Yet Another Value Podcast - Alex Morris from TSOH on Spotify $SPOT

Episode Date: April 30, 2021

Alex Morris, founder of The Science of Hitting, comes on the podcast to discuss his investment thesis for Spotify (SPOT). Topics include how Spotify can compete with larger competitors like Apple and Amazon, why Spotify is gaining the upper hand in negotiations with record labels, and how Spotify today rhymes with Netflix in the early stages of their streaming pivot.The science of hitting substack: https://thescienceofhitting.substack.com/Chapters0:00 Intro1:40 Why is Spotify a good investment?4:40 How the past year built Alex's confidence in SPOT7:55 Spotify as Netflix 2.011:30 Spotify's discover potential versus Netflix home page13:40 Bear case #1: Competing with giants17:35 Bear case #2: Lack of operating leverage and dealing with labels22:10 Touching on the Taylor Swift re-recording24:40 Bear case #3: Valuation32:00 Bear case #4: Opportunity cost versus buying Twitter37:40 Bear case #4 continued: Why not buy a label?41:37 Live and podcast opportunity46:10 Spotify's video opportunity48:20 Content moderation issues52:45 Spotify's concert and live event opportunity55:45 What could Spotify acquire?1:01:40 Alex's closing thoughts

All right. Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have my friend Alex Morris. Alex is the founder of The Science of Hitting. I guess it's the science of hitting.substack.com now. We'll get to that in a second. But Alex, how's it going? It's going good. Thanks for having me. I'm excited for this. Hey, I'm really excited for this too. I think about 18 months ago I came on your podcast and did cable stock. So I'm excited you can return the favor. Let me start this podcast. the way to every podcast, and that's by pitching you, my guest, this one's going to be pretty easy. You know, I went on your podcast 18 months ago. I've been following your writing and

everything you write for over five years. I was literally, you just launched the science of hitting substack.com. I was literally a minute, like three subscriber. So, you know, if five years of following a minute three subscriber, if that, if all of that doesn't speak to how much I respect you, I don't know what will. So anyone who's listening, you know, I encourage you, go check out Alex's new substack. I think it's pretty interesting for people who are looking at, you know, reasonable law. I would say like reasonably valued long-term growthy plays that you can buy and just kind of compound at mid-teens or maybe even a little bit better IRAs for several years, but nothing's investment advice. That's just how I kind of think about what Alex writes. That sounds perfect to me.

I hope we can, I hope we can do that. That sounds fantastic. Well, that out of the way, let's turn to the podcast. Today we're going to talk about Spotify. The ticker is Spot. It's one of my favorite companies to think about. I think it was the first company you wrote about on your substack. You've got a pretty nice size position in this. So I'm excited for the conversation. I'm sure most listeners are familiar with the company. So let's just kick it off with a simple question.

Alex, why is Spotify a good investment right now? I guess to give the full story, my perspective would probably be that for a long time. I didn't think it could be or was. You know, from a user perspective, I've toyed with YouTube music in the past. And I eventually started using Spotify because they offered a free service, their free subscription. And, you know, I've seen Amazon's offerings and other things like that. And my perception going back, you know, a year or more was these are essentially commoditized services. They all have the same music. They all have similar price points.

You know, user experience is going to be roughly similar. So I didn't really see how they could differentiate from one another. And obviously there's a supplier component. here where you're dealing with a handful of, you know, record labels that control, the vast majority of, of the content that you have to have, you know, there's always been a little bit of collusion is probably a strong word, but in the book, the Spotify play, they use the term thick as thieves. And they tend to know that there's, there's value in kind of working together. So that was kind of my priors. As I started digging in more and more,

probably one of the earliest things that jumped out to me was a comment from Spotify's Investor Day, which I believe was before the direct listing. And they talked about, obviously, their subscriber base, which you can kind of put those numbers together on your own to see that they're the leading player in the industry. But the other comment that they made had to do with engagement,

and they talked about how the users on their platform, engagement is meaningfully higher than it is as competitors like Apple or Amazon. And, you know, the way I kind of framed it over time, to myself was if someone had brought me a thesis on Netflix five, six, seven years ago, what were the numbers or the facts that could point to the outcome that we've seen subsequently happen? And obviously there's a ton of stuff that went on there. But I think the two that, for me, that would stand out the most would be one, the large user base they had in S-Fod, and then two,

obviously the lead and engagement that they had relative to any competitor. So I think there's something valuable there. And, you know, in the book, the Spotify play, Eck mentions this idea of everything changes that scale. And I think that's part of what's going

on here. So anyways, over time, my thesis kind of moved from this is commoditized to, well, they must be doing something, right? They have more users and more engagement. And then in the subsequent, you know, six to 12 months over the past year, I think you've seen them do a lot of things where they're trying to truly differentiate their service

above and beyond what they've done so far to differentiate it. Can I jump in with just two things? First, when he says Eck, he means Daniel Eck. That's the founder, CEO. I think he's one of the best executives out there. I think it'd be tough for anyone to argue otherwise. He started a multi-billion dollar company. But let me dive into one thing. I'm glad you mentioned Netflix because I think for a long time the case on Spotify has been Netflix 2.0, and we'll go to that in a second. But you mentioned you were reading the Spotify Direct Listing Day right before. And I think one of the things you said in is over the past year, this was in your write-up, you said, over the past year, I've become increasingly confident in Spotify's future. And the directly thing obviously happened more than

a year ago. And I agree, all that is interesting. But is there any, have there been any inflections or any things that you've picked up in the past year that has really built that confidence up? you know well part of that part of it is just the fact that I you know out of laziness or just being blind to and I didn't I never did the work on the name that I should have done um which happens to me all the time with all kinds of stocks I'm sure it happens to everybody so I don't feel that bad but so that's definitely part of it um you know a big one here lately was the uh the disagreement with the label in South Korea that led to I don't know if you know about this temporarily spot in South Korea.

I do know about it because you put it in. Of course I know about it. So long story, short, people can read about it. But eventually the label basically folded and decided that they had to be on spot because this agreement was a global agreement. It didn't apply to just a single market. So it's just a good example of how the balance of power is somewhat shifting. And then the other thing I'd note, and again, this is from the book, is things like the

Taylor Swift tussle that they had previously where, you know, they've had these problems with artists over time. And when you look back in hindsight, I think the conclusion really is that at the end of the day, Spotify ended up being okay because artists know that they need to be where listeners are at. And we're talking about those arguments happening at a time when Spotify was maybe a tenth of its current size. So that's so much more true than it was three, five, seven years ago.

