American giants are swallowing Sweden’s tech successes

September 25, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on September 25th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

With new laws, the EU has American tech giants in a firm grip. But Europe has yet to produce a single one of its own.

EU Commissioner Thierry Breton looked visibly pleased as he looked into the camera and delivered the following message:

“It is D-Day for the DMA. This is a very important milestone for freedom and innovation in Europe.”

Breton was referring to the legislative package known as the DMA — the Digital Markets Act — which had just published its list of tech companies the new laws would apply to.

The names on it were familiar to most: Apple, Amazon, and Meta, for example.

More interesting is where those companies come from. All of them are American, with the exception of ByteDance, which is Chinese. Europe’s new laws therefore do not apply to a single European company.

That the EU has been at the forefront of regulating tech companies is well known. The question worth asking is the opposite — what has it done to foster them?

For a well-functioning tech company, there are few reasons to remain listed in Europe today. SvD’s analysis shows how large the valuation gap between European and American stock markets really is. Comparable companies are often traded at significantly higher multiples on the other side of the Atlantic. Firms like Cevian Capital are now actively looking at moving some of their listed holdings to the US to unlock more value.

Part of the problem with European stock markets is low liquidity. Look at how individual sectors are distributed across the Nordic exchanges, for example. Both tech and gaming companies are noticeably more concentrated on the Stockholm Stock Exchange than their counterparts in Copenhagen or Helsinki. And even if it is technically possible to trade across borders, smaller silos form that limit liquidity. In a small region like the Nordics, there is not an unlimited pool of investors to draw from.

The same reasoning applies more broadly to all of Europe.

Add to that currency risk in certain countries — Sweden in particular — and there are many reasons not to list a successful company in either the Nordics or Europe. Spotify — Sweden’s most brightly shining star among tech companies — chose, as is well known, to list in New York in 2018.

Europe’s problem is not a lack of ideas or capital. A report from Swedish venture capital firm Creandum shows that Europe has captured a growing share of early-stage investment capital (what is known as seed). Over 20 years, that figure has risen from 8 percent to 28 percent. The amount of money raised by European venture capital funds for further investment also reached a record level in 2022.

So there are upward-pointing arrows for Europe in tech as well.

The concern grows when you look at where the value of these companies is ultimately realised.

Most tech companies — those that survive at all — will be acquired rather than going public. And who is doing the acquiring? Again, Americans are in the driving seat. The European M&A market for tech is very limited. There are very few large players in Europe buying companies at the same level as their American counterparts.

Looking at a selection of major Swedish tech deals, a clear pattern emerges. On the selling side: Swedish tech successes. On the buying side: American companies. The list is long. The European equivalent, by contrast, is short.

Nothing suggests this trend will reverse. On the contrary — due to the weak krona, Swedish companies have never been cheaper for those buying in dollars.

At the same time, the European tech ecosystem erodes with every acquisition that takes place. The acquired companies never get the chance to grow into the kind of tech giants that buy rather than get bought.

In the middle of all this sits the EU with its new legislative package. The cumbersome data law GDPR was already in place. These laws have done much to keep tech companies in check. But very little to ensure they remain here in the first place.

Instacart’s IPO shows the tech market has sobered up

September 20, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on September 20th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Optimism is returning to the tech market after delivery company Instacart’s listing on the American Nasdaq. But Instacart has what many tech companies still lack: profitability.

Lime-green canvas bags were everywhere in San Francisco in the mid-2010s. In shop after shop, people walked the aisles picking items that ended up in the bags. They were not shopping for themselves, though — they were doing it for someone who had placed an order through an app. The bag said “Instacart.”

The pitch was very simple. Someone else shops for you, at your favourite store. You get food delivered to your door within an hour. For the trouble, you pay a small fee, plus a tip.

Living in San Francisco at that time was like being subsidised by venture capitalists. In the race for growth, services were offered at unreasonably low prices. Why shop yourself when someone else will do it for you? It might sound like a luxurious life, but the cost was often negligible. There was one simple reason for that — someone else was paying. In this case, American venture capitalists who wanted companies like Instacart to win new customers.

