The Vergecast - Apple's new App Store tax, Microsoft Surface reviews, and Meta's earnings

Episode Date: October 28, 2022

The Verge's Nilay Patel, David Pierce, Alex Cranz, and Tom Warren discuss Microsoft Surface reviews, Apple's new App Store tax, and Meta earnings. Further reading: Microsoft Surface Pro 9 (SQ3) review: Windows on Arm is not ready Microsoft Surface Laptop 5 (13.5-inch) review Surface defined 10 years of Windows PCs — can Microsoft nail the next 10, too?  Microsoft says more than 20 million people have used Xbox Cloud Gaming Zuckerberg is all in on the metaverse whether you like it or not  Xbox’s Phil Spencer says the metaverse is a ‘poorly built video game’ Microsoft: Xbox game streaming console is ‘years away’  Apple macOS 13 Ventura review: a bunch of good updates you can mostly ignore  Apple’s new App Store tax on ads is a direct shot at Meta  Spotify pulls audiobook purchases from iOS app after Apple blocks updates Apple confirms the iPhone is getting USB-C  Apple could release a 16-inch iPad next year The Twitter deal is all downside risk for Elon Musk This tablet pairs an E Ink display with a... 16-megapixel rear camera? Power struggle: Puerto Rico’s battle to fix the electric grid  Email us at [e-mail] or call us at 866-VERGE11, we'd love to hear from you. We are conducting a short audience survey to help plan for our future and hear from you. To participate, head to vox.com/podsurvey, and thank you! Learn more about your ad choices. Visit podcastchoices.com/adchoices

Today on the Vergecast, Tom Warren joins us with news and reviews from Microsoft and its earning season. Meta is in pain. Jim Kramer is crying, but Apple is selling a lot of MacBook airs. That's all coming up right after this. Support for the show comes from Retool. Too many companies run critical operations on duct taped spreadsheets, Slack workflows, and whatever else they could cobble together. Not because they want to, but because building internal tools means weeks of waiting on someone else's backlog. That's where Retool comes in.

Build custom internal tools just by describing what you need. Prompt something like, build me a revenue dashboard on our Salesforce data. And Retool actually builds it on your company's data in your cloud with enterprise security built in. Go to Retool.com slash Verchcast. We all need to retool how we build software. What's up, y'all. I'm Skyler Diggins, seven-time WMBA All-Star, Olympic gold medalist, and mom. And I'm Cassidy Hubbard, host and reporter for nearly

20 years covering the biggest names and stories in sports and mom. And this is Am Mom, a community for athletes, game changers, and moms of all kinds. Dropping May 14th. Tap in with us. Welcome to the Vergecast, the flagship podcast of crying on television. Who hasn't cried on television? Every time I go on television, I'm crying inside. I have yet to cry on television.

The next time I get some like local news pitch, I'm like, you know who you need to talk to is Alex? Cranes. Just softly weeping. He's like, can I do iPhone? Something. A little tear. Yeah, lots to cry about it this week. Lots to be happy about. It's a cocktail of emotions.

I'm your friend, Nelai. That's Alex Cranz. Hello. David Pierce is here. Hi, I'm always in a cocktail of emotions. This is what the Vergecast is. Can we just recall it, rename the Vergecast? A cocktail of technology emotions?

Yeah, I think that's what people expect for us. Also, deep in his cups, Tom Warren is here. Hello. I only cry. people are mean to me on Twitter. Oh. Luckily, that never happens. What time is in England, Tom?

It is quarter past nine. Yeah, you're hammered. Let's be honest. A couple of teas past dinner time. Here's what I know about British people. It's 3 p.m. they're drinking. Especially lately, is my understanding of the state of it. We're drinking if it's 3 a.m.

We're just in bed drinking. Like, wake up, open the paper. Who's the monarch? Who's the prime minister? Different today? Throw a couple back. Let's see what happens. Yeah, you have to be careful.

You have to be nice to all of us now, all British people, because you never know when one of us is to become prime minister. I saw that video of Rishi Sinnak partying, and I was like, this shouldn't be a scandal. More world leaders should be forced to rage on video before they become world leaders. So they are reminded that at any point, they can be taken down by their own actions. It's true. It was a good video. It reminded me of a thing that Casey Newton has said to me. For years on end now, we are quickly approaching the day.

when world leaders will have just commonly have sexted in their teens. Oh, yeah. And like, we're just coming to that moment. He's like, that's the singularity of all politics and culture. It's definitely coming. It's the default expectation, not a scandal. We'll have Casey on to unpack that in great detail. Instead, what we're going to talk about in the show is gadgets, tech companies, products

they make. The things you use to sext other people. Yeah. Devices for sexting. Surface Pro 9 with the armchip. Good for sexting, yeah or nay. the verge cast. It has portrait blur, so maybe.

That's true. All right, so we got Surface Pro reviews. They hit. Tom, you wrote about 10 years of Surface. You talked to Panis Penae. Microsoft had earnings. Facebook had earnings. Apple is going to have earnings while we record.

You'll hear us live react to Apple either making billions of dollars or slightly less billions of dollars, depending on how the economy went this quarter. Google had earnings. There's lots of earnings, lots of economic shakiness. Meta in a free fall because they're spending a lot of money in the Metaverse. and we got some gadgets. And then here's the thing I want to tell you. We're recording this the day before Elon closes the deal to buy Twitter.

So we're not going to talk about that on this episode of the Vergecast. Tomorrow, when he closes the deal, assuming he does, which we all think he's going to do. I was just about to say that's a lot of confidence, Neelai. Like, given what we know so far, with 24 hours notice to say you know what's going to happen, is like a truly, truly bold claim to make. You've just got to let it sink in. that he's got Twitter now. He's the Twitch chief or whatever he calls himself.

Assuming that happens, we'll have another episode tomorrow with Liz to just unpack the Twitter situation. The thing I want to say about the sink, the number of people who willfully did not get the joke, the dumbest joke

in the world of Elon tweeting, I just, I'm going to close Twitter, let that sink in. In him walking in Twitter headquarters with a sink, i.e. letting the sink in You see what I'm saying? It's the dumbest joke in the world. I fully appreciate this joke.

He like doubled down on the dad joke by also bringing one of his children with him. Just be like, if you didn't know this was a dad joke, there's my kid. But it's like, CNN's like, Elon Musk shows up at Twitter headquarters of The Sink. And it's like, yeah, he tweeted let that sink in. And the joke is he let the sink in. It's not a complicated idea. The word Sink has two meanings. that's the whole joke and now it's in and now it's it and i'm just like it's like you guys this

he's he's just being a clown like it's pretty funny actually like he's a billionaire he showed up in an office with a sink so that he could tweet let that sink in and none of you got it where is the sink now though he just like dropped it on prolog on girls desk she's like dropped it through the desk. All right. That's enough Twitter for this episode. Like I said, when the deal closes, assuming it closes tomorrow, we'll have another whole episode with Liz, an emergency episode. We'll put it in the feed. It'll be right there for you if you want Twitter stuff. But, you know, other things are happening in the world and the deal hasn't even closed yet. Who knows it's going to happen? Let's talk to Microsoft. So Tom, you wrote a great piece about 10 years of surface.

It has been 10 years. You and I've talked about this many times. The surface line effectively rescued the Windows market. Yeah. It's one of the only examples I can think of of the OS vendor making the hardware and competition with its partners where everyone actually became a success. And now we're in this moment where it's like they made some more surfaces and they're right back where they started with like an arm surface and it's just as crappy as it was 10 years ago.

It's like weirdly full circle. Yeah. And it's at the point where it's where does it go next. I think that's the big question. Because obviously they had before the pandemic and I think this is the most important bit of the surface history is that they were really pushing. for this dual screen future. You know, they, they showed that stuff super early,

which is kind of unusual for surface as well. And then obviously the pandemic hit, and they, you know, they completely just went the opposite way because everyone was wanted to work from home. They were focused on laptops. So they kind of scrapped that idea. But it's like, does that come back at some point?

Like, who knows? I don't know. Like, so I visited the headquarters, spoke to Panospanay and the whole surface team. I'm in this, like, room, which is like their roadmap room, which is essentially a room, with windows, but they all blanked out.

They have, like, essentially three sort of rows of tables where they'd have products. So it's like the current, the next version, and then the next version after that. Now, obviously, they didn't have those laid out when I went in because, you know, they thought they'd get rid of those. But that's essentially what that room is for. But I thought it was kind of interesting that the Neo was still in the room when I visited. So it's like, obviously, they're showing off some of the history of some of those devices and all that sort of stuff. But I feel like that will come back at some point. Why did they stop?

Like, why did it go away? Because all their partners were working on it, too. I remember Dell and Lenova were both like, want to see this? And they would always kind of like pull you into a room and show it to you. You'd be like, cool. And then everybody was like, no, we don't do that anymore. Yeah, I think it was partly because it just wasn't really ready, the software. And then it was like a big demand for Windows itself to be better.