And I think as you see a lot of those things happen, it's changing the dynamics a bit. And I think it's become more apparent to me as a result. And just to build on that and not to, you know, I try to be the neutral host and provide a lot of pushback. But I love Spotify. I do think one of the things that's happened is like even five years ago, artists made so much money from DVD sales and everything that the streaming revenue. They were very cautious of it. But now all the money is coming from their live tours. And when, as you said, when the artists get kicked off Spotify because their labels disputing, their live tour business goes to crap and their merchandise business goes to crap and their relationships with fans goes to crap.

So in many ways, you know, the artists, they don't care so much about the streaming money. What they care about is the engagement with fans and all that other stuff. And if you pull off Spotify, yeah, maybe the label cares about the money, but now all of your artists are really pissed off. Yep. Yep, I think that's right. And that's funny because in the in the in the South Korean case, I mean, this may be biased. But from what I saw, it seemed like fans and artists were both much more incensed with the label than they were with Spotify. Yep. Yep.

Let's so I'm going to there's there are tons of bare cases on Spotify. There's absolutely no doubt about that. And we're going to dive into them in a second. But let's keep going on the bulk case. We mentioned Netflix. You know, I think I've always thought Spotify's Netflix 2.0. you mentioned in your write-up, everyone thinks it because for a while they had Netflix's ex-CFO as their CFO and he would go on every earnings call and anytime anyone asked him a question, he'd say, oh, you know, I encountered this at Netflix and we'll solve it and we're Netflix 2.0 over here. So they've got, I think Ted Sarando's, the chief creative officer and coceo of Netflix is also on Spotify's board. So they're definitely leaning into that. You know,

the big thing with Netflix is they went from DVD at mail to streaming to they own their own IP. Right now, I think Spotify, they started streaming, and now they're going into own their IP with podcasts. So I jam on that wherever you want to, but how is Spotify kind of following the Netflix 2.0 path and how do you see that evolving over time? I'm honestly less sure about how exclusive content plays into the story here long term. Obviously, the idea is that it will be part of it, obviously. And if you look at the letter that they just put out before this quarter, I think they're starting to play into this idea of, hey, we can be local on a smaller scale than anybody else can be by nature of our size,

which is a good narrative. And I could potentially be additive to the business. I'm not saying it's not important. But at the same time, you know, you'll see them do things like with Live, which I'm sure we'll talk about. But I also think a lot of it comes down to things like having the best tools for personalization and discovery on commoditized content like music. I think that's incredibly valuable and incredibly important.

And it's part of what keeps people locked into your service over time. And it's one of the things that also allows you to charge more money potentially. So things like ubiquity and personalization, I think, are still incredibly important. Not to say they're not at Netflix, obviously. But I think Spotify can differentiate itself on commoditized supply. this isn't just a story about having, you know, unique content that nobody else has. I think that'll be somewhat limited, actually. So do you think the unique content, is it just because you think podcasts and stuff are

less valuable or is, like, and I'm saying less value will compare it to Netflix's unique content? Or is it because maybe like it doesn't scale, you mentioned local scale, it doesn't scale quite as well. Like part of the podcast is the personality, right? So one of the great things with Netflix is they might, they make money heist or loop in. and that's in French or Spanish, and those become global hits, whereas I don't think podcasting translates as well. You know, part of this podcast, I'm sure, I think most listeners probably listen because I'm so personable and they just love me. But I kid a lot.

I'm sure they listen because I guess they're pitching smart ideas. But, you know, most podcasts are, it's the host interplay that really gets it. So do you think that just doesn't travel as well internationally? Is that why? Or is there something else? Yeah, I would think that's definitely part of it. I mean, it's, it makes sense. the way you just described it. I'd also be curious, too, how true that part of the Netflix story

actually is. Again, I don't think it's, I don't think it's irrelevant. How important is something like loop into their actual business? I don't know. I guess we'll see. It's certainly a narrative that plays into their favor and it's something they like to talk about a fair amount. I'm not positive what that actually means at the end of the day. But maybe I'm wrong. But yeah, it seems like that is more relevant for Netflix than it would be for an audio platform like Spotify. Let me give you another one. And again, this is probably going to be a softball. But I do think one of the things that Netflix's biggest advantage is the best advertising space for Netflix, in all of media, is Netflix's homepage.

They can create a hit just by putting it something on their homepage and tons of people are going to click it. For Spotify, I think one of the things that gets their flywheel going is they've got so many users. And with like discovery mode and their playlist, they can create international hits and. international stars just by putting a right putting a track into a playlist right if you and i release a song and they put mine in the top of a popular playlist like there was all the stuff about the the country hits playlist just making country stars left and right and yours isn't in a playlist even if your song's better i'm going to become a star and you're not so uh can you talk about how that feeds into the moat and how that how you think about that long term for spotify yeah

it ties into what i was saying a minute ago about personalization and data and some of these things I mean, obviously, it's a balancing act. You can't let people buying placement drive everything. It still has to be a good, you know what I mean? It still has to be a good product at the end of the day. So that's an incredibly important balancing act that Netflix, Amazon, I mean, obviously advertising versus owning the content is slightly different. But placement's incredibly important for these platforms.

So it's something they always have to have to balance. I think for Spotify, one of the ways that this will really be a benefit is that, you know, as I mentioned a minute ago, the labels tend to operate pretty closely with one another. I think this is one way to somewhat inject some competition onto the platform, is to get labels and really artists, they know exactly what you just said, and they know how incredibly important it is to be on a certain playlist. So that is the type of thing they're very focused on because it drives plays, it drives ticket sales, as you mentioned.

And so I think it's one interesting way where obviously Spotify can make some money through either directly or through reduced rates, which I've talked about. But I also think it's a way to inject a bit of competition onto the platform amongst the labels. Yep, yep. Okay, so I'm going to start throwing out some bear cases. Again, there are a lot of bear cases. This is a company that it's competing with Giants. So there are certainly bare cases out there. Let's start with the first and most obvious bear case.

Look, you mentioned it for a long time. You just looked at Spotify as commoditized. There are giant players you're playing. And a lot of these giant players aren't necessarily concerned about making money in the music business, right? Amazon music is basically given away for free. If you don't want to pay anything, you can go use Pandora for free. Not many people are doing that anymore, but Pandora is out there for free. YouTube music, you could just go listen to music on YouTube if you wanted to.