On Tuesday, Instacart listed on the American Nasdaq. The core idea remains, but the company has undergone a substantial transformation since its founding. Going public with a business model where shareholders foot the bill is no longer particularly fashionable. In Instacart’s IPO prospectus, a profitable company emerges — with 5.4 billion kronor in adjusted earnings.

Going public as a tech company has been essentially off the table since 2021. Growth stopped being attractive and investors instead wanted to see profitability. Listing without having solved that question has been virtually impossible — there is simply no appetite for that kind of company.

Many tech companies have therefore spent the past two years trying to become profitable. Instacart’s listing now is because they managed to do exactly that. At the end of 2022, they turned a profit for the first time.

It is also interesting to look at how Instacart reached this sought-after profitability. It was not, as one might expect, the result of consumers simply paying more to have food delivered. Instead, Instacart has undergone a transformation and now has three legs to its business: food delivery, advertising, and software. The company’s stated vision is to “build the technology that enables every grocery transaction.” That does not quite sound like a delivery company anymore, does it?

What they are referring to is what they call the “Instacart Enterprise Platform” — a technology product sold to retailers, enabling everything from e-commerce to advertising management.

By holding data on every customer’s purchasing habits, they have built a highly attractive and successful advertising business. In the past year, the platform and advertising accounted for around 29 percent of revenue — more than 8 billion kronor in total. In the US, only 12 percent of grocery purchases happen online, which means there is a great deal of market share still to be gained. And the more people who shop through Instacart, the better their data becomes — and by extension, the more advertising revenue they generate.

On the first day of trading, Instacart rose around 12 percent, giving a company valuation of roughly $11 billion. Under normal circumstances this would be a major success — but that assessment depends on not knowing Instacart’s valuation in 2021, which was around $39 billion, nearly four times higher.

But that was a different time, as we know. Perhaps Instacart’s new valuation is a sign that the tech world has sobered up a little? The numbers are high, but not as astronomical as they once were. And — just as in the rest of the business world — it helps to be able to show that you can actually make money. When the next generation of tech companies reaches that point, the market appears to be open for them too.

Schibsted is the last owner Viaplay needs right now

September 14, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on September 14th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

When Schibsted buys into Viaplay, they acquire power without having to take responsibility. That is the last thing Viaplay needs right now.

There are phrases that a company in crisis does not want to hear from newly arrived owners.

“We see this as a financial investment” is precisely one of them.

These were the words of Jann-Boje Meinecke, investor relations director at the Norwegian media group Schibsted — which owns both Svenska Dagbladet and Aftonbladet — after announcing that it now owns 10.1 percent of the shares in streaming company Viaplay.

Viaplay has had a tough year — to say the least. The share price has fallen almost 80 percent since January, and recent months have been marked by executive departures and a pervading sense of crisis. If you ever wanted to own Viaplay stock, this is therefore an opportune moment — it has never been cheaper than right now.

Even Schibsted’s own share price fell on the news, and by considerably more than the cost of the Viaplay shares themselves.

The stock market, then, was not exactly jubilant.

The question is whether Schibsted really intends to hold the stock for the long term.

Through a clever arrangement involving banks, the company managed to avoid notifying the stock market when it crossed the 5 percent ownership threshold. Instead, the announcement only came when they crossed the 10 percent barrier — by a small but very significant margin. The total holding is 10.1 percent.

Consider the following scenario: if someone were to make a bid for all of Viaplay, they could force out the remaining shareholders — provided they had reached 90 percent of shares. Now that Schibsted holds 10.1 percent, that kind of deal cannot be done without them on board. French television company Canal Plus already owns around 12 percent.

Taking Viaplay off the stock market in a quick deal suddenly became substantially more complicated — and probably more expensive. Calling this a “financial investment” for Schibsted can therefore be read in that light: any new owner must now negotiate with them directly.

The bigger question, however, is who would even want to make such a deal.

Whatever the share price, Viaplay’s problems have been building for a long time. Slowing streaming growth, increased competition from international players such as Netflix and HBO, expensive sports rights, and high interest rates have all contributed to squeezing the company. Being a Nordic streaming company with international ambitions has proven to be a very difficult strategy to execute.