So then they were like, okay, let's just take the stuff that we were doing, the simplification, all the design work. and let's roll this into a new version Windows to try and capitalize on that for our OEMs. And let's be honest, look at some of the specifications for Windows 11. They push the CPU stuff up. So it's trying to be a bit of a moment to have that old glory of Windows where they would, you know, a cycle of new hardware

and that sort of moment. So I think there's so many different factors into why they kind of pause that or cancel it, whatever you want to call it. Well, I think one of them also is just there was this massive leap in the number of people who suddenly wanted and needed very straightforward, very functional PCs. And the idea of like, sell me something new and insane, like goes out the window. And it's like, I have to go to school tomorrow. Like, I need a thing that works.

And Microsoft was, I think, correctly also dealing with there's like a chip shortage and this stuff gets harder to make and there's supply chain issues. So it seems like Microsoft, like a lot of other companies was like, okay, we make this lineup of very good products. And then this lineup of like bonkers experimental. we think the future, but definitely not ready products. And I think, like, probably correctly made the choice to, like, center back on some of that stuff.

But now the question is, when do you get back to it? Because, like, Tom, you and I have both been talking to Pennos about folding and dual screen devices for, like, a decade now. Like, that dude is in on this idea. Like, I don't know if he's right, but he will, he, that man will spend every dime Microsoft has trying to make dual and folding screens a thing if they let him do so. Yeah, he always pretty much comes back to the idea of. the device like will mold to you you know like the different mode switching and like that's his that's his

big thing but it's whenever the hardware is right for that I guess but the piece that I wrote was like obviously the history there but then the whether they can really nail what's next or or whether like in 10 years we're still on the surface pro like because it's kind of become their sort of MacBook air like devices very similar to what it started at it's it's got a form factor that's kind of you know everyone's familiar with and they refine it every year essentially um so like this year's one isn't really that different. The thing that's very different is that they've got an intel or an arm chip that you can pick between, which is, I think that whole arm stuff is still not, it's still not there, you know, like, it's still very early on. And whether you want to blame Microsoft

for that, or Qualcomm, or developers or whatever, or the whole, the whole lot, I think, I think you probably blame both, but if you do run Windows on an M1, on M2, it runs quite well. So, wait, how do you run Windows on an M2? Some people have been able to, but, you know, to hack it and get it running. The problem with the Qualcomm stuff is they just don't have the performance. Like even in the single, single Freddy performance is pretty bad. They're like basically offering up I5 chips from like two, three years ago in terms

of performance. And then on the operating system side, you don't quite have the apps that obviously they're all emulated essentially if you want to run Chrome. Although you could blame Google because they don't let anyone who uses chromium compile it for arm. So there's another, there's another aspect to that as well. obviously Microsoft does because they've put in all the work and they can go and do that, but like Brave only just put out a preview build because they went and put in all the work that Google for some reason is reviewing to do.

So there's a whole lot of things that go into making it a thing. But I mean, Microsoft's been trying to do this for a decade now. Yeah, this is what I mean. If you recall the Surface line launched with the Surface and the Surface RT. Yeah. And they have been trying to make Windows on Arm a viable competitor in so many ways for so long. And it's 10 years later and they're like, here's a surface with an arm chip in it.

And God bless them, they didn't put Windows RT on it, like the most ill-fated version of Windows to ever exist. So let's just a start button still looks like Windows. Theoretically, you can't run whatever app. But it's just as limited. It feels like as Windows RT, right? It can't run every app. The apps that runs an emulation are slow.

And the underlying arm chip is slow. I wouldn't say it's just as limited as RT, but like, because it's basically just Windows 11. The main problem is the non-arm apps are slow. So you really do need developers to actually port those apps across. And if you're using stuff like, you know, Slack, all those sort of apps that haven't been compiled in Arm, then you're going to notice it hugely. But then if you think about it as just being a really expensive, like really expensive Chromebook, then it's like, if you start using most of the stuff out of the actual browser out of Edge, which is on, then it's not so bad. And then you get the battery life improvements, all that sort of stuff.

So you can see where the future is. It's just they're not there yet at all because they need those developers to really buy into it on. And to be honest, there's not enough OEMs that are really buying into it and putting these devices out at a reasonable price. But do they actually need those developers? Because that was one of the things that was really good about when Apple did it is they had that emulator to just do it, to just speed it up for these people. Because they're like, yeah, we want everybody to do this. It'll be way better if you do. But we're just going to do this other thing for most of you.

because we can't. Yeah, I do wonder what the performance would be like on the Windows emulator if the chips were better. Yeah. If they were at the sort of M1, M2 level, I don't know. It's hard to say, really. Yeah, like, I don't know for sure. I think there's a mixture of it.

That's the thing I keep coming back to, too, is like all of these things, and I think you're right that there's a lot of blame to go around. And Microsoft is clearly doing more now to try and get developers interested in building these things. They're putting out nicer dev kits that run arm. Like, there are good signs in this direction. It took them way too long to make any real moves in this way. But it does seem like Apple's move was like, oh, your app is not perfectly optimized.

Here is infinity processing power. We will solve all of your problems with just brute force. And like reading your story and then reading Monica's reviews of the Surface Pro 9 and the surface laptop, like all I could think the whole time is like if Microsoft is not deep down the road of making its own chips to solve some of this problem for itself, like what in the hell are they doing? But it did. Like that's the SQ3.

It's a Qualcomm chip that Microsoft says it helped design. It's like a souped up Qualcomm chip. Yeah, all they do is they take the chip with an extra core and then they do some driver work with Qualcomm and then that's it. They go to San Diego and they say, can you make it faster? And Qualcomm says no. And Microsoft says, okay. And then they leave. Yeah, but like who makes faster arm chips?

Apple. Yeah. And soon probably Microsoft. Like the rumors of Microsoft building arm chips have been around for the last couple of years. for servers and Surface. I think we'll be talking about Surface devices in five years, and then we'd be like, Jim Inbo when they were so crappy, like the Surface Pro 9.

And then they'll all be on Microsoft chips, and then hopefully they would have actually nailed the actual chip work there. Because I think Microsoft has proven that relying on, like, Invidia in the early days of TeGra, and relying on Qualcomm has just not really got them anywhere if Windows and on, even though they have done a lot of the operating system work. How would that work with their OEM partners? though, because if they start making their own chips, then that just makes it really, really messy

with those OEMs. It does, yeah. I mean, who knows who they partner with to do it? But I feel like it's the next phase of it, though, isn't it? Like maybe they license those chips out. A lot of the stuff that Surface does, like, they license the pen technology out, but they don't actually charge for it. Yeah.

And then they share the whole, you know, the kickstand design, all that sort of stuff with Intel and all the OEMs. So they've all benefited from it in one way or another. That's why basically every device looks like a surface because they've shared those designs. I once took a very memorable walk around CES with Pinos. We just looked at all the OEM PCs and he was like, this is all the stuff. Like this is why this is successful. Like when I give them credit, I want to give them a lot of credit.

They took a more abundant PC industry that could not compete above $700 and created one out of thin air with the surface. Like that's legitimately exciting. And legitimately, no other OS vendor has ever managed to compete with its licensees. And the way they made it work is they just gave, they did the innovation, they spent the money. I've been in the room with all the prototypes and styrofo, like, we did that story every year for like five years. Like, we're going to go to the surface styrofoam room. Then they gave it away, right? They did not keep the engineering benefits to themselves.

They accelerated the ecosystem by giving away the engineering, the OEMs themselves were not doing. doing or could not afford to do. That's cool. Like, there's real business strategy and model innovation that went into all of that. And now they're just at the hard wall that they've been at for years of they cannot go on, they cannot go beyond the form factor of the surface into folding screens, into thinner designs, into whatever else, because you have to get away from Intel to do it. And arm and windows are just, they just hate each other. It's like when you're watching your favorite show and the writers are like, all right, now these two characters. are going to get together. And you're like, no, they don't belong together. That's Windows and

Arm. I don't know how else to describe it. It's Joey and Rachel. That's what I was thinking, but I didn't want to say it out loud. I'll say it outside. It's Joey and Rachel. I'm curious if there's a world where Microsoft makes its own armchips, licenses them out for some, you know, nominal fee to OEMs, and Intel builds them. Yeah, that's a future that, like, Intel will be super happy about. That seems like a gigantic win for Microsoft, too. Like, even if, if, you it can like kick off this next flywheel of like that's how you compete with the iPad in a meaningful way in terms of like battery life and connectivity that's how you compete with the new max that's like that's how you win as an ecosystem and as long as they keep caring about windows

as more than they care about making money from surface which continues to be the case as far as I can tell that's just a huge win like I assume that's where Microsoft's the internet part of it I hadn't thought about which would be sort of fascinating and they'd make a lot of like America first noise in a way that would be really interesting that seems me like where Microsoft ought to be going if they're not. No, we look, we had we had Pat on the other show that I'm not allowed to mention. We don't have another podcast. Nobody listened to Eli.

