selling as many high-end smartphones as they'd like, but seemingly no one is. There's a new Galaxy tab. Facebook hasn't given up on their portal ambitions and the rise of live-streamed funerals.

Here's what you miss today in the world of tech. As per usual, Apple brings up the rear of the tech earnings parade. Yesterday, Apple reported Q3 revenue of $53.8 billion, up 1% year over year, but iPhone revenue of $26 billion, which was down significantly from $29.5 billion year over year. Apple's stock was up more than 4% this morning. So, Apple's revenue was flat, iPhone revenue was way down to the tune of $3.5 billion, and Wall Street is fine with all this? Well, remember, Apple has been working hard to telegraph its shifting business emphasis. Yes, for the first time since 2012, the iPhone makes up less than half of Apple's revenue.

But don't sweat it because it's all about services revenue, baby. Services revenue hit a new record, in fact, $11.5 billion up from $10.2 billion year over year. And actually, it's not just services because Apple's wearables, home, and accessories business generated $5.52 billion up 50% year over year. So Apple Watch, AirPods, all that stuff, is now almost as big a business as the Mac business. The Mac, by the way, did $5.5.8 billion in revenue up from $5.5.5.5.5.5.5.000. 3 billion year over year and even the iPad is coming back. 5 billion in iPad revenue up from 4.6 billion year over year. So yes, the TLDR here is that Apple's carefully constructed narrative is actually playing out exactly as planned.

Fine. It's not all about iPhone sales anymore. But that's okay because all of these ancillary businesses are doing great. And if you think about it in a certain way, all of the ancillary businesses are all built off of the iPhone. or at least the iOS ecosystem. So Wall Street is buying Apple's argument that everything is great because they are finding a way to continue to grow the money that they are making off of each iOS user overall year over year. And that's great because unless something drastic happens,

iPhone sales aren't going to suddenly explode again anytime soon. Think of these numbers. There are now 420 million paid subscriptions across Apple's platform. I was trying to find something on this today. Does anyone know, does anyone in the world have more paid subscribers than Apple does to anything? Total subscriptions rose 55% year over year, 16% quarter over quarter, and, you know, Apple TV Plus ain't even a thing yet. The total wearables business is now bigger than the iPad business or the Mac business. Apple Pay is completing nearly one billion transactions.

per month. And P.S. on the earnings call, Tim Cook said that the Apple card, that new credit card, will indeed launch in August. Cook also intimated that Apple's sales in China might be rebounding. They're still down, but not down as much. So basically, virtually every business Apple is in grew in every region of the world this quarter except for the iPhone. And Apple says, that's fine. And as of right now, everyone including Wall Street seems to to agree. Samsung reported earnings as well, with revenue coming in at $47.4 billion, down for percent year-over-year, and operating profit of $5.6 billion, down 56 percent year-over-year.

So I'm mentioning this because remember how I said yesterday that Samsung is basically the only one in the Android ecosystem who can make money on Android smartphones reliably? well, look, Samsung is a huge company that has its fingers in a lot of pies. Its memory chip business still contributes to the lion's share of the company's revenue, and it was weakness in that business, as well as price drops in memory chips overall, that has created what Samsung called, quote, persistent uncertainties in their business. The display panel business bounced back for Samsung slightly, but, quoting ZDNet, its mobile business, meanwhile, posted an operating profit of 1.56 trillion won much lower than

analysts' estimations. It is significantly lower than last year's 2.67 trillion won and the previous quarters 2.27 trillion won. The South Korean tech giants said the sales of Galaxy S-10 have slowed and the competition in the low to mid-end has intensified. The company said it would work hard to increased profitability with the launch of the Galaxy Note 10 and Galaxy Fold in the second half of the year. Though Samsung didn't refer to it in the fiscal report, the lower than expected profits are also likely caused by the delay of the Galaxy Fold's launch due to its review units being faulty. The company initially expected in April launch with the goal of moving a million units for the foldable device that would have helped profitability. The company will now launch the Fold in September, end quote.

So yeah, the fold fiasco hasn't helped Samsung at all. But what's really going on here is that high-end flagship smartphones suddenly just aren't selling. Remember, Google telegraphed this when they noted that sales of pixel phones doubled from some unreported number. But remember, Google released those cheaper Pixel 3A phones. So maybe that is responsible for the sales increase. Samsung basically said the same thing in its earnings. Galaxy 10 sales sluggish. the lower-priced A-series phones selling just fine.