And then obviously the Big Daddy is Apple Music. is out there, right? So when you look at those, and some of the competitors, you know, especially Apple Music, Apple Music's advantage is enormous. If Spotify's monthly price, I don't know, Family Plan, I just got something there flexing price and power, but it's about $15 per month. I sign up through my, if you sign up through Apple, you're going to have to pay the Apple tax about 30%, whereas if you go to Apple Music, you pay them $10 or $15 per month. That goes straight through to Apple, right? So not only are they disadvantaged because Apple's so big and they don't necessarily have to make money off, they're disadvantaged structurally from a cost standpoint because

if you're signing up on your iPhone, they're starting off with 30% less dollars. So how do you think about the competitive landscape here? Well, the answer is that I think you're right and it's very competitive. And I think Apple will inevitably do well with a certain subset of smartphone owners, of internet users. That said, obviously iPhone unit share globally is not nearly as impressive as it is in the United States, even in a market like the United States, Spotify's done quite well on both the ads supported and premium side. So I think it's a reality that has been a reality for many, many years. It's interesting in Spotify play, which I'll come back to a hundred times. But a big part of the story is basically about running parallel to Apple over the past

decade. And after reading that book, I went back and pulled the Steve Jobs biography and read a little bit about music in there, too, the Isaacson book. And I guess the point I'm trying to make is this has been a reality for a while. And I think it will ebb and flow. At the end of the day, though, I put a lot of emphasis on having a team that is 100% focused on a clear goal versus a team operating inside of Apple that, I mean, to your point, maybe their focus isn't to make money, what exactly is their focus? How are they compensated? You know, Those things are not always clear. And I think of the example, I just listened to a big Tim Cook interview this week.

He went on Kara Swisher's podcast for The New York Times. It's a pretty long interview. I don't think music was mentioned once. I mean, it's just there, he has things to focus on. And music really isn't one of them or getting better at podcasts really isn't one of them. Can he delegate that to somebody else? Sure. But as you move further and further down the line from the person who's in charge of making the big decisions and driving the mission of the company,

sometimes you have leakage and there's a reason why Spotify's ahead now despite the fact that Apple started from a hugely advantaged position with iPod, iTunes, etc. They still have a ton of advantages today that will definitely help them. But I feel comfortable thinking that Spotify will continue to take a fair share of the growth. Yeah. And I guess I would just add two things. Again, Netflix 2.0, it reminds me for years the bear case on the bear case on Netflix was look at all these other people. You know, Amazon Prime gives it away for free. Apple is going to get into it. Disney Plus is coming and all that. And it just didn't matter. Netflix was maniacally focused on one thing and they did it better than everyone. And because of that, people were willing to fork over

their money. And I had a second point on that, but I can't remember it. If I do later, we'll come back to it. But let's talk about the other point. And these two are kind of connected. So the two bear points are operating leverage. We haven't seen any operating leverage in this business. And I think that is related to, you know, there are four big music labels that control almost all of the music that everyone listens to. And if any one of those music labels played, and we've talked about this a little bit so far. But, you know, the big worry has always been, what if one of those music labels pulls? And then all of a sudden, Spotify has, you know, 66% of the world's music and Apple has 100%. And you just see people, you know, we lost our Taylor

Swift. So I'm fleeing over to Apple Music to do that. So we can hit on both of those. The music labels as a threat and the margins. Well, one interesting place to start this is when Spotify saw their step up in margins over the last few years, I mean, there was one noticeable step up before the IPO. And as they noted in the S1 or the equivalent of the S1 for a foreign issuer, that was directly attributable to negotiations with the labels. So it's funny to think about exactly how they were thinking through that decision. I've had some people tell me, for example, that they think it was because the labels had ownership in Spotify.

So they thought it would lead to a better valuation when went public. If you have a long-term perspective, that sounds a bit insane, considering that they might end up being your biggest customer, five or ten years down the road, which looks like it's going to happen. So I don't know how to totally think about that. At the same time, I also think Spotify has a huge percentage of their listening attributable to songs that they recommend to people. and losing a label surely would not help, but I think that's one way that you alleviate that problem. How much of listening on the platform is people just going out and searching specifically for the Rolling Stones or whatever band?

I'm sure a decent amount is, but once you become a user for a long time, how much of you're listening is clicking on like songs or clicking on recommended playlist? I think that's a big part of their business, and it's somewhere that they have to continue to get better. I think they've said, we'll get to the point where we can pick a song,

for you better than you can. And to the extent that they can make that happen, the labels still are obviously incredibly important, but it lessens anyone label's ability to kind of dictate the conversation. And it's also funny to think about, in my mind, when Spotify launched in the United States, they had to go through this dance of getting the labels to agree to be on the platform and obviously set terms and all that.

And when they finally managed to get it done, And they got the three biggest labels, I think, or, you know, three of the top four. And they sent an email to the fourth one, whoever the holdout was and said, hey, we've agreed to terms of everybody else. We're launching the product in X number of days. We hope you're on the product. But if you're not, it is what it is. And just reading that to me is kind of funny to think their position at that time was so incredibly different than it is today. Again, we're talking about hundreds of millions of users now.

I think their negotiating position is probably stronger than people give them credit for sometimes. That said, how that shows up in the income statement is where in some ways I think they can play the long game. You don't need it to directly negotiate for better terms right out of the gates. You can do things like making sure that you've secured global licensing for all the content that you need because when you go to new markets, you want to make sure you actually have a good product. You can do things like we were talking about a minute ago.

in terms of getting the labels to start bidding against each other for placement. You can give them tools that actually make their lives easier so they do a better job for their clients, the artists. So I think there's a lot of ways that they can actually get to the end game here that are not as direct as sitting down at the table and saying, hey, we want five additional points of each dollar revenue versus our last contract. That makes sense of sense. And no, and I also agree with you like, this is just my personal experience.

but when I go on Spotify, like I don't go search, I generally don't go search for a specific artist. I generally just go and play, hey, it's Monday. My new Discover Weekly is out. Or, hey, it's Friday. My release radar is out. Hey, I'm just going to click on the made for you playlist or something. Right.

So I'm not searching. So if a big label pulled, yeah, it would suck. And at some point I would probably notice, but it would probably take me a couple weeks to actually notice that a big label pulled. And in that couple weeks, I guarantee you that big label is going to be hearing from, especially their major artists who are like, what the hell is going on. Nobody's using my stuff and everything.

Let me ask you a related question. Recently, Taylor Swift, for those who don't know the story, Taylor Swift, basically her back catalogs of all of her old CDs, you know, 1989, Fearless, the CDs she wrote when she was younger. That got sold to a private equity sponsor, I believe. And the private equity sponsor thought everything was good, and Taylor Swift was not happy about it. And Taylor Swift went and re-released one of her albums, right?

And what she did is she recorded it, Now. She recorded now, and she released it on Spotify and everything as it was fearless. Taylor's version is what she called it. And she also stopped approving the rights to use the other version in a lot of commercials or movies and everything. And because of that, I think she's going to have the private equity firm fold on a lot of the rights are old song. When you look at how Taylor, now, again, Taylor Swift is a completely unique artist, maybe the biggest artist in the world, all that. But when you look at how that dynamic played out around the rights and Spotify wasn't even really involved. there. But do you see any good or bad points for Spotify going forward in that negotiation? The honest answer is I'm not totally sure. The thing I come back to is for someone like Taylor Swift.