Telia, which owns TV4 and C More, has also signalled in various ways that its TV business is likely up for sale. The outgoing CEO Allison Kirkby previously worked at Danish telecom giant TDC, where she fully separated the content business from the technology side. “Content is hard,” was how she described it at the time.

On the subject of TV4, Kirkby has said that “media should not be owned by operators.”

The problem is much the same there. TV4 appears to be for sale. But who are the potential buyers? Who looks at the media landscape today and concludes that Nordic streaming companies are what they want?

Schibsted’s move suggests they believe there are buyers out there. They do not need to be one themselves, despite the sizeable new stake.

Of course, Schibsted may have interest in specific individual assets, if that kind of solution is on the table.

“We hope we can support the company in creating value, and in further developing its strategy going forward. Whether that leads to us joining the board, we shall see,” Meinecke told Dagens Media.

Having multiple large shareholders who can block structural transactions, and who are not necessarily willing to roll up their sleeves on the board to address the company’s problems — is a nightmare scenario for Viaplay. All the underlying problems remain. But now there is an ownership problem on top of them.

Footnote: Svenska Dagbladet is owned by Schibsted. Journalists at SvD may own shares in Schibsted through the group’s employee share programme.

Arm Holdings: standing strong despite the market

September 13, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on September 13th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

When chip company Arm goes public, the world waits eagerly to see whether the appetite for tech listings has returned. But reading too much into Arm is risky — it is not an ordinary tech company.

A jubilant and excited Masayoshi Son, CEO of Japanese investment firm SoftBank, met the press in London in 2016.

“This is a company I have admired for the last ten years. This is the company I want to make part of SoftBank.”

The company in question is Arm Holdings, a British chip firm. The Japanese conglomerate SoftBank bought it out from the stock market in 2016 for around $32 billion.

The path since then has not been straightforward, at least when it comes to ownership. On Thursday, Arm will in all likelihood make its comeback on the stock market — and in doing so, open the window for other tech listings, a window that has been firmly shut for some time.

Arm is not just any tech company. Its market share for processors used in mobile phones is over 99 percent. There is not an iPhone or Android phone in existence that does not contain an Arm component. That kind of position is very different from the many software companies that are collectively considered “tech.”

Being so exposed to a single market comes with complications. Arm does make products beyond mobile processors, but the mobile phone market has faced headwinds in recent years. Growth has stalled, and for companies like Apple and Samsung the challenge is more about maintaining existing sales levels and supplementing with services and adjacent offerings. For Arm, this creates a kind of stability — but not the explosive growth that markets typically expect from tech companies.

On the other hand, the area of AI — with Nvidia leading the charge — has generated enormous interest in chip companies. It is partly this situation that owner SoftBank is looking to capitalise on. The company’s valuation at IPO could now exceed $50 billion.

There are additional reasons for the listing. SoftBank made its name with bold tech investments at enormous valuations. For several years, when capital was cheap and freely available, one of its strategies was to pour in as much money as possible into its portfolio companies — enough to simply outrun the competition. This worked well for a number of years.

When the air went out of the tech market, however, SoftBank found itself stuck with a portfolio of holdings whose valuations had fallen, and with weaknesses in the underlying businesses. SoftBank ran into trouble. In its most recent quarterly report in August, the parent company recorded a loss of $3.3 billion — more than 36 billion kronor.

In the current AI boom, Arm presents itself as a saviour for the Japanese parent company. If Arm goes public, SoftBank can more easily leverage its remaining roughly 90 percent stake, and in that way build a new war chest to invest from.

This is not the first time SoftBank has tried to do a deal with Arm. Back in 2020, Arm was set to be sold to chip giant and partner Nvidia for a price tag of $40 billion. Nvidia was already enormous at the time, but the world’s interest in AI had not yet exploded. That deal fell through in February 2022, when both parties realised that the regulatory hurdles were too great. The combined company would have become so large and powerful that it would have distorted competition. The two companies continue to work closely together as partners, but without any ownership connection.