There is no other podcast. I'll happily put an AMD logo on the side of a chip fab in Ohio. I'll happily put it on their logo, right? And like he knows that he's got to make his foundry business real. If he's making five nanometer arm chips, 18 Engstrom arm chips or whatever, whatever, they're like lower than five nanometer, lower than five nanometer. If he's making them for Microsoft and there's a Microsoft logo and an arm logo, he doesn't care because he's just getting the volume and the foundry that he needs to save the business

while they desperately try to catch up on the processor design side. All of that is three years away. Like they just broke ground on this founder. They're not even close to it right now. Yeah, but if they time it right, it could be the perfect time for Intel with like the geopolitical tensions, trying to compete with TSM City. like if they get it at the right time you know they should build for for anything really do you think that the surface line you know the the new surface laptop the pro nine is just like an evolutionary step

or these like upgrade worthy devices are they just there like if you got to buy one you buy one yeah i don't think like this year's a bit weird because it's 10 years so you thought oh are they gonna do some crazy device you know but they they kind of weren't thinking in that way from when i was talking to them and it wasn't really like a big fan fair for them. It was like, you know, a point to sort of reflect. But in terms of the actual devices, yeah, they're just, they're very incremental, right? The Surface Studio 2 plus, the four, $4,300 or four, four, five hundred if you get the keyboard as well, and the mouse and the stylus. It's got a 3060 in it. Yeah, it's got 3060 and an 11th gen chip.

Wamp-womp, yeah, and we're on 13th gen at the moment. Not those mobile chips, but they're about to drop. The interesting part about the whole of these surface devices this year is the pro nine with the arm and the interchips that we've just been talking about. But they are very incremental. But I think more interesting is that these three devices, a decade from when they first started releasing the surface RT tablet on arm on in VDegra back in the day, it's come full circle because Panos actually told me that they originally were planning to.

to actually release a PC, a laptop, and a tablet for Windows 8, for Surface, which is something he hasn't really talked about before. And he said those other two devices dropped off because they, you know, they bit off more than they could chew, so they weren't quite ready to launch them. Also, like, Michael Dell showed up and was like, I'll kill you if you put out a desktop. That's my whole business. They wouldn't do a laptop for years, right? Well, yeah, but apparently they were always planning to.

John Lenovo was like outside with a knife. Old John Lenovo. It's Michael Dell, John Lenovo, Steve HP. But the OEMs famously didn't know until, I think, Ballmer called them like a couple of days before or something like that. So I feel like they were probably still planning to do the laptop early on, and maybe there was a bit of OEM pressure. So it probably pushed it out even further than maybe they were expecting.

But then they were obviously, obviously if Surface R-T landed a bit rough, Surface Pro was, you know, the form factor was there, but it wasn't quite until the pro three came when everyone was like, okay, this makes sense. That was the one where they really got the kickstand right. Yeah, yeah, the kickstand. It went three per two aspect ratio, biggest display.

It was really thin and light. It was like a bunch of different hardware things came together. And it kind of made sense for everyone. So I think probably after that device, then they were like, okay, we can go ahead and do the laptop now because they were probably focused on getting that pro free, right. They had given away enough hinge engine. to be like, all right, can we do a regular laptop now?

And they were like, yes, we've taken enough hinges from you. I was going to say, is wild that the laptop has been kind of like boring its entire time, this entire time? But like in the best possible way, I'm totally convinced that the surface laptop is the, like, most underrated surface by a million miles because it's just like, they do such cool stuff on the Surface Studio and the Service Pro 3 has like a great form factor. But like, if you just want a laptop, the Surface laptop, the Surface laptop, is a great laptop.

And it has been for a while now. It was it kind of had its fits and starts at first. But like the last couple have been very good. And I feel like it doesn't get nearly the shine. I guess Alex, because I think you're right. It's like they're not breaking any new ground there. They're just like, would you like a good laptop? We made one of those.

But do you remember the early days, though, like putting fabric? Oh, yeah. Yeah, that fabric. Right. Again, they did that at knife point. John Lenovo was like, here's what I want you to do, upholster the laptop. All right? Make sure it stains really nicely.

But actually that reminds me of an anecdote that I didn't actually include in the story. But like Ralph Grown, who's like their, I can't remember his exact title, but he's basically Windows and Devices, does a lot of the design work. He recounted like that idea of like trying to put the fabric on the laptop and how difficult it was because they thought, oh, we're just going to slap the Surface Pro keyboard on top of a laptop and glue it. it'll be fine, but it wasn't. And he said that it greatly reduced the repairability, which is why I fix it, gave it like a zero when they first tore it down. And he said that if they were going to make that trade off again, he probably wouldn't make it.

I think that makes sense. That was before Microsoft went to repairability as a virtue, I think right after that. I think it woke them up in some way, because they started making a lot of noise about it right after that happened. Yeah, and last year they partnered up with, fix it to do some like kits for technicians and stuff to be able to repair surface devices and their scores have obviously creeped up as well especially on the laptop side and then they did the

I can't remember the name of it now it was the laptop go they have so many different names the really cheap one that's what I say and that thing is like super repairable for technicians like you can pull the display off and change the RAM and everything is essentially repairable on it so that's I think that's a kind of hint of where they might go with surface devices as well but on the arm side, the stuff that they've done with like the neural processing chip on there and the AI stuff,

I think that's kind of a hint of where they really want to go. They see how computing's changing, especially like, you know, like on Discord or on Zoom or Teams, it does like the background removal, like if your dog barks and that sort of stuff. The difference with what they're doing

is they're actually using this separate chip so that it doesn't even use your CPU or GPU. So that's kind of interesting if we're going to offload productivity tasks and all that sort of stuff to a separate chip in the future. Kind of like what Apple's doing. That's so back to the future, man.

I had a Mac in like the 90s that had a separate DSP chip in it for things like that. Like everything old is new again, like all the time. By the way, the Mac I had the shortest-lived Mac in history. It was called the Centress 660AV. It was on sale for like 68 days. Somehow I had one. But it had DSP in it. That's what we call British Prime Minister sort of time.

That's one list of trust. It was the macro head of lettuce. And somehow the lettuce was a much more reliable school computer. Microsoft also had earnings this week. It seems like things are fine for Microsoft-ish. Yeah, I mean, so their revenue was okay. Their profits weren't and everything else. But I think it's more their outlook that's quite surprising.

So Windows OEM revenue dropped by like 15%, which, you know, PC sales have dropped by 15%. So it all kind of like lines up. but then they're saying OEM revenue next quarter is going to drop the high 30s. Wow. And devices revenue, which includes surface and HoloLens and PC accessories now, is going to drop by 30%. So that's some big heavy drops that they're forecasting. And alongside that, Zura growth has slowed down.

So they're getting hit sort of like three times with some of the market stuff. So I think next quarter is going to be very difficult for them and probably meta in Amazon and everyone else who's whose profits are hurting at the moment. So it's their forecast that have really got their stock wobbling at the moment. It seems like cloud gaming, though, is starting to tick up and win in a pretty interesting way. Like, it's, what was the number that like 20 million people have tried it at some point, which is one of those like meaningless numbers? It seems big, but like what has used it at me?

I don't know. Yeah. But it does seem like they're pretty optimistic about where this is headed, I feel like. Yeah, like they shared 10 million earlier this year. And that was just before they signed that deal with epic games to bring Fortnite to Xbox Cloud Gaming. So that's clearly made the numbers double. Oh, that's right. And that you don't even have to pay for it, right?

You can just do it. Yeah. Okay. Exactly. That's the only game. Yeah, you can play for free. So I think that's like their experiment to see what if they let free to play titles on there, how much revenue they're going to generate from in-game purchases and stuff.

But yeah, like, it's still really early, though, Cloud. And it was kind of interesting to Phil Spencer speak at the Wall Street Journal live last night. he was talking about how game pass is 15% of their Xbox content and services revenue and that how he thinks that's going to remain the same so obviously the revenue will grow overall but he thinks that it's going to account for that 10 to 15%. So it sounds like game pass is kind of hitting some slowdown in growth in terms of the console side. I think their long bet is that Apple and Google will be both be forced to make changes on mobile and that's their like sort of in in the future. but that's a long, that's a long big bet and they're spending billions of dollars on that. So it's still the growth that they really need for game pass

isn't quite there yet. And I think there was a report today for Maxius where Satindela, the benefits he gets for his salary and all that sort of stuff, he gets them based partly on game pass growth. And they were supposed to hit 75% and they hit 20-something percent instead. So you can see that they were clearly expecting a lot more growth in game pass this year and it wasn't quite there. So it's just some interesting dynamics going on with Game Pass

and their bet on gaming. And it's definitely a clear case that it slowed down a little bit more than they were expecting. It seems like to some extent, Microsoft's bet there is like a bet on Congress getting something done and changing things because it seems very unlikely to me that Apple is just going to suddenly change its mind to be like, never mind Microsoft, welcome back to the App Store. And betting on Congress to get things done so that Sautja and Adele can make more money is a dangerous game to be playing right now. Well, it's not just Apple and Google

that needs to change. Like, it is also the ISPs in the United States need to actually deliver internet that can support this product. Like, part of me is thinking that's one of the reasons that they did Fortnite is that's got a huge audience, a wide variety of people are using that. It's not just those people who can afford an Xbox

Series X and live in a house with like 200 megamets down. So they can test it and see how it's running on these other things. And probably not as great as they would like. Yeah, they probably get some really good data out of that. Also, Phil said last night, you know, the Keystone device, their export streaming console that appeared on his shelf that he tweeted a couple of weeks ago. He now says that that is not coming for like a few years.