And I think Daniel, Daniel Eck wrote a letter, a public letter, when they had the issues with Taylor Swift, however many years ago that was now. And I think he specifically said in that letter, our incentives, what we want to do is completely aligned with artists. And I think as a general statement, that's true. Their goal is to make streaming music or streaming audio available everywhere, to make it incredibly accessible, which obviously would drive engagement and more listening and more fans that love artists. And I think they're generally aligned in regards with all that stuff. And they have to do this weird dance because there's another party involved between them

and the artist, whether it's a label or someone like that. this PE firm. So I don't entirely know, but at the end of the day, as a shareholder in Spotify, I feel really good about the fact that I don't think the company's ability to make money long term is dependent upon taking advantage of contracts or anything else in a way that I don't think is sustainable. I think their success long term is dependent upon people like Taylor Swift and creators of all kinds being successful and fans being able to find those people. So that's what makes me comfortable with the investment. Perfect.

Let's put some more bare cases. And again, two related ones. I think there's valuation and opportunity costs. And let's start with valuation, because I think this will build into opportunity costs. So valuation, you know, as we're speaking, Spotify is trading about $260 per share. I'm just looking at my model. That's about a $50 billion market cap. And let's just call it a $50 billion EB to make the numbers nice and round, right?

It's Spotify, you know, they're not really, they're basically break even, I would say. So you're looking at infinity multiple if you're kind of looking at them on an earnings basis. And on a user basis, you know, I think that's $110 per monthly active user, about $250 for kind of premium active user. And I'm basing this on their 2021 year on estimate. So that's a little forward looking, but I think we get the just and we're fine talking on numbers. So when you look at Spotify, and we've already talked about how they, they haven't really had operating leverage so far. How do you think about that valuation?

Well, the first thing I start by saying is that in general, I don't feel great about it. And at the same time, that's true for a lot of the companies that I've either followed or owned that I think are really high quality that have potentially very attractive long-term opportunities, both in terms of increasing their user base, increasing pricing, increasing profitability, et cetera. So as always with these things, I think you need to have some thoughts about what is going to happen over the next five to 10 years and what your company's positioning will be as that happens.

A company like Disney is a similar idea. I mean, any way to try to value it now at $180, $190 a share relative to historic earnings is going to look very expensive. But if you think about what it means to have. the highest quality IP in the world as you go direct to consumer on a global basis and presumably have some pricing power as you do so, you can start to get some interesting numbers as you play with those assumptions. So obviously, as an investor, it's your job to figure out where that gets you. For me, as I think about Spotify over the next five to 10 years,

I do believe that they're in a position to continue to grow the overall user base and the premium base at a fairly attractive rate. And I ultimately think that they can also get to double-digit operating margins on a run rate basis. So, you know, as I run the math, I think at current levels you can get to a valuation that appears somewhat reasonable on, you know, call it 20, 25, 2030 numbers. And even to the extent you agree with that, then you need to ask yourself, okay, well, what does that mean when they get there in 2025 or 2030? And as I think about what that looks like, I think it's an incredibly compelling position

where they can do things in all of audio that has never really been possible before. And, you know, somebody listening to this might say, well, that's a lot of talk without very many numbers. And I think one of my learnings as an investor is that the numbers need to be second. as part of the whole exercise. They're not, they're obviously not irrelevant, but they're secondary. So I don't have some of the math right in front of me. But as I work through the

numbers, I think this can be a reasonably successful investment at a current valuation of, as you said, roughly 50 billion. So for me, it's not a massive position in terms of the sizing, but, you know, maybe it becomes significantly cheaper at some point, too. And if the story hasn't changed, then it can become a massive position. So it's something I feel comfortable betting on, Admittedly, the sizing is, for me, you know, it's basically just an average position size. Hey, I think you put it in your write-up, so I'm not breaking any use here, but it's a 5% position, which, you know, for you that you say average, but for most people, that's about average for me as well. For most people, that's a pretty big position. I think even for you and I, average, that's a pretty big position. And I like what you said on the numbers there. You know, the way I've recently started thinking about it, and this is a little bit more meta, but I'd love to hear how you think about it.

when you're dealing with an average business, right, a steel mill would be below average, but maybe a cable company, that's above average, but the numbers really matter there, right? Because yes, they'll grow a little bit, but they're not going to grow 30%. They're not going to put up the quarters that Facebook, Microsoft, Google, and everything I've been putting up this quarter, right? But when you're dealing with one of these platform companies that, you know, if you buy a platform for five times price to earnings, you're probably actually going to lose money because the market's pricing in that the platform is falling apart, right? You need to get the platform right. And then the operating leverage is so huge and the optionality is so big. You know, like Amazon building Amazon Web Services, nobody would

have seen that coming. It's kind of crazy. It did happen. But the reason they could do that is because they had this giant retail platform and they had visionary leaders. So I think you are right on that. I'll flip it over to you if you want to say anything a little bit on that philosophy or anything. No, I think that's exactly right. And that's how I think about it as well. The one thing I'd add to it is when you start to get into these scenarios where you're basically betting on a zero or one outcome, when you have quarters like Spotify just had where, let's just say the market was right. And there are reasons to questions the thesis now because it's down 10%. I think those are the type of situations where as an investor, you need to be very honest with yourself about

what kind of bet it is. And then that should influence how aggressively or not aggressively you are with either buying more, continuing to own it, whatever. I think you need to be very honest to yourself about what the bet is, what it can be if it's a success, what it'll be if it's not a success, and then position yourself accordingly. I'm not sure if that makes perfect sense, but, you know, I don't play a quarterly earnings numbers game. I was a little surprised at the market sold Spotify off 10% on those numbers. Like everything I saw in those numbers, I saw nothing that said, I didn't see a single thing

of those numbers that said, hey, this is, this doesn't have a chance to be the dominant streaming platform. And like, I think they're doing all sorts of things correctly. If you want to comment on anything on the quarterly earnings, go for it. No, it's just the idea of, you know, it's, we're all long-term investors, right? So some of us really hard. So it's just a idea of how do you think about quarterly results and how do they influence your thought process? And I guess the answer in some ways might be, well, I just don't. I make the bet and I see how it plays out and it is what it is. And I think there's some validity of that idea. On the other hand, if you're going to try to look at things like this and say, okay, well, when, you know, user grows slows for a six-month

period, how do I incorporate that into my thesis? It's incredibly difficult to do. And so I think what I was trying to say in the first part there was, in some ways, it actually is very helpful to displace a bet and not let yourself get sucked into the game of continuing to bet on something just because it goes down 10%. Because that sounds like a lot. But to your point, if you're buying that platform at five times earnings and the platform's going away, then it's not a better deal because it's down 10%. So I think there's just a component of that that's worth thinking about as you're making any individual investment or constructing a portfolio. Let me switch to my next spare case. And this is opportunity costs. And I want to come out

this for two ways. The first way, actually the Andrew Walker is wondering if Twitter or Spotify is a better investment, right? So I think they are interesting comps, right? Because I mentioned when we started talking to Spotify valuation, $50 billion enterprise value about $250 per it was a premium user or a monthly active user. I think it was per premium user. Guess what Twitter is valued at right now. It's valued at $50 billion and it's valued at $250 per daily. Now, we are talking complete apples to oranges in terms of just about everything, right? Except for the fact these are both internet platforms that I spend a lot of time on. And I really like both of them.