When the Nvidia deal collapsed, SoftBank had to rethink. And somewhere in that process the new plan was born: to bring Arm back to the stock market — where it had been before SoftBank bought it out in 2016.

The world is now watching closely to see how the market receives the listing. Shortly after Arm, delivery company Instacart and software company Klaviyo will likely also go public. All three will be scrutinised carefully by both the market and by tech entrepreneurs who did not manage to list their companies before tech stocks started falling. Many had planned to go public during 2022 but were quickly forced to find a new plan. If these three companies are well received by the market, it could trigger preparations for new listings at many mature tech companies. If they do poorly, that window will be pushed several more months into the future.

But reading too much into Arm is risky. It is a company with a near-monopoly on the mobile market, and with such a strong AI tailwind that the timing could hardly have been better. Partner Nvidia’s stock has risen more than 213 percent — this year alone. Not many “ordinary” tech companies can match that.

Forget the iPhone — Apple’s real ambition is health

September 11, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on September 11th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Forget the new phones being announced — but do pay attention to the earbuds and the watches. The most interesting news from the event is Apple’s ever-growing ambitions in health.

When Apple’s CEO Tim Cook faces the world on Tuesday, he will present the company’s best iPhone yet. You can say that with confidence, since it happens every time at this occasion in September — every single year.

Apple needs to continuously release new hardware — the iPhone above all — to sustain its sales. This normally happens once a year as summer comes to a close, and sometimes there is a smaller update come spring. In addition, there are software upgrades that enable new functionality in existing devices.

Software has over time become increasingly important for Apple, as hardware sales have leveled off somewhat. Services such as Apple Music, Arcade (gaming), iCloud (cloud storage) — and the behemoth App Store — all belong to the segment loosely called “Services.” In the most recent quarter, these services accounted for around one quarter of total revenue.

It is also within services that you can see signs of where Apple is headed. That there will be a new iPhone with a slightly better camera is well known, and not something you can draw any particularly interesting conclusions from.

But at Apple’s developer conference WWDC in June this year, the company outlined news hinting at an ever-greater focus on an area that fits perfectly with its emphasis on privacy: health.

Walking alongside the Apple Park Pond — a pond located inside the company’s new, saucer-shaped headquarters — health chief Sumbul Ahmad Desai spoke about the new initiatives. “We are moving into two new areas that are always grounded in science with privacy at the core,” she explained, referring to mental health and eye health.

Apple’s new software is said to help users understand what contributes to their mental wellbeing, as well as reducing the risk of myopia — the nearsightedness that affects 30 percent of the population — which can be influenced by spending a lot of time looking at screens. An iPad can now alert users if a child is sitting too close to the screen, for example.

Those with an iPhone can also now choose to set it to different focus modes, so the phone does not disturb its owner when they are working, sleeping, or simply want a break from notifications.

The choice is no coincidence. Apple has selected two areas for which tech companies have previously drawn heavy criticism. The initiative thus becomes a kind of alibi for the responsibility the industry has been accused of shirking.

Mental health data is a particularly sensitive subject — something many people would likely prefer to share only with loved ones or professional care providers.

Here, Apple — whose multi-year commitment to protecting data and privacy is well established — can stake out a position that is hard for competitors to match. Nobody wants information about their mental state to feed targeted advertising, for example.

Apple’s commitment is not entirely altruistic, however. Having a service where one tracks one’s wellbeing is also a way of ensuring users do not switch to a different mobile platform. And one way to prevent myopia is to get plenty of daylight — something Apple measures with its watch, the Apple Watch. In the presentation, the watch is suggested as ideal for children, precisely to help ensure they are getting enough outdoor time during the day. So now even tech companies want children to go outside and play — provided they have a device on their wrist, of course.

Apple Watch, which is also being updated on Tuesday evening, has become the hub for a series of health initiatives in recent years. It can now perform basic ECG tests, measure nighttime body temperature, and track blood oxygen levels.

This makes the watch a kind of medical device that requires regulatory approval before it can be sold — a slow and administratively complex process, for understandable reasons, and not something a tech company would take on if it were not important. That Apple has chosen to do so anyway says something about its ambitions in this space.