So you can tell that that cloud stuff is still a little bit early and they're not quite sure where they're going to go over it. Yeah, wait, hold on. There's like a lot to unpack with this whole thing. first of all, like betting on Congress is one idea. And to some extent, you know, they did a bunch of stuff recently. Did they do all the things? They did not do all the things. Had they confirmed Gigistone to the FCC?

No, I don't know what they're doing. Got a whole episode of that of the podcast coming with that. Have they passed the antitrust bills? They have not. Is there whatever? I don't know what they're doing. Apple, we'll talk about this later, but Apple just this week was like, guess how in charge we are of the iPhone?

The most in charge. Here's all these new app store rules. Here's new ads in the app store. Like, yeah, we're just in charge of this product. And no one stopped us yet. There was all this noise last summer. And we don't care. Here's the new app store rules.

By the way, the 30% fee now extends to even more things. Like, Apple's the most in charge there. And unless Microsoft can figure out how to get over that wall and deliver a game streaming app on iOS, which they have not done. And we've heard about it at various hearings and trials and whatnot. not like they can't do it. The other piece that's fascinating to me is Microsoft was so close to announcing that game streaming product.

Like Phil Spencer was on decoder and told me it was coming. He said it out loud. It's coming soon. Tom, you and I both were like ready for the announcement. Yeah. That was like a last second switch. Yeah. Like we just heard the rumbles.

Like we were like, all right. It's going to happen. Like we're ready. And then like it went away. And now he's like. It's years away. We've decided to partner with Samsung. By the way, Wall Street Journal Tech Live that conference, props to Joanna. She got good stuff out of Phil Spencer. She got good stuff out of Jaws and Credigrity. We'll talk about that stuff too, but Joanna's a co-finer. I got to throw it out

to work. That's just the Verge family. It's really what is the Wall Street Journal Tech Live conference, but an extension of the Verge.com. That's how I feel about our alumni network. We reverse colonize Bloomberg. Let's take it over. It's mine now. So it's just weird. Like that whole product was their future and the brick wall still exists and the idea that they're just going to like put apps on Samsung TVs is not going to grow that market. I'm like pretty confused about all because they were like they were rip-roar and ready to go and now they are in neutral. I fundamentally do not think it's Apple or Google. That's the holdback here. Like Spencer has repeatedly talked about this.

Microsoft as a whole has talked about the internet is the barrier here. Like Microsoft has been doing these internet reports for years now being like, the FCC is failing on this. Everybody is failing on this. The internet is bad in this country. And they're financially incentivized to do that, both because of cloud gaming in Azure. And like, that's what's holding them back. Like, I don't think it's a coincidence that they open up cloud gaming to Fortnite. They get a ton of new users. And then they're like, whoa, whoa, let's hold back on the next big cloud push because they're seeing probably over and over and over again that the internet just can't support it. As everyone who tries cloud gaming sees,

despite the Midi-Stadia fans' insistence on their Reddit to this day. I also think a lot of it, though, is that they went pretty quick with Xbox Cloud gaming. Like, they weren't intending to launch it when they did, as far as I'm aware. Google came out with, it was the Assassin's Creek game in the browser. They had that working in press hands, playing with it. Microsoft announced, like, the day after that or two days after it. We're doing XCloud, but we won't have public trials until a year later. So I think Google really spooked them in many different ways.

So they pushed ahead with this, but they made it an optional thing. They put actual Xbox consoles in the cloud rather than PCs or infrastructure like that. And they're kind of held up by that in a way because their streaming architecture isn't quite as good. It never was quite as good as Stadia, definitely not as good as GForce now. They're still at 1080p, 60 frames a second. They can't do 4K streaming at the moment. So if you're going to go to TVs and you're going to launch a streaming stick or device or whatever you want to call it, you kind of need that 4K, I think you do now. I think there's an expectation for that, even though it's cloud.

I think there's still an expectation. I have a much, much more cynical rate of this. Vastly more cynical read of this. Give it to us. The game streaming market is unproven. No, I notice how the economics work. The Xbox console market, super proven. And they have the chips now.

And it's the holiday quarter. And they can just sell a lot of Xboxes. And that is a safer economic bet in the current climate with the rocky waters ahead for Microsoft to just be like, you know what? Pump the brakes in your weird experiment. Sell a lot of Xboxes this quarter. Gaming is quote unquote recession proof. That's what people always say. There's still all this pent up demand because we weren't able to sell them for the past a year and a half.

Just flood the market with Xboxes. People will buy games. We know how that money works. And I have to imagine it's some combination of don't take the risk on the future. like just extract the money from the present for as long as we can. Well, especially with, I was going to say with the economy, with the fact that they're seeing these like, look, our outlook's not so great for the next couple of quarters.

Like, yeah, let's just huddle up. Let's do what we know how to do best and make money consistently rather than get really big and experimental. All right. So we're going to go to break, but we come back. We're going to talk about a company doing the exact opposite of that idea, which is meta. We'll be right back.

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There's a lot going on with this company. We started the show by saying it was flagship podcast for crying on TV. What I'm referencing is Jim Kramer, CNBC Anchor, who told people, I guess last quarter or a quarter before, you should invest in meta, and then this quarter, the stock has tanked. Meta's business

is falling apart, and they're throwing money at the Metaverse, and today he apologized to everyone for this bet. He said he trusted management too much. It was pure hubris, the Metaverse. And he said, it's almost a rogue situation, which is an incredible thing to say about meta, which I will remind everybody, is fully controlled by Mark Zuckerberg. He can just do whatever.

You can't fire him. He owns the whole company. He has super voting share. Every year, this is a true story, every year the stockholders of Meta vote to somehow limit Mark Zuckerberg's power. But because he has super voting share, he just votes no and wins. this happens every year. It's crazy.

So, I don't know. Meta is in like a really tough spot. They had horrible earnings. The Apple ad tracking transparency prompt ruined their ability to track it. It hurt the advertising market. They've tanked there. They're losing share to TikTok.

And then they are just blowing money on reality labs. Just $10 billion gone against the Metaverse. And I would say effectively no one's happy. You could say that. I mean, the numbers are really insane. Like, I'm just looking at these now. Like, just the, my favorite part is, so meta's reality labs division, which is the one overseeing all the Metaverse stuff, all the, all the artists formerly known as Oculus

stuff, all the Quest stuff, the Quest Pro. It made $285 million in revenue for the quarter, which was down 50%, which they're saying mostly is due to lowering sales of the Quest 2, which makes sense. It's relatively old. It's got a big price. take that division, which remember, $285 million in revenue, lost $3.7 billion this quarter and $9.4 billion for the year so far. So this company is going to spend what looks like $13 or $14 billion on the Metaverse this year. Meanwhile, it's hemorrhaging money because of Apple and some of the ad tracking

stuff and some of its core revenue drivers like Facebook are not the sort of of unstoppable juggernauts that they once were. And so it's like, it just seems like all at once this week, everybody looked at this and was like, hey, Mark, no. We are not interested in this company doing this thing anymore. But David, you got to spend money to make money. That's what sucks out there saying. You have to spend all your money.

You'll make money. It's going to be fine. Or while your lunch is being stolen by TikTok. Exactly. Right. So this is the thing. So they did report some of their users. are numbers. So all these numbers are crazy. They all just have crazy names. And they just make people

on Facebook seem like robots. Like Facebook doesn't know you as a person. It only knows you as something called a daily active people. That's not me. I refuse to be a daily active person. Never. How dare you? I haven't been daily active since the pandemic. Yeah, I'm more of a three times a weekly active person. So daily active people up four percent, monthly active people, right? daily active users. The difference between a family daily active person and a daily active user, who knows. They're saying these numbers are up, but they're up like 2%, 3%. And this is after they were like, turn on the jets compete with TikTok.

Everything's real now. And this is the best they've been able to do. And then here's the main piece of the puzzle. They've delivered 17% more ad impressions here over year. but because the tracking isn't as effective, because Apple refuses to let them track, like when you say tracking, there's like lots of tracking,

there's whatever scary tracking you're thinking of your head. But very specifically, what Facebook has long promised people is we can show people an ad on Facebook. We can target their interests so precisely. And then later on, when they buy something from you, we can attribute it to that ad.

Because we can track people from the app onto the web onto wherever else they are. all this stuff we can do. Apple's ad tracking transparency broke those links. So Facebook can't track you outside of its app anymore. When you buy something in the web, it can't attribute, hey, you saw this ad a bunch of times. Now you bought something on the web.