And right now, full disclosure, I own Twitter. I don't own Spotify. If I sold Twitter, I would probably be, I would probably use the proceeds to buy Spotify. So I don't know how familiar you are with Twitter. I know you're a user, obviously. But I'm looking at the two of them. My push to you would be, hey, I can buy Twitter and they're already EBITDA positive. I know they've got mammoth operating leverage because as they add users to that,

they do not have the same gross margin problems that Spotify has. and you want to talk upside optionality and this is the thing I've been saying forever Twitter literally has the power to overthrow governments now that probably comes

with a couple of regulation problems on it but they don't have the big label issue that Spotify has they've got tons of optionality and I do think both of them have interesting we'll talk about this later

but Spotify bought a semi clubhouse competitor called locker room Twitter's launching spaces I do think both of them have interesting live audio problems in fact maybe both of them belong together at some point but we can talk about it later

But when I talk just that individual opportunity cost, why Spotify better than Twitter? And you can all say I haven't done a ton of work on Twitter if you want to. Part of the answer is I haven't done a ton of work on Twitter. Or I did, but it's been a couple of years. And I haven't kept up to date on it. You know, the other part of Twitter that stands out to me is, you know, as we discussed, I have a substack. You have a platform that you, you know, go direct on.

There's other people that we both know that do the same thing. And it's funny for me to think that Twitter is a. massive customer acquisition channel for all of us, but at the end of the day, we all end up going to different platforms. Obviously, Twitter has an interest in changing that. I'll be curious to see if they can actually do it successfully. You know, I look at a product like review, which is, I don't know how much you've actually looked at review. It's their basically competitor substack. The functionality on it is very, very basic at this point. Obviously, they're going to invest in it and make it better and we'll see what they can do there. Will they be at a meaningful

disadvantage by that point? Because as you and I discussed before this podcast started, tons of people already have their credit card information on substack. And it's just going to be where a lot of people default to. Obviously, substack can change their rates if they have more competition. Things like that just, it's not entirely clear to me that they found out how to take what they have, which I think is incredibly valuable in terms of eyeballs and, you know, getting people on the platform and turning that into an actual business. I'm sure they have in some ways. I just, I'm not sold on it yet. But again, I haven't done a ton of work on it. So I could just be completely missing the missing the big nugget. No, that's fine. And it's all friendly conversation, right? Let me try

one pushback. You said Twitter's a great customer acquisition tool. And that's undoubtedly true, right? And I think we're going to talk music labels in a second. One of the reasons, you would prefer Spotify over a music label is Spotify owns the customer, right? And we talked about how they own the customer, they own that personal history, they own discovery, all this type of stuff. Well, I think we could take it one step further. And like, this podcast will be on Spotify, but the way most people will find this podcast is they'll find it when I'd throw up my Twitter post or when someone shares it on Twitter or something. So yes, Spotify owns the consumer, but in some ways, isn't Twitter owning the discovery there?

Yes, but how is Twitter making money off of it versus how is Spotify making money off of it? That's where I get a little bit more confused. Spotify has a very good. No, no, please, I don't want to interrupt you. I want to hear what you have to say. I think it's a very clear value prop for users. And there's a reason why even with a free offering, they've been able to convince 40% plus of their users to convert to premium. And I think that's the part of the equation that for me is, well, one, it's incredibly impressive.

They have this podcast called a Spotify story, which is basically about a lot of the things they did that got them to where they are today. It's a podcast from the people at Spotify. I'd be a little biased. Well, I mean, yeah, they're telling their own version of the story. But they talk about this idea of how they've managed to convince free people to become paid. And it's just interesting to think about that decision. And maybe Twitter can find some comparable way to monetize. I'm just not entirely sure.

Of course, for them, if they do that, then they're shutting off all the new users, right? So I don't know. I don't know. It's interesting to think about it. I'm just, I'm not sure what's happened to Twitter today that makes it so much different

from the past few years, but that's where great investment opportunities come from, right? Yeah, and I'll pitch, I did a podcast with Elliot Turner right when Twitter fell off on the heels of banning Donald Trump and they fell and people were freaking out. And we discussed some of this stuff. So I will push you for that.

And maybe in six months we'll be talking about, your next piece where you bought Twitter. Let me approach opportunity costs from another angle. And this is actually a question I got a lot on on Twitter when I mentioned that you were coming on here. And the question was, hey, why buy Spotify when you could buy one of the music labels? And I think the one that most people were thinking it was Vendie, where I believe just about all of the enterprise value is covered by their stake in universal music. I believe 10 cent bought about 10% of Universal Music at a valuation that implied about a $35 billion valuation. So let's just say, let's just pretend Vavendi is a universal tracker and you could buy Vavendi

for $35 billion, universal for $35 billion versus Spotify at $50 billion. Why do you want to buy Spotify, which has these operating leverage problems we've talked about and all this, versus Universal, which has a great runway for earnings. They own these great libraries. They've got a live play as live, comebacks, and everything. Why would you prefer Spotify versus them? Yeah, it's another name that I need to do more work on. And, you know, obviously to bring this research process full circle.

So it's something I'm definitely going to spend more time on in the future. I do think about the position they hold in the eyes of their key constituents, which in this case would probably be the artists. And, you know, you read about things like artists over the years trying to launch your own streaming services. There's certainly a sense that the artists don't feel in many ways that they've had a fair shake as a result of the way the industry structured. And, you know, I'm not well-versed on some of these kind of independent or less controlling solutions that are coming out and trying to be a tool for artists to obviously get on services like Spotify and to, to basically be. basically be a label, but in a different way. I'm not well-versed on those things,

but my sense is that the world is moving in a direction where it's less relevant for them to be securing plays on a radio station or securing shelf space at a Best Buy or something like that. Obviously, it might just transform into securing shelf space on

Spotify or on Apple Music. I wonder how much those tools evolve and become easier to use without an intermediary. So those are just very high-level thoughts, and I would need to do more work, but it certainly could be an interesting place to invest if you believe some of the things about audio and music that I do. Yeah.