There was a time when tech enthusiasts sat glued to Apple’s product launches. Now they have instead become part of the establishment, with all the predictability that brings.

The next iPhone 15 will likely feature a slightly better screen and a marginally smarter camera. The more interesting things lie in the smaller announcements. Are there new earbuds coming? And if so, will they be able to measure body temperature?

Slowly but surely, Apple is moving ever closer to the most intimate thing we have — our bodies and our wellbeing. And at the same time, the company is drawing yet another line against competitors such as Alphabet (Google), Meta (Facebook), and ByteDance (TikTok).

Pay particular attention to news about health and privacy. That is where you will find the clues to Apple’s strategy going forward.

Spotify’s evasion is remarkable

September 7, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on September 7th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Spotify is happy to talk about how its platform reaches millions of people every day. But when SvD reveals it has been used for money laundering — the company declines an interview.

It was Spotify’s Capital Markets Day 2022, and CEO Daniel Ek opened to set the tone from the start. With stock analysts and retail investors in the audience, the star entrepreneur was going to try to convert a few skeptics.

“To begin with, we have an excellent product and our business is going very well. But beyond that, we are investing in building a fantastic, multi-sided platform with all the ingredients to become a truly unique, creative platform in the world.”

This is how it tends to sound when tech companies speak. Lots of talk about scalability and building platforms that enable others to express themselves. What they tend to talk less about is their responsibility for what goes on within those platforms.

SvD’s investigation shows that gang criminals have exploited Spotify for money laundering. When SvD contacts Spotify for an interview, the answer is no.

Companies having internal challenges is not something that requires a press release to the public. Money laundering, however, is a problem that affects far more people than just Spotify. It is a cornerstone of sustaining criminal operations over the long term.

It is therefore remarkable that the company avoids being interviewed about the platform it so readily promotes to the outside world in other contexts.

The situation is familiar. Meta, formerly Facebook, has found itself in similar positions on many occasions — including around the spread of misinformation. Tech companies’ approach follows a predictable pattern that tends to repeat itself when this type of issue arises.

Step 1: Create a platform that allows millions of people to use and participate in various ways. The number of users is so large that no manual oversight can be carried out to review them all.

Step 2: When problems of some kind arise — something that is often flagged from the outside — tech companies state that they have internal systems working to address them. But they are quick to add that the problem is so complex that an immediate and definitive solution is not available.

Step 3: If the problems continue, or are elevated politically, an internal review is launched and a tech executive comes out to say the company will do better and invest more. The issue disappears temporarily. Until the next — often very similar — problem arises again as a result of the large and ungovernable platforms.

What is missing from this cycle is tech companies’ recognition that these problems are self-created. It is not a given that an unlimited number of people should be able to freely use a platform without restriction. They are designed to have as little friction as possible for both new and existing users. The problems that arise become an acceptable side effect of tech companies’ demand for growth.

In Spotify’s case, concerns about money laundering were known internally. This is apparent from a report the company references when SvD requests an interview. At the same time, the streaming giant responds by email that it has no “evidence” that money laundering has occurred.

SvD’s reporting suggests the company is more reluctant to disable paid accounts used for fraud than free ones. Disabling premium accounts runs counter to Spotify’s entire strategy of building up that subscriber number.

Spotify disputes this characterization, writing that it “detects and addresses artificial behavior from both free and premium accounts.” What proportion of the disabled accounts belong to the latter category, the company declines to say.

There are many losers when fraud of this kind occurs. Spotify likely incurs high costs for staff and systems working to prevent it. Other artists — whose streams are genuine — receive a smaller share of revenues. Ordinary listeners look at the charts to get a sense of what is popular, without knowing the charts have been manipulated.

The situation is both messy and complex. One can have a degree of understanding for the difficulty of solving these issues quickly. But having a tricky self-created problem does not relieve Spotify of responsibility for managing a situation it made possible — even if unintentionally.

Money laundering is not a tech problem — it is a societal problem. The solution therefore does not need to come from Spotify alone. But more transparency about how it is contributing to the issue would be appropriate — for a player with so much power.