Just on iPhones, though. Just on iPhones, but, you know. There's like 12 people who are using their little Chromebook and being like, I'm going to see what Doddy's doing today on Facebook. The money is on the phone. And the people who spend money, famously, there's a lot of data about this. People on iPhone spend more money.

So, ad impressions went up 17% year over year. The price per ad, because Facebook can no longer guarantee success, went down 18% year over year. So they're delivering more ads that are cheaper. That means their revenue went down 4%. And that's like, that's a death spiral. Like, I don't know how else to describe that. The value of the product they sell for money is going lower even as they deliver more of

them. And it's like, like, whatever, ads are free. like digital advertising is a zero like there's not someone in like the facebook ads factory like hammering out bespoke ads like it's software but you're making more of a thing for tiny user increases that you're selling for cheaper while over here mark Zuckerberg is just the lighting cash on fire to give people legs in the metaverse like it's just a bad situation all around well and and i think that the like macro thing going on here for me is that it's super super, super clear that everybody's out on the Metaverse.

Like there was that moment where everybody was all in on the Metaverse and there was like a Metaverse ETF and all these companies went public and it was a whole big thing. And now what's very clear like this big meta investor Altimeter Capital, their CEO whose name currently escapes me, Brad Gersner wrote this whole thing basically being like, we still think Facebook is a strong business and Instagram is a strong business and WhatsApp is a strong business and we wish you'd stop paying attention to this stupid thing where nobody has legs and focus on the thing where you actually know how to make money and that was really fascinating to me because like there's there's this one line of thinking like you're saying that like all of that stuff is

sort of has peaked and is now just going to be sort of slowly managed to climb for a long time and thus what meta needs to do is find this next thing but that I thought was really interesting that it's like no there's still a good successful company in here you just won't pay attention to it because you're so obsessed with this idea of the Metaverse because you'd rather not talk about content moderation anymore. And so you're running away from the company that works towards one that increasingly people think just doesn't. If that has really flipped in people's minds,

it's going to be really hard for meta to pull out of any of this. I thought it was interesting that Phil Spencer last night called it the Metaverse a poorly coded or poorly created video games, some of that. Yeah. When Microsoft's like they're teaming up with Meta to do their work stuff. I was like, yes, Phil Spencer. go nuts man

but he's being honest right like he's he's telling it how it is yeah he's like I make kick ass video games do you make a good video game chances are we'll just buy your shit I'm Phil Spencer and then he's like looking at these avatars in the metaverse seems like what are you doing

what are these polygon counts five buy an Xbox series X like do it there's like a whole thing there that is like worth thinking about because Microsoft has all but abandoned HoloLens Yeah, it's dead. Right?

And they're like, screw it. Meta can take all this risk and we'll just deliver outlook to their headset when it's time. Yeah. And I think that's like perfectly smart for Microsoft in like the current economic conditions they're in. Whereas Zuckerberg is like, we're sticking with it. He has a quote. The first part is I get that a lot of people might disagree with this investment. But from what I can tell, I think this is going to be a very important thing.

There's the confidence you want. It's like what a fake So a backdrop of all this I should note we have a Quest Pro review units I have one Alex Heath has one Eddie Robertson has one The embargo time in this review was Incredibly short. It was like four days

Whatever so people have them And they're out in the world I'm sure you've seen other reviews We are just taking our time I think it is impossible to know Whether the metaverse is going to work or Zuckerberg from what he can tell this is going to be an important thing without a thorough review of this product. Like this product is the payoff right now. It's the state of the art that meta can deliver against this vision. So we were like, we're not going to

rush this out in four days. We've taken a couple meetings in Horizon Worlds. We're doing the stuff. Here's my preview. I think you all know that I was a big fan of the Quest 2. I remain a big fan of the Quest 2. The Quest 2 is an excellent consumer product. It under promises and over delivers. And for a while there, it was cheap. So you bought this thing that you didn't feel like you were blowing a lot of money on. You'd put it on. You're like, this is cool. Grandma's in the metaverse.

She's freaking out. There's stuff to do in there. It's a game console. It's a cheap game console that can do a lot of things. And it, like I said, under promises over delivers. My preview of the Quest Pro is this thing promises a lot. Tune in next time. Our review of the Quest Pro.

Boy, that's a lot of promises at $1,500. And they also announced that they were going to, like, they confirmed the Quest 3 is coming next holiday season. But the Quest 3 is more game console. That's fine. I don't think that like, well, that's going to, like, anybody who is like, anybody who is like, maybe I'll get a Quest 2 this holiday. It's like, why, why am I going to go spend more money for the Quest 2 when the Quest 3 is next year? Well, they've already, from these earnings, we can tell, they have people stopped buying a question. They raised the price and everyone was like, well, I'm done with this idea.

Because again, it's a toy. Like, I, it was competitively priced like the Nintendo Switch. Right. Right. And now it's $3.99. It's competitively priced with the PS5. Like, it's just in a different zone and you get just get way more out of it. You get way more out of its competitors.

So I just don't, I don't think the $1,500 Quest Pro, which is marketed. business use cases. Right? It's like, do Zoom as a cartoon. It has nothing to do with whether you're going to like play games in it, like the Quest 2. Yeah, I just, they're just in a weird spot.

So we've got that review. We're working on it. Addie's writing it. Heath and I are just helping. I don't know. Because the idea is that you're doing it together. The point of this product is not to be alone. It's to be together. So we're trying to like hang out together in the Metaverse.

Right. It's trying to answer for like Slack and Zoom. And everything. It's just trying to be like, the office is done. $1,500 instead of a real office. Go. Yeah. The one thing I will say, without trying to give too much away, the first time we all met

in Horizon with the face tracking was just one of the funniest 15 minutes of my entire because it was just us making faces at each other as cartoons. Like, I was like, I'm making a kissy face. Can you see the kissy face? And Annie is like, yes. And then she's just waving her cartoon hands around. And that was legitimately some of the funnest, funniest moments with a computer I've ever had. Is it an HR violation to make a face tracking, kissy face in a meeting?

I don't know. Fish face. I was making a fish face. If any cops are on this, it was a fish face. We got to take a break. We'll be back. Apple earnings are out. We've got to get into that. We'll be right back. Support for this show comes from What Not.

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episode. Claude.a.ai slash vergecast. Okay, we're back. A bunch of Apple news to talk about. MacOS 13 Ventura hit iPad review, iPad Pro review. Apple confirmed the iPhone's getting USBC. There's a rumor of a 16-inch iPad, which is deeply hilarious. But we should start with earnings because earnings literally hit while we were doing the last segment.

Right. Apple made a bunch of money in a way that other tech giants are not making a bunch of money right now. Alex Washed through it. Yeah, no. So services are up are like 5%. Tom's been helping me do the math off screen. You guys can't hear him do it all. I think the big surprise here is that max are up, what, 20%, which is just...

25, yeah. 25% which is just a big number. That's a new MacBook Air. That's that number. Yeah. It's just that MacBook Air jump. Counter that to what just happened to Microsoft and Microsoft's guidance. And it's like we've seen this like tank in the PC industry over the last.

And Chromebooks have been collapsing over the last few quarters. And Apple is just like here, would you like a very fingerprint heavy MacBook Air? And people like, yes, I do. Well, so they won't tell us. We don't know that it's the MacBook. It could be the Macs Studio. Like, we don't know. You only have to sell 12 of them, and that's all your revenue.

So these Mac sales are more than what Apple thought, because they forecast 9.3 billion, and it was actually 11.5 billion. And they forecast 20.1 billion for services, and it was actually 19.2 billion. So, like, their forecast seemed to be a little bit all over the place this time, but the Mac sales are super surprising, especially in the light of like 15% down PC market overall at the moment.

The Mac is like way out above. I think what we're seeing here is that everybody went out and they rushed out and they bought a computer because everybody needed a computer because of the pandemic. And now everybody's like, wait, but I want a computer that just works. And so they're going and buying a Mac. I don't know. I think they, I think this was the first year that a bunch of kids like physically went back to school and they already had their Chromebooks, but then there was a new MacBook Air, and it was available to buy for a bunch of college kids. Like, there's just a thing happening in the market for laptops where, yep, people bought sort

of what they needed to get by for work from home, but then we're kind of just like back to the laptop market as it was. So it's just normalizing down. And whenever Apple releases a new mainstream model, like sales go up, except this quarter, when they release new iPhones and every. everyone was like, me. Yes, iPhone sales are up quarter over quarter. It's beneath estimates. But there's just all this chatter that people don't care. And that's the weird part to me. Because all of that services, I think the reason Apple bets so heavily on services and then constantly forecast services

is because they're just trying to squeeze more money out of existing iPhone owners because they can't, they've sort of lost the ability to tell what will be hits and what won't be hits. I'm one of the suckers that bought an iPhone 14 Pro and I had a 13 Pro. And I was like, as soon as I got it, I was like, why did I buy this? Yeah. Like it's just like it's not that radically different. I think more people are like me. I bought an 11 Pro when it came out years ago.