You know, for me, the music labels, I just look at that. And if I put on my really long-term vision and think 10 years from now, you know, I think a lot of artists right now are becoming huge by they have a breakout song that they market on, that breaks out because they share it on Twitter or YouTube or something, and then they put it on Spotify and after they've already been discovered they might they kind of go with label but i just i can't imagine longer term that the labels aren't getting cut out of this in some form you know if you and i form our rap duo and we release an album and it goes viral like i don't really know why we'd go sign with universal instead of just uploading everything to spotify and

like planning all of that you know maybe we get an agent to do the live tours and stuff but i i just it reminds me a little bit of um you know like an nbc or something has the local affiliate which um you know, a gray or something will own. And that's a product of from the 60s. They didn't want NBC controlling the local news for 100% of the country. And you do wonder, like, going forward, as people cut the cord, what is the local affiliates role in the world? Because all they really produce the local news, which is valuable, but it's kind of a commodity.

I don't know what the label's role in the world going forward is because as everything's internet, I think a lot of people are just going to be incentivized. I go make stuff myself. I get my own following. I upload it to Spotify and I keep 100% of the proceeds for myself. Yep, I agree with that completely. And more importantly, you start writing the songs. I'll get her account set up on Spotify for this rap duo to get started.

I'm liking this idea. I thought you were going to write the songs. I was going to be the fat man and you were going to write the songs. We'll talk about it. Let's talk about the live opportunity because I think that live and podcast opportunity, because I think both of those are huge. We touched on podcast second, but I'll just flip it over to you. They bought locker room.

They're buying a lot of originals. You know, they mentioned the Joe Rogan experience, the Joe Rogan experience, with a ton. I love the ringer. They bought the ringer. So how do you think about both the live opportunity and the podcasting opportunity evolving going forward? Yeah, I think, I mean, obviously the live opportunity is a lot more nascent than podcasts, but podcasts are also relatively, you know, relatively nascent as a category and in terms of at least getting people to listen and listen consistently. I think what Spotify has shown already is that by caring about that category and by making, making it prominent on their platform,

and by, you know, obviously going out and doing deals to get high quality creators on their platform that they've been able to drive listening. And people are interested in doing this. You know, in terms of them placing the bets and knowing what's going to happen, I think it's smart that they do things like they did it with locker room. You place a small bet and you put people, put people on it and, you know, try to figure out how to win in that space. And we'll see if it becomes something real or if it just goes away. But if it just goes away, it's somewhat of a rounding year that a company like Spotify can afford versus if they just missed it completely. It became something huge and you got a problem. So I definitely think those types of deals are smart. You know, Ben Thompson wrote the other day. He said Spotify has shown the will to support openness and independent creators. That type of idea is encapsulate so much of what I think about what they do. I think that they truly make it better for creators for musicians, whoever.

and they also make it better for fans. So as long as they continue to do that, I think they can address every opportunity that comes up in the audio space and potentially some stuff that blurs into video. We'll talk video a second. That's one, I've never really been able to wrap my head around with Spotify and video,

like why they haven't moved in it with the optionality. But have you listened to a podcast or, I guess not a podcast, have you done anything with the locker room app yet? I have not. I haven't used any of the live product yet. I just, when I look at that, and I tweeted this out, but, you know, Clubhouse is a buzzy hot startup. And when I look at Twitter spaces and locker room, so the way locker room works is like, you and I could do this podcast and we would do it live. And then we could open it up and have listen, people who are listening live, they could hop on and ask a question verbally or they could just type in a question if they wanted to.

And I just look at that. I'm like, I don't know how Clubhouse competes with that because, yeah, Clubhouse, you can spin up random spaces. but like if I if you really like my podcast and I say I'm having Alice coming on you could listen live and you could you could just be typing in topics and doing that and like I don't think I just don't think Clubhouse I think the fact that they Spotify is marrying the podcast ownership with the live I think that beats Clubhouse and then for Twitter spaces I think the fact that they marry hey we have all the industry breaking news and everything we can spend that up in spaces I just think Clubhouse is in trouble in terms of that space yeah I I I would tend to agree with that. It's not clear to me why they would win. And I also think a big opportunity with all this stuff is, you know, obviously the live component of it all is important. But, you know, if this podcast right now is live, people could listen in. But there's also a ton of a ton of need for the ability to have it on demand and to listen afterwards, whether it's an hour afterwards or six months afterwards. So I honestly think a lot of that just plays into Spotify's

advantage. And again, a big part of all this will be, as we kind of discussed, before with placement for individual songs and a playlist. A lot of this is taking that real estate you have that's incredibly valuable on the front page of that app and finding how to, again, you can always get caught up in the commercial interest of what you want to throw up there, but you have to balance it against what makes it the best product for your customers. So as long as it can stick the landing on that, I think they have massive opportunities throughout all of audio.

Yeah, but just quickly to your point on listening later, that's one of the things I love, right? Because if you and I wouldn't do a Twitter space or a clubhouse on this, like anyone who couldn't listen live for any reason, would never be able to hear it. But with locker and with Spotify, like, we could spin this up, we could do it. And then people also, you know, hopefully a lot of this conversation is semi-timeless, right? Like, hopefully we're discussing the strategy and not just quarterly earning. So four months from now, somebody who gets interested in Spotify could come and listen and do that. So I just love Spotify's position there. And Clubhouse just raised a valuation at $4 billion and Spotify's $50 billion. So if they can capture it, you would think, oh, they could

create roughly $4 billion in value. Let's turn to video. It's one of the things I've had the most trouble thinking about with Spotify because they've got Netflix members on the board. So maybe they have some video ambition, but also if they really had video ambition, you would think the Netflix members would resign. I think there's some synergies, but it's kind of weird. So how do you think about video opportunity or any other like kind of moonshot, not moonshot, but other kind of synergistic opportunities out there for Spotify? Yeah, I think it depends if you're, you know, if you're talking about music or or non-music audio.

In the music space, you know, I think there's opportunities probably, obviously they do things now like where you listen to a song. You'll see almost like, almost like artwork. I guess you would describe it. You know, there's probably opportunities to do things there with video in terms of, you know, maybe concerts or something over time would be more of a live play. But video would obviously be a value add to that product. And then for non-music, you know, something like the Joe Rogan experience, I would presume that a big part of its success over time on YouTube was the fact that it had video.