So maybe it turns out that the whole industry's race to the $1,000 price point has been a bust for everybody. Most consumers just don't see enough new or enough for a feature value to justify that price point. And even when they do at that price point, it merely encourages them to wait longer to upgrade phones. which, to bring it back to Apple for a second, makes that what-me-worry strategy of Apple's when it comes to iPhone sales look smart. Again, maybe hardware sales are flat, but if you can still make incrementally more money

off of every user year over year, but let's jump back to Samsung because they have announced their new high-end Android tablet, the Galaxy Tab S6, which has a 10.5-inch OLED display and a Snapdragon 855 chip. It's coming September 6th for, well, starting at $649. It's thinner, it's lighter, it's faster than the Tab S4.

It comes with an optional keyboard case. This is designed to be a possible laptop replacement. Quoting the Verge, however. In terms of size and features, the Tab S6 compares closer to Apple's most recent iPad Air than the more expensive iPad Pro. but the air starts at a lower price and has a much more developed operating system and app ecosystem than the tab S6.

As with most of Samsung's high-end tablet efforts for the past few years, it's hard to see why anyone would choose the tab S6 over Apple's options. We'll have a better idea of how well the tab S6 stacks up against Apple and Microsoft's tablets once we've had a chance to put it through a full review, so stay tuned for that, end quote.

And one more earnings report to squeeze in here. Spotify reported a 3 million euro operating loss in Q2 on revenue of 1.67 billion euro, which was okay. Revenue was up 31% year over year, and that loss of only 3 million means that their quarterly losses have shrunk considerably. In fact, the net loss has been cut almost in half year over year. But, well, since this is an Apple heavy day to bring this back to Apple for a second, quoting Mac rumors, Spotify today announced that it has grown to 108 million paid subscribers globally as of June 30th, 2019. That number is an increase from 100 million paid subscribers, which the company reported in April. In total, there were 232 million

monthly active users on Spotify, including the ones on the free version of Spotify. This is an increase of 29% year over year. Comparatively, Apple Music was reported in June to have 60 million paid subscribers. Despite that difference in paid subscriber counts, Apple Music in early 2019 reportedly surpassed Spotify's paid subscriber total in the United States. Apple Music at the time had somewhere around 28 million U.S. subscribers compared to Spotify's 26 million, end quote. The information is reporting that Facebook is working on a new TV device that will be able to stream video and make video calls. So imagine some sort of a marriage between what the existing portal device already does, and I guess, like Netflix or something. In fact, Facebook has

reportedly approached Netflix, Disney, and others about making their content available to this device if it becomes available. Quote, the device, which Facebook is aiming to release this fall, will use the same video calling technology that is in Facebook's camera-equipped smart speaker called Portal, which has a screen of its own, and it's designed to sit on kitchen counters and desks, according to two people familiar with the project and documents viewed by the information. The new device codenamed Catalina will also come with a physical remote and streaming video services similar to other television boxes like Apple TV.

In addition to Netflix and Disney, Facebook has approached Hulu, HBO, and Amazon about making their streaming services available on the device. The news site Cheddar last year revealed Facebook's plans to make a television-connected device, but the company's approach to the media companies and its plans for a fall release date haven't been previously reported. The status of the talks with the media companies couldn't be learned, end quote. Just this morning I recorded a great weekend bonus episode with The Great, Jason Delray, to talk about his new podcast about Amazon. You'll hear our conversation on Saturday.

And of course, amidst that, we had to get into a brief discussion of what Amazon faces now that antitrust is the buzzer word of the summer. Now, given all of the talk about antitrust and things like that, I find it interesting that articles like this one have suddenly started popping up with regularity on sites that I check every day to do this show, quoting from a site called Talking Business and Politics. Amazon remains the undisputed leader in online sales of consumer package goods, or CPGs, with 39% market share, but that's down from 43% and. In 2017, according to a new Nielsen report, Instacart, Chewy, Walmart, and Kroger each increased their share of online CPG sales in the same period. Instacart doubled its share from 4% to 8% and Walmart tripled its share from 2% to 6% over the past two years.