And I bought the 14 Pro this year. And I was like, oh, wow, this is a big, this is a big change for me. But these changes are so incremental that most people are like, do I want to spend the money on that. Do I want to spend the money on my ever-increasing rent? Do I want to buy a MacBook Air to replace this Chromebook I Panic bought at Best Buy in March 2020? Like, where's my money going to? I have finite money. Where does it go? When you factor in the fact that the pros are the only exciting phones in the lineup and like even the earnings seem to confirm that, that the 14 and 14 plus didn't do anything for anybody, which I think was more or less the correct response to the 14 and 14

plus. No, the 14 plus wasn't in there, man. Yeah, but there have been. Then there have been reports that the demand is not what Apple hoped for. Like, I don't know. I don't see a lot of 14 pluses floating around. I'll just say that. How could you even tell? They all look to say. David's like walking up to people.

Like, you've got a big phone. Can I see how many cameras you got on the back of that thing? Because I've been collecting some data. He's been using his Quest Pro to scan their phone phone phone phone phone. It's fine. Big cheap, big cheap screens always works. I'm just holding on to this in my heart. We'll see.

I believe in you and I believe in. big cheap screens. But I do think like it as the price of these things gets more expensive, like one one thing I have sort of held onto for a long time is that Apple believes its users are not at all price sensitive and that it can raise the prices of everything into infinity. And that will always work. And until now it has always worked. But it does make me wonder, like if the only interesting phone is the $1,100 one, are people going to wait one extra year now to upgrade because now the good phone is $1,100. Yes.

And the thing that's interesting about it, by the way, is the dynamic island, which, Tom, I don't know you feel about it, but I've had this thing now. I feel the same way about it when I did the review, which is an iOS 16.1 came out this week with live activities. There's a bunch of apps. But I tell you what, it's one of those things that, although it doesn't feel like it's fully complete, I feel like if I went back to an iPhone without it, I'd miss it. It's one of those things you get, you get used to and you, you see.

sort of like I love the time, I think. The timer's great. I use it for playback controls. I like that a lot. The confirmation of face ID is just like so soothing and satisfying. I'm like, ooh, that's a nice feeling. I just want to point out, and I'm just going to say this, think about how many like major technologies have come out in the past five years where at the end of it, we're like,

boy, that was really useful for timers. Right? Like Alexa. All of Alexa. All of Google Assistant. All of Siri. Not Siri. Siri sucks at timers.

Siri does not get credit for timers. Sir is like, pardon? Sir's like, I can't do two things at once. The entire dynamic island, like, great for timers. I'm going to be happy the dynamic on and once it tells me the hassle score. There you go. Right. So the API for live activities just hit like this week in 16.1.

You know, the flighty app, which is the number one app they were showing off. It has been released. It uses the thing. There's some really interesting cooking apps that are doing, like, the recipe steps on the lock screen with the live activities. That's cool. The best Reddit app has a little puppy dog that runs around the dynamic island. It's pointless, but it's very charming. And for a while, it was destroying the battery life.

It was great. But none of this makes you buy a phone. It's like all I'm saying. None of it is enough to upgrade. and there's probably another year of iteration and innovation before it becomes a must have. Whereas I think for a lot of people at the iPhone 11, big cheap screen, that's the thing that will make them upgrade if they have the money to upgrade, which is I think a lot of people are like, I don't need to spend this money right now.

My phone works just fine. And so what Apple's betting on is they can shove ads in everyone's faces or squeeze more money out of more companies by adding fees to more things and increase their money that way. And that's just like, yeah, I don't know, man. This is kind of like the thing that happened with Meta, where these companies both have known this is coming. Meta knew that it was going to get absolutely bodied when it tossed all of its money into the Metaverse. And it was trying to prep people for it. And it did a terrible job clearly by evidence of Jim Kramer crying on television.

But Apple has known for a while now that that upgrade cycle is getting longer and longer with its customers. People don't want to do a one-year upgrade. They don't want to do a two-year upgrade. They're doing three years. They're doing four years. They're doing five years. And they're getting really, really comfortable doing that because these devices are no longer like gadgets

that are having these huge, amazing technological advancements every year. They're pretty iterative. I think it's the same thing we've seen with laptops. It's the same thing we've seen with TVs and, honestly, appliances. Yeah. Do you know what's going to make your upgrade next year? Say it. That's what I'm going to say.

The EU. The EU! Yeah. European bureaucrats are going to drive the greatest iPhone upgrade cycle of all time. They will. Unless Apple just makes what they did in the US this time with the E-Sim stuff, unless Apple does, you know, a SIM train Europe plus USBC and in Lightning in America. I don't know. That would be so real.

I hope they do that. So let's explain what we're talking about. Notable Verge trader Joanna Stern, again at the Wall Street Journal, Tech Live, Convecern. conference had Greg Jawsriac, Cred Federee on stage. Like half an hour. You should go watch it. Great interview. She's a great job. She asked them straight up, what are she going to do about the EU, her new rap single.

You know she's going to make a video where she raps about the EU now. This is your fault. You just spoke this into existence. So she said the EU is going to mandate USPC. What are you going to do about it? Jawswiak. And actually, John Gruber pointed us out, Craig Fegris looks at Jaws and just starts laughing because he doesn't, he's the software guy. He doesn't have to answer that question. Josriac has to answer a question.

So Josriac, a friend of the verge, in front of the verge, Greg Josriac says, obviously we have to comply. We have no choice. Which is incredible. He looks super pissed about it. Just so salty. Jayne asked when, and Jaws says,

the Europeans are the ones dictating timing for European customers. And then she says, well, you do it everywhere. He says, I'm not going to talk about future products, which is, of course, what he would say. So it's true. Apple has to comply with all local laws. but it's going to happen.

Like they're saying it has to happen and they're not happy about it. And he gave some examples of things they're not happy about. He was like, our solution was that the power bricks would have removable cords. It's just so not the right answer.

But like that's what we wanted. He's like the government tried to mandate all this hearing aid stuff and it was a disaster and we finally just did it our way and we gave the government what they wanted without these pesky regulations. And these are all the arguments

that we've heard every time. And it is also true, I would point out that Apple invented USBC. Everyone forgets about this. USBC was a standard effectively developed and pushed by Apple because they wanted a single port on that first MacBook ages ago. And now their argument is, what if we invent something that's better than USBC?

And it's like, well, you could have put USBC on the phones the whole time and then you could have invented a new thing and then we could all just move to that. But you won't. So we're just like stuck with lightning. I don't know. It was a good exchange. You should watch the interview.

Joanna did, like I said, a great job pushing on it. But Tom, I agree with you. That's the thing that drives the huge upgrade cycle is this thing got way more convenient to charge. Yeah. And I think Apple's annoyed at the fact. I don't think they're annoyed at the fact that they have to do USBC. That was probably in the plans at some point.

But they're probably just annoyed that they're getting dictated on the timing of it. So because they probably could have gone another couple of years with, with lightning. But now they're like, we kind of probably have to do this next year because the legislation comes in for 2024. We don't know exactly when it sort of cuts in. But yeah, like, they kind of need to get something rolling probably next year on the iPhone 15 or whatever it'll be. So I don't think that they're very happy that they had to do it then. I think that's the thing. Like it's not the fact that they're being, that they have to do USBC because they probably were planning to do that. It's more being forced to do it at their inconvenience.

essentially. Yeah, I think if you're like reading Apple tea leaves here, there was a, there was a moment where Joswiak could have made a case about connectors and what people want. And instead he picked a fight about timing, right? So like I think you're exactly right, Tom, that like this is less about Apple not wanting to do USBC, which is like basically every other device Apple makes charges via USBC now, which is super irritating when I'm in the car or on a plane, that's a whole different story. But, yeah, Apple just does not like being told when and how to do things.

It seems to be like in the bylaws of going to work at Apple that if anybody tells you to do something, you have to be mad about it for two or three years. Yeah, and I can appreciate some of their arguments where it's like, you know, let's not forget lightning was a good connector for its time. Like they solved a lot of the problems that obviously USBC came along to solve like reversible, a lot smaller, all that sort of stuff. So if they hadn't have done that, if they weren't free to do that, which is kind of like what they're saying, you know, if there's regulation around this, it's going to prevent them from

doing this in the future. And I mean that's necessarily 100% true. But I could see where they wouldn't want governments to step in and say, you have to have this on this device, you know, for five years or whatever, because it does kind of hold that back if they do want to do that. But again, it's proprietary. What Apple's really mad about is the EU did this again and they closed the loophole. So the EU mandated micro-usb, but then Apple just shipped a micrower. micro USB to lightning adapter. It was like this little thing that they shipped in the box. And that got them out of it because technically you could use all your micro USB accessories.

And now the EU said, okay, we're updating the USBC. Every other manufacturer is like, great, we were already there. Like, who gives shit? And the EU also said you can't ship your stupid little adapter. And Apple is furious. Apple's like, have you seen how many dongles we have? Like our entire business is $29 don't. The wearerboard accessory.

ripen you. Just, just going to plummet. So they close the loophole. I just think fundamentally I agree with you, David, they just hate being told what to do, but they're so behind on this. Like, they invented this connector. It is their connector.