And the other nice thing that YouTube has that other podcast players do not have is Clipsed. So I think they've been explicit about it, but I've definitely heard Joe Rogan say that part of the agreement that he has with them is that clips should be part of. of the equation basically, because I think they recognize how incredibly important it is to have a seven-minute clip on a specific topic versus just assuming that everybody's going to go in and listen to a two-and-a-half-hour podcast. So I think there's a massive opportunity there as well. A lot of these things for me come back to the same idea of how do you present that in a way that is attracted to users versus information overload or jumping into too many different directions and your product kind of loses its focus. So I don't think many of these things are

easy to do, but I definitely think there's an opportunity for them to incorporate video in some areas. This is a tougher one, but, you know, Spotify, they clearly want to own, they clearly want to own some of their podcast and content and stuff. And that does introduce some risk. So, like, especially Joe Rogan, he can be controversial, you know, he said some stuff, he said, so far the weekend, he said young people shouldn't get the vaccine, which, who boy, but, you know, for Apple, if Apple has a podcast with an issue, Apple can just take it down if they decide to do. content moderation or something. But Spotify's got a double issue, right? If they want to take it down, and I think they have taken some legacy Joe Rogan down, they have to both make a content

moderation decision and then they have to go to their talent and they own it. So they're kind of conflicted and if they want to take something down or not. And they're going to piss off their talent. Like if I was Joe Rogan and you took down my podcast on that, I would not be happy. Like my whole thing as Joe Rogan is I'm a free thinker and I express my opinion and I put it out there bluntly. So how do you think about the risk of kind of content moderation, especially as Spotify dives into the ownership strategy? Yeah, my buddy Francisco Alvara, sent me an article today. And the intro to the article was Spotify had an employee meeting and they put up some quotes that someone said in a podcast that was on the platform, obviously.

And they asked these employees, like, what do we think about this? Should this podcast be removed? And I think it was like unanimous that they should remove it, remove the podcast, and the person who was presenting then revealed that it was actually lyrics from an NWA song. It wasn't something said in the podcast. I think the point there is pretty, it's a good one. This is obviously an incredibly gray area in terms of what what is or isn't acceptable on these platforms. And I think all that you can do at the end of the day is set relatively clear rules. If I was the person, responsible. I don't think Daniel Eck or Mark Zuckerberg or any of these other people should be solely responsible for saying what that actually means. I don't know if it's a bigger tech

industry decision in terms of what is or isn't acceptable on these platforms. But I think those rules need to be as clearly said as they can be. And then someone like Joe Rogan, I think he's a relatively reasonable guy. At the end of the day, when you've recorded thousands of hours of podcasts where you're, you know, he might be high for a good portion of those hours, you know, you're going to say things that maybe come out wrong or that are just not well put or, you know, so it's the reality of doing all this. And I think reasonable people are going to understand the fact that, you know, there's going to be a line somewhere. But do I think Spotify or Daniel X specifically should get into the game of censoring what someone says during the course of a three

hour podcast? I personally think that's kind of crazy, but that's just me. I'm with it. Look, it's just tough because you mentioned Francisco. He came on and we talked Roblox. And I had to us the same question on Roblox because there's a Wall Street Journal of Cole where, you know, my five-year-old kid goes and he went into some weird like S&M Roblox world, which I didn't, I don't know why anyone would have to think about this stuff. It's just, you know, the internet. No, definitely. It provides great scale and great opportunity. But there are, you know, scale comes with some really weird tail ends. So it's kind of kind of weird. interesting side point. Facebook made this comment, or, you know, not Facebook, someone who represents Facebook made this comment in front of Congress about the idea of safety and security. And, you know, people kind of took the comment as being, well, now that Facebook has built up its safety security business, or its ability to do these things, now they're putting up

the wall so another competitor can't, you know, build the next Facebook. And I think that's one way to look at. The other way to look at it is that Facebook has probably built up something where they can actually sell the safety and security ability of their platform to these other platforms that are going to come up over time and face identical issues. So I've never heard anybody talk about this in terms of the company, but I'd be curious to see over time if they can actually make a business out of that and find a way to take the expertise that they've developed and sell it to maybe not a Twitter or a Spotify, but a way to monitor and to remove content that

has obviously been agreed upon to be harmful or violate rules. That's interesting. It's interesting optionality, but I think it's such a unique advantage to them. I would guess that they don't want to do it. One more thing on Spotify's optionality. One thing I've really thought about is Spotify owns the customer relationship. I think there's huge opportunity with them with artists make almost all of their money now is in endorsements and particularly in concerts when the world reopens again.

how do you think about Facebook interact or sorry about Spotify interacting with concerts and kind of live events in the actual physical sense going forward in the physical sense meaning at like at the actual concert venue or you mean a recording of it on the platform what do you mean well you know so I've always thought Facebook knows that I love uh Facebook knows I love Taylor Swift and Taylor Swift needs no help selling tickets but you know I I do think if a Taylor Swift concert coming through the area, the best person to sell, or let's take someone a step or two below, Taylor Swift. In high school, my favorite band was Fall Out Boys to let people know how cool I was

in high school. If Fall Out Boys doing a reunion tour, I'm probably not going to know about it, but it would be pretty easy for Spotify front page of the Spotify app when I opened it up to tap in and say, hey, Facebook's touring in your area, buy tickets here, right? And that would be, artists would love it. I think Spotify could take a huge clip and you have to start wondering at some point, does Spotify start tapping into, does Spotify start tapping in there? Do they start cutting into Live Nation? Does Spotify just start throwing the freaking concerts themselves, recording them, making money on the merchandise, and then putting them on Spotify and getting fans listening to them and getting unique, they would probably own the rights

to that live recording. So they start getting unique things that starts cutting the labels out. So how do you think about that type of optionality? Well, to start by saying that I also like fall-up, and I thought it was still cool to like them. I'm very sad to hear that it is not. For me, it's so cool, but my wife tells me all the time that it's not. Now that you said it out loud, I'm going to assume that she's right and we're wrong. But no, I agree with that general point. I think it goes along with the idea of artist's recommendations and things like, things like that.

It's a way to, it's a way to help artists and labels as well to the extent that they're aligned with artists. It's a way to help them more effectively monetize what they do. And it's a way to get in front of fans, you know, in a way that would have been harder to do previously. And as Spotify is able to offer these kind of services, I think they'll be compensated for doing so. And it's a good example of why I don't, my personal focus, especially in the short term, meaning the next handful of years, my focus is not on Spotify going into a meeting with the record labels and directly negotiating lower rates. I think it more likely comes through things that grow the pie and make life better for labels and artists directly, and Spotify can share in that. And I think that's going to be the most effective way to do it. So, yeah, that's another example of how I think they can get there.