Target grew its share by 1 to 3%, and Kroger more than doubled its share to 5% up from 2% in 2017. Nielsen noted Amazon still continues to dictate the pace of change, driving a third of all growth, experience in CPG e-commerce since early 2017. Two years ago, CPG e-commerce sales totaled roughly $37 billion, but has grown to $65 billion. Amazon's share of that growth is 33%, Instacart's stake is 13, and Walmart's share is 11% according to Nielsen. Chewy, Kroger, and Target, command shares of 9%. and 8% and 5% respectively, and all other retailers hold a 21% share of the total market, end quote. Now, I'm not saying that there is any sort of conspiracy here, but I am telling you that I have noticed a sudden surge in pieces and data points that collectively are kind of obliquely making the

argument that far from being the 800-pound gorilla in e-commerce, Amazon actually still faces plenty of competition in the e-commerce space. There were a flurry of pieces last week talking about how Shopify is actually a major threat to Amazon's dominance. And again, I'm not saying that there's anything fishy going on here, but it is sort of useful for Amazon in the summer of antitrust rumblings for stories like this to suddenly be getting into circulation. Finally, today, as they say on Reddit, today I learned that funeral live streaming

is a thing. In fact, it's a big business. An estimated 20% of funeral homes now offer live streaming video services. Quoting Wired, in a culture obsessed with tweeting and Instagramming every moment of life, it's a little surprise that streaming extends to death. Funeral live streaming services have been around for more than a decade, but the practice has recently exploded in popularity, says Bryant Hightower, President-elect of the National Funeral Directors Association. He estimates that nearly 20% of U.S. funeral homes now offer the service, a big number in an industry resistant to change. In response to demand from clients, tech-savvy entrepreneurs offer live-streaming as a service to hesitant funeral directors. Gary Richards, founder of One Room, a company that offers live-streaming services to funeral directors in New Zealand, Australia, Canada, and the U.S.

says he's noticed that many of the families that use his service are recent immigrants from the Philippines, Vietnam, or India, who are looking for a way to continue. with family and friends from back home. He says he's also noticed a considerable number of Americans looking to bridge the East and West Coast, end quote. So I bring this story up not as a, can you believe the world today? We're all obsessed with streaming and sharing and video. No, actually, I kind of think that this makes a ton of sense. Aside from the ability to give people the remote ability to grieve without having to spend a ton of money to do so, to travel, plane tickets, that sort of thing. The piece actually makes this point as well. They're quoting a woman who used a live streaming service for her mother's funeral. Quote, one of the things

that we were told was, you're not going to remember everything, she says. Everyone is saying all these wonderful things. They're telling these stories and you just can't process it. The grief and shock is still too much in the months since her mother's January 7th funeral. Levy says she and other family members have watched and rewatched the recording online. Quote, one of the only things that every day reminds you of how great she was in such an awful time is people's memories and you sharing those memories with each other, end quote. So, I mean, yeah, I'd love to have the video from my grandfather's funeral 20 years ago. I didn't get to attend the funeral of one of my grandmothers about 10 years ago because she died overseas.

I think this is a great thing. Is live streaming of weddings also a thing? And if not, why not? That's all for today. Nothing exciting to close on here. But we do have a podcast classified coming up right after this. And for those of you in the ad-free feed, yes, I will put the text of the classification. in the show notes. It's a weird thing. Some of you want the classifieds very much, and others of you

are adamantly opposed saying ad free means ad free, full stop. So this is sort of a compromise. If you're in the ad free feed, you won't hear the classified, but if you're curious what it was, check out the show notes. Talk to you tomorrow. There is a great new podcast on Venture and startups. It's called LA Venture, and it's all about the Los Angeles Venture and Startup scene. It's super useful if you're looking for funding or just interested in getting to know the LA investing scene. Admittedly, it's hosted by two VCs, interviewing other VCs, and everyone is talking about themselves, but we're all avid tech meme listeners, so perhaps we've picked up some of Brian's ability to make our stories snappy and enjoyable listening.

It's flattery will get you everywhere, right? Search for LA Venture, hosted by 10110. It's a great source to get venture insights, if you're already caught up on the TechMeme right home. Again, LA Venture by 10110. Search for it in your podcast app of choice.