They should, they should, A, done this a long time ago, and B, the next thing they're going to do is take all the ports off the phone, which is, I don't like, like, I really like MagSafe. I just bought yet another MagSafe charger for my car. I'm like addicted did this thing.

Every time anyone makes it like 5% smaller, I'm like, I'm there for you. But the idea that I'm going to get a really long magsafe puck to like use at my house is just ridiculous. That part of it is absolutely not ready and cannot charge fast enough. Wireless charging is like self-driving cars in that it's been like 90% done for a really long time and it's going to be 50 more years before it actually works the way that it's supposed to. Well, it's also like wireless earbuds.

Like the AirPods are great. They are not. they don't compare to wired headphones. I know you guys talked about the new iPad review on Wednesday. The thing that kills me about it is they took the headphone jack out of the thing. Like, again, it's just like they don't even make the product. Like if you assume it's greed, it's like, well, then make kid headphones. Make AirPods for kids that work seamlessly instead of being like, now your children will

get insecure Bluetooth headphones that suck. Because that's what people are going to buy. and buy $30 Bluetooth headphones. Kids, it suck. And it's like, well, just be greedy all the way. Like, all the way greedy, Tim. Just make the kid headphones. You own beats.

What are they doing? Beats for kids. Let's have at it. What does Dr. Dre think kids' headphones should look like? I'll buy him as long as they pair seamlessly. And I think there's just, there's a little bit of, I mean, look, they just made a lot of money. They're selling everything all the time. But doesn't it feel like they just like lost the plot?

Just like a tiny little bit. By the way, iPad sales are down. I'm guessing because people look at the iPad lineup. They're like, I don't know what the hell is going on here. Can I have a MacBook error? And they leave the store. Well, the iPad was also their first product where they saw, oh, wait, we can't force people to buy a new one every year.

Like that was the very first one where everybody was like, I have one. I'm going to hold on to it for a decade. I mean, I think Macs have been like that for a long time. Yeah. That's because they never upgraded the processors on the Mac. That's true. Well, the Mac has recaptured the plot is the funniest thing about all of this to me. It's like the line is relatively straightforward.

The like Mac Pro's existence continues to be weird, but I think we'll eventually figure that one out. Like the products kick ass. Like the MacBook Air is like, it's very easy for me now to tell people what computers buy. I just tell people to buy MacBook Airs, which was true for a long time and then not true and now it's true again. And as Apple has really figured out how to do this again, like surprise, surprise, it's growing really and is massively successful again. But then in every other lineup, especially with the iPad, they're just like, here's some things.

It's just like we had some parts. So we like closed our eyes and threw them all at the wall and whatever stuck together. We gave it a name. And now you can have it if you want for $500 more than you spent. And here's a dongle. Yeah, and here's some dongles. So how many years are we going to see like the A15 just recycled over and over again in these things? Like those Haswell chips were for a while there.

Forever, apparently. Yeah. And great news, it's more expensive. Yeah. So the other piece of the puzzle, which we have not talked about a lot and we don't have to dwell on too much. Right. The Mac is doing really well. It's Apple's most open platform in its way.

I'm sure people can quibble about it. But the Mac is like, you usually like run any app on it, right? It's like the most open platform you can do anything you want on it. The idea that Apple's there to stand over your shoulder and just like take 30 cents out of every dollar you spend. end doesn't exist on the Mac. Right. Super exists on iOS and iPadOS, right? It's totally closed platforms.

Everyone knows about the App Store. This week with iOS 16.1, Apple updated. It's app developer guidelines, the AppStra rules. Spotify had earnings this week, too. Basically, Spotify is on the warpath. They're like, look, we thought we were going to do an audiobooks vertical. We would sell audiobooks directly in Spotify. We had lawyers on the product team reading Apple's rules as the

product team developed this. We thought we were in compliance to these rules. Apple rejected our app like three times. And then this week they just pulled the feature. And the thing that they pulled was merely telling people that you could buy audiobooks somewhere else. Well, they were sending a link.

They were sending an email link. Right. So you'd push the button and you're like, I want this audiobook. And Spotify would send you an email with a link to where you could buy it. Which is itself like a ludicrous solution to this problem. Like that the fact that that's what Spotify had to do to comply with the rules is ridiculous. Yes, this is the this is like the lead story in a mini series called

when lawyers develop products, right? Great, but they had to do it, whatever. And so Apple boots them out of the store and they say you can't do it. Then this week Apple says, if you have an app where you can boost your social media posts, that's an in-app purchase. We want a piece of that pay up beyond 30% of that. This is like a direct target at meta because people boosts Instagram posts and Facebook posts. You just like do it right in the app. Apple's like, this has always been our rule. They gave a quote to Heath. Heath followed up and said, why did you have to clarify it then?

There was always the rule. No response. Meta is like they're directly taking a shot at your business. Like Apple is building its own weird ad business and they're trying to undercut hours by doing this. They already took beat with app tracking hints. Like this is just a direct shot at meta. Like Apple wants to knife meta. Which we saw that ad business grow this week and then kind of like immediately be like,

oh, our bad, our bad. Because they started saying, okay, now you can advertise. your app alongside other apps in the app store. And so there's like, here's my app to stop gambling addiction next to, would you like to gamble a whole lot advertisements? It's like, oh, that's a bad move, Apple. By the way, this is what happens when you aren't good at tracking. Like, if you don't build the ad business with some amount of tracking and sophistication,

what you do is you do blunt force keyword targeting. And so people type in gambling. And you get the gambling addiction recovery app and the gambling app. And it's like this is what makes internet advertising hard. You want these like fine grain controls. They're required to know more about people on and on, whatever. Marco Arment was tweeting about how basically the targeting does work. And the idea is that you can advertise your app in three ways.

You can do similar categories, which is basically like show people who like things like my app, my app. You can do all categories, which is all relevant. of an app categories, which is how you get the like gambling addiction equals gambling mess. And then you can do other categories, which is just like, show some people my app. Like, this is not a good system. Like it's, this is, suddenly you understand why targeting advertising is like a useful and good thing that people do to make money. And it's like there's two very good ways of doing advertising.

There's have people curate it. And that's a lovely, usually nice way of advertising. And then there's invade people's lives so much that you know what they want before they do and advertise that. And Apple is like, we're going to do a half-ass middle road, which is very un-apple. Yeah, Apple was like all of our playlists are made by humans, but our ads, we don't really know. We just kind of make it up as we go along. But they've been gradually creeping towards this sort of scenario for a couple of years. Right.

The ads that they actually put into iOS, so, you know, get Apple Arcade or get, Apple music, they're kind of gross as it is. They're terrible. But then they also have started allowing developers to push their notifications as basically as marketing ads. Some of them, you can't even disable. So like Uber does it a lot. If Uber eats and Uber, you have to dig into the settings and disable their crappy marketing notifications. Uber keeps telling me that I have 250 Taiwanese dollars credit that I can use at any point. Never going to use it. I will say the ads and the setting screen, they have somewhat improved them and made them a little less gross in iOS 16.

There's still a red bubble that says two when you open settings, but it's, it is now inside of a line that says services included with purchase instead of just the straight up tout that's like, you can play games on your iPhone, $4.99. They're just kind of undercutting their own arguments over and over and over again on advertising, because they've been going after meta for a long time being like, well, we don't do what they do. We're better. We don't track you. We are honest and ethical.

Ignore all these kind of scummy borderline unethical things we're doing to get you to like buy Apple Arcade. That's different. That's us. We just care. Yeah, I think the app store, there's like a lot of fine arguments and like the notification. Like in the marketing, the services on the platform they own. Okay. Like very fine grain, very nuanced arguments.

We rolled out an ad platform. in the app store that we totally control, where your only point of contact with your customer is your app page on the app store. And now we're going to sell parts of that page to other people to try to get them away from your thing into their thing. That's just rude. Right. Like, that's just like straight up, like, there are very few other retailers who will just openly undercut you to make a little bit more money. But Apple is now at the scale where that's the choice they have to make. This is like meta is like way out over at skis. I'm not saying Apple's anywhere close to this. They're just at the point of, I'll put Google search in this category. There's just a handful of

these companies that are so big that they don't really have to care about the user experience. And I'm not saying that's everywhere with Apple. I think that's true. Like the Macs are really good in a max are in a super competitive environment all the time. The phone generally is very good in a super competitive environment all the time. But when Apple has to market apps, there's nothing there. They can just be whatever kind of rude Goliath they want. When Google is like,

what should the search page look like? Yeah, it's whatever useless garbage Google wants to put there. Right? Facebook is feeling it. Like the products got so big, they took them for granted. TikTok showed up with a better user experience for the stuff. And now everyone's like, yeah,

it's like more fun. than whatever garbage is happening on Facebook. And that is like, you know, this is the argument against antitrust laws is eventually the giants will just collapse on their own because they're monopolies and people will be like, screw this. The products are bad. But it's also like you could just make them compete. You could just do a little work to make them compete a little bit more. And Apple right now with the app store, I hope they see, like the danger is, they did another one, another one of their apps for rules updates was they clarified this rule. that NFTs are digital purchases,

which like, I don't, whatever, but like, but if you just, like, do the math on that, right? So let's say you're playing a game. And the whole promise of an NFT is that you would like buy a skin in the game, right? You would buy a skin in Fortnite. Not iOS, but you just Fortnite example.