Let's talk M&A real quick. So Spotify's done some small acquisitions. We mentioned locker room. They bought Ringer. They bought some podcast thing. But let's talk a little bit larger than that. When you think M&A, are there any larger companies, real strategic mergers that kind of in your head as a shareholder you would love to see

Spotify. Let's stick on the buy side because you know, you might be disappointed if Spotify got bought out for a 50% premium tomorrow, but you'd probably be pretty happy too. But, you know, the buy side. Are there any targets you've thought about strategically that you think if Spotify put out a PR tomorrow that said, hey, we're buying this company, you would be like, let's go. Honestly, no. Maybe I haven't thought about it enough, but no, there's nothing that's really come to mind because it's almost we've come back to Netflix a couple times it's almost like asking that question for them and maybe the answer would have been a Disney or somebody with content that they could they could obviously monetize long term or you know maybe a deal to get

parks from NBCU or something to try to get that full that full mousetrap for lack of a better term but no I don't I think Spotify's ability to grow and to capitalize on the opportunity ahead of it is solely within their control of everything they have right now. On the other side, though, I have wondered about the fact whether or not Spotify would be an interesting target for Facebook. And I obviously think that there would almost certainly be regulatory issues with anything that Facebook tried to buy,

especially if it was big. I'd also be curious, too, in this case, if European regulators would not like the idea of a very successful European tech company being bought by bad old Facebook. So I haven't thought about that incredibly deeply, but I know Eck and Zuckerberg seem to be pretty good friends. And if I had to guess, it's the kind of sale that would only be done if Act was doing so kind of out of a position of weakness would be my guess. I don't think he has any interest in selling from everything I've read. So on both sides, I'm not sure.

I'm with you. I think Spotify is one of the few European tech champions. And I think the European regulators, I think Facebook would be tough. But, you know, I do think you mentioned NBCU. I think Comcast would be really interesting. There would be some pretty interesting synergies with Spotify, Sky, with the European sports, NBC, with all of their, the theme parks, the shows. I think there could be some interesting stuff there. I've always thought Twitter and Spotify could be kind of interesting together.

There would be kind of interesting energies with fan generation. But I'm with you. I don't think they needed. You know, you mentioned Netflix for years. All you heard was Netflix needs to buy a movie studio. Netflix needs to sell to someone. And Netflix said, no. I mean, they've basically done it rounds to zero acquisitions, right?

They did two small IP acquisitions. And that's it. And Netflix showed, hey, we can build all this stuff. And one of the things, the other thing that was interesting, the Spotify podcast we talked about, I believe the last episode that posted yesterday. I have not listened to it, but it's titled Buy versus Build. So I'm kind of interested to hear how they think about that. How do you think about that for Twitter while we're talking about it,

just because we brought it up before. Do you think there's something that Twitter could buy that would be, that would be really interesting for them and improve their prospects? Or is it kind of just, they just need to execute? Yeah, I think it's execution. No, I really like the review acquisition. I was, I was hoping they'd buy substack, to be honest with you. Just go, you know, in tech, buying the second place player often is a disaster. And review was, they were basically like start with startup. That was more higher than anything, I believe. But I think buying substack would have been so interesting because Twitter is the funnel to get

to substack. Twitter would get that they'd get the credit card information for users, which would be great for advertising, targeting. It'd be so seamless for the sign-ups. You know, they've really improved a lot of their advertising, but having that credit card information, they could just do direct buy on Twitter's platform. So, I think

that's really interesting. And as you said, I don't think Twitter needs to buy anything, but I do think there are a lot of interesting things that Twitter possibly could buy. I know it's Scuddle Blurb we talked about before the podcast started. He puts out like an annual, just an update on his, you know, his subscription business, which is a fantastic read. And it's really cool of him to be transparent about that. And it just really helps someone like me as I launched my own thing. But he's pretty

explicit in there that Twitter is the vast majority of his audience has come from Twitter. And from the data that substack shows me, I've had the same experience. And it's funny to think, as you said, you know, they decided to buy review, which is definitely an ackeyhire. And I looked at review before I launched my substack. And one of the problems I ran into was they had an article from 2018 talking about what you can do to kind of grow your audience and to retain your readers. And one of the recommendations was to offer an annual subscription, which I think is a fantastic idea. I mean, I've priced my product to drive annual because I want people who are actually going to get value from it. And I only think they'll get value from it is if they

read what I'm saying over time about companies of the portfolio. Well, that article from 2018, if you go to review and set it up and try to offer annual subscriptions, they don't have them. So I set them a message saying, hey, I agree with you guys. It's a fantastic idea, but you don't offer it. It's 2021. So can we do something about it? But to your point, it's a, it's a very nascent offering. It's an acu hire and they'll probably build these things over time, but it makes it hard for people who are looking at it now. It does come full circle, though, right? Because we mentioned Spotify. Can someone kill them? And you said Apple did an interview and they didn't mentioned music once, and that's one of the reasons you think Spotify survives.

Twitter, you know, Jack Dorsey, A, he's double CEO, right? But when you go to Twitter, the first three things are not kill, the first three things on their lists are not killing Substack. There's other things that they're trying to tackle. So I do, I think it's very similar. Substack is 100% focused on people like you and me who run subscription services and people who sign, people like you and me who subscribe to subscription services. So I think that is their edge going forward.

So I would not want to bet against them. I want to be cognizant of time, but let me. me just, we've talked about a lot on Spotify. I love this company. Is there anything you wish we had hit a little harder or any closing thoughts that you want to end, uh, leaving the listeners with? I think it's an interesting tip, but that just ties into what, what you just said. So maybe I'll close with that. There was an interview with the CEO of Barstool Sports. I'm forgetting her name right now. But anyways, she talked about working with companies like Apple and Spotify, obviously, because they have a ton of podcasts.

And I can't remember the exact context, but she essentially said, what is Apple doing? Like, I were obviously, Barstles Sports is a big platform. We have podcasts that are being listened to. And she's like, I have no idea who works on the podcast team at Apple.

And they may have improved things since then. This was probably 12, 18 months ago. Who knows? But it gets to what you were just saying. And there's, when you're a small part of a big company, Maybe in certain situations, the incentives are set up properly and people are allowed to run with their vision to do what they need to do. But it seems like a lot of times it gets it gets mucked because of because of its place inside this broader corporation that has its own mission and its own KPIs, et cetera.

So we'll see what happens. But I think it's hard when you don't have, I think a quote from Sachinadell's book is something along the lines of when the strategy. and mission of the people at the top of the company is off by an inch. By the time it gets down to people further in the organization, it's off by a mile. And I think that idea really rings true. So for someone like Apple to be even more competitive than they've been in the past with Spotify, even for iPhone users, let alone everybody else, but they'll need to really nail that. And I think it's hard to do.

But we'll see. Fantastic. Well, Alex, appreciate you. coming on. Looking forward to having you on in the near future. Everyone should go check it. There will be a link in the show notes. Everyone should go check out the science of fitting substack. I'm a subscriber. I've really enjoyed the first. It's only been, it's been less than a month at this point, I think. But I've really enjoyed the first few articles. As soon as that Spotify one hit my account, I was tweeting you. I was like, come on. You got to do it. This is the

company I'm talking about. Appreciate it. We'll have you on going forward. And we'll talk soon. Appreciate it. Thank you.