You're going to buy a Fortnite skin and now you own it and you can sell it. Right? This is the whole promise of the NFT marketplace. Is that you would just like buy a digital item and then you own it and you can like sell it. So let's say you, buy it from Fortnite, you buy a Fortnite skin from Epic for $10, and now you own it, and you want to sell it on another marketplace, well, you've automatically lost 30% of the value of the thing. Even if you sell it for $10 back to someone else, because Apple is now saying,

in their rules, NFT sales are in at purchases, you got to give them 30%. So Apple's just like flatly, just like effectively removed this from existing on iOS. Well, what's crazy, is like the math on that particular transaction means Epic would have made $7, you would have lost $3, and Apple would have made $6 in that transaction. Like Apple, it's insane. Like the, and all of the like,

you know, Web 3 NFT people I follow on Twitter and stuff are like up in arms about this because they're like, you just basically just like obliterated the liquidity of this market because now buying and selling is now dangerous because you've just devalued everything by at least 30%. It will definitely not happen on the phone. The very least, they've guaranteed that whatever innovation happens in this area,

assuming the innovation happens where it's good or useful, whatever, right, they've guaranteed it will not occur on the phone. Yeah. Right? It's just like what happened there. The same way they've guaranteed that whatever innovation happens in game streaming will not happen on their phone. And that's, to me, these are the ideas, whether you love them or hate them,

these are ideas that people are very excited about. I was going to say, I want to know what, like, what Apple and Google, but especially Apple knows about Congress that the rest of us don't, that they can be so confident this week with all of these deeply, deeply unpopular rules that they were like scaling back on last year when they thought they were going to get regulated into oblivion. And now they're like, nope, we're firing both barrels. We're going balls to the wall. It's just scoreboard, right? Like, it's what it is. like, he walks in and it's like the sort of overarching assumption is that like Congress is going to be taken by the Republicans, which means there's probably going to be less energy

focused in this direction. Like any like Tim Cook just walks in and he's like, what do you have to show me from the last four years of energy around this? Like let's just keep pushing. I feel like it's just the, it's like the pragmatic decision to make at some point. What do you guys think about TikTok getting games? Because that's, apparently that's going to be announced next week. TikTok has like edged into this space for a while now.

And I feel like it's one of those things that TikTok is either going to try to do so much stuff. It like breaks the thing that makes the app fun. Yeah. Or it's going to win in a big, huge way. And I feel the same way about Netflix getting into gaming. It's like, there's an adjacency there that makes total sense to me. And there's also a thing that's like, maybe you fundamentally misunderstand why people are coming to your app. And I don't know which one of those it is.

And I think it's going to be fascinating to find out. But TikTok is like, it's another one that it's like, oh, remember how you were going to ban us over and over. and over and over every single day for like four years. Remember how we're still kicking all y'all's asses? Like, come at me, bro. Here comes games. That's like, that's how I imagine TikTok. TikTok's fascinating for the future of wherever there's mobile innovation.

Because obviously Apple doesn't want rival app stores, which is exactly why cloud streaming isn't there because they don't want those stores within stores because it frightens them, obviously. But TikTok is like a platform within itself. And it's basically, everyone's just using it. Like, people use it to search their recipes, you know, like kids aren't going to Google search. They're staying within the walled gardens of TikTok. You know who can cut all that stuff off at the knees is Apple.

Like, TikTok's going to do music. TikTok's going to do games. And Apple, any time it feels like can just be like, no, no. We'll take 30% of that. Thank you. So at the Code conference, you know, Tim Cook was on stage with Lauren Powell Jobs and Johnny Ivan. It was Kara's last code and the vibe was not be mean to tick Tim Cook. Like, they were all there to talk about Steve Jobs.

But I'm still me, you know, so I ask him, like, what do you think about TikTok? Like, Chinese app. TikTok, by the way, is burning cash. Like, this is not a public company. We have no idea how much money BiteDance is spending to make TikTok the winner. How much money the Chinese government is spending to make TikTok the winner. Like, there's an element of this whole competition is deeply unfair because we can't, we can't see if TikTok is profitable or if the Chinese government just thinks it's a good investment to have every American teen in their algorithm. Or how accurate those view counts are.

Yeah, we just don't know. But whatever, it's popular. It's growing. There's all this noise about bite dance. So I asked Tim Cook, like, what do you think about TikTok? And he's like, I'm not an expert on TikTok. And I have been thinking about that answer ever since. Like, I regret not immediately following up and saying, you have not used the most popular

app on your platform. Because it's wild to me that that was his answer, that he was like, I don't know what's going on with this app. It seems fine. because it is closer to the everything app that, like, Elon Musk wants to build Twitter into. It does have all these, like, weird data concerns. I have heard, this is completely that's forced.

Don't take this for real. But, like, yeah, I've definitely heard about TikTok employees who put their phones in airplane mode when they, like, leave the office. Like, like, there's, like, a thing with TikTok. Like, there's a weirdness about it. I can't source that. I don't know. That's real.

But it's under scrutinized. And Apple has the power. to scrutinize it and they like won't take it. That's weird, right? Meanwhile, they're like, meta, let's kill it. Yeah. Just destroy it. Well, I think they are obligated to work with China. And China has made it very clear every single time. And I've spoken with like experts on how China works on this when I was doing a story about Huawei before Huawei got bodied by the American government. And if you are operating in China and your business is based in China, and China once you to do something about your business. You do it. It's not like, let me think about it. It's like,

you do it or you get fond bing bing away for a couple of months until you come back and you do it. Like, authoritarian regime. You just, you do what they say. And TikTok existing there is a little like unnerving. And Apple just being like, yeah, whatever is because Apple needs China. Yeah. Desperately. Yeah. And this is every time we do earnings, we have to go look at their exposure. trying out how wireless sales are doing in China. So, like, there's just all the stuff throwing out Apple. But, again, I would just put some of this iOS stuff, these rule changes, these unhappy developers, Google search getting sort of like increase.

You know why people use TikTok search instead of Google search? Because you use just faster results on a TikTok. David, you did it for a while, right? Yeah, it's just more fun. Like, it's, which is half of what searching is, right? You're like, I don't, I'm not trying to figure out, like. But how many of it? their recipes end in an air fryer.

Oh, like three quarters of them. And the other quarter is terrible recipes that other people are telling you not to make, but making funny jokes about it. It's just wins all the way around. And it's like, if I just want to like watch some videos about a band, I like, TikTok is infinitely better at that than Google. But still, like Apple is in this place where it is so in charge of how this stuff works on its own platform that, I don't know, it.

And it is coming from such a place of confidence that it kind of feels like. like Apple is just going to keep tightening and tightening and tightening the ropes until somebody makes it stop. And it sure doesn't seem to think anybody's going to make it stop. Yeah. Or it's like we got to squeeze as hard as we can. So when someone makes it stop, we've collected all the money we can. Yeah, it's probably both of those, right? Like it's a win win for Apple at the moment. Yeah. All right. We have gone way over. Also, I will just point this out, as we've been recording, apparently Twitter sent an email to all staff saying there's an all staff meeting at 735 p.m. tonight, West Coast. So all you East Coast Twitter employees are

you're going to find out what's going on at 11 p.m. tonight. We've got an entire emergency episode of the Vergecast coming when that deal closes or doesn't close. We'll do that tomorrow. We wanted to get this one out. Thank you for listening. Tom, thank you for joining us. No worries. We have forgotten to talk about the E-ink display with a 16 megapixel rear camera. That's for next week. That's for next week. Yeah, this is why we have two Vergecasts a week. We have plenty of time to talk about that. it's the onyx books don't get it that's a bad idea amazing josh jeza who many of you will remember from our foxcon coverage has a huge feature this week about the fight in pror rico to turn the

power back on it is a complicated adventure of a tale through the bureaucracy with real stakes go read that it's just excellent work uh that's on the site we'll be back on wednesday and then you know in like several hours because of evan you can call us you can call the birdcast Outline 866 of Verge 11. That's 866, 837, 4311. I love those phone calls. They like the most fun. You can tweet at us.

David's at Pierce. Alex is Alex H. Kranz. I'm at Reckless. And Tong is at Tom Warren. That's it. That's the Vergecast rock and roll. And that's a wrap for Vergecast this week. We'd love to hear from you.

Shoot us an email at Vergecast at theverge.com. The Verge cast is a production of the Verge and the Box Media Podcast Network. The show is produced by me, Liam, and our senior audio director, Andrew Marino. Our editorial director is Brooke Mentors. That's it. We'll see you next week.