The stock market’s biggest winner is betting everything on AI

August 22, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on August 22nd, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Nvidia crushed market expectations in May and the stock surged. Now everyone is waiting to see if the company can repeat the feat. But riding the AI hype comes with significant risk.

There is an old saying in business: “under-promise, over-deliver.” The well-tested model is about lowering expectations so that it is easier to surprise on the upside.

Jensen Huang, CEO and founder of the successful chip company Nvidia, works by a different playbook. Here, a great deal is promised. And yet the confident Huang manages to beat those expectations. Since AI technology exploded, his Nvidia has been the biggest winner on the stock market.

When Nvidia reported in May, it gave a forward-looking forecast that beat market expectations by over 50 percent. The stock surged. Total revenues for the coming quarter were projected at around $11 billion — roughly 120 billion kronor.

On Wednesday evening, we find out whether Huang has managed to live up to those numbers. Following the last success, some analysts believe Nvidia may surprise positively again.

The timing is in Nvidia’s favor. Interest in AI could hardly be greater, and now there are signs of a broadening customer base beyond the well-known tech giants like Google and Microsoft.

The United Arab Emirates has access to thousands of similar chips, and the UK is reportedly about to make a major investment in the area. Last week, the Financial Times reported that Saudi Arabia had purchased at least 3,000 of Nvidia’s H100 chips. That may not sound like much, but an H100 costs nearly 450,000 kronor — each.

The chips are primarily used for what is called generative AI, where products like ChatGPT and Midjourney have made their names. These purchases suggest that the centralization we have previously seen around cloud storage and similar services may develop differently in this wave of AI expansion. If more countries and companies invest in their own capacity, the market would grow substantially.

Beyond the initial investments to build AI capacity, Nvidia also offers services that help with refining and inferencing the available data. This is a more ongoing stream of work that extends several years into the future beyond the initial purchases.

Being exposed to a technology in an extreme hype does come with risks, however. Nvidia’s stock has almost become synonymous with a belief in AI. It is therefore worth considering what would happen to it if interest — and appetite to invest — in the technology were to diminish.

During the summer, preliminary research from Stanford and Berkeley universities showed that answers from ChatGPT had become significantly worse. It is unclear what may have caused this, but the question marks suggest we are still in a very early stage when it comes to artificial intelligence.

That new technology will revolutionize society and business is also something we have heard before. Most recently, it was blockchain technology and cryptocurrencies that were going to rewrite the balance of power in the economy — but which lately have mainly led to massive losses and scandals.

The crypto exchange Coinbase had a similar type of association, and went public in spring 2021 at a price of $381. The price now is just above $70. Coinbase is in every meaningful sense a completely different kind of company than Nvidia, but the strong association with a single new tech phenomenon looks similar — and points to a possible scenario that is not as glittering as the one Jensen Huang paints.

Nvidia does not appear particularly worried about this risk. On the contrary, they seem to be looking for more areas to expand their exposure to the industry. In winter 2022 they called off the billion-dollar acquisition of British chip developer Arm, owned by SoftBank. Objections from regulators in both the US and Europe were so significant that the deal could not go through.

But this does not appear to have deterred Nvidia. Instead, they are rumored to become an anchor investor in Arm’s IPO — announced this week — which may happen as early as next month. The two companies are already partners today — despite the failed acquisition — and the collaboration could now become even closer.

The sharp rise this year — a tripling of market capitalization since the start of the year — means that Nvidia’s performance affects more than just its own shareholders. It is now the fourth-largest company on the Nasdaq, and its weighting in the index is more than double that of companies like Cisco, Netflix, or Intel.

If Huang manages to beat expectations again, the whole market could be smiling.

The battle for sports rights has only just begun

August 15, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on August 15th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

A World Cup run for Sweden means new millions for the broadcasters who hold the rights. But around the corner, far bigger wallets are waiting to enter the bidding.

There is a category of television events that are hard to ignore — events that become a shared gathering point. A classic Swedish example is Melodifestivalen.

Major sporting events, such as an ongoing football World Cup, are another kind of campfire TV. People talk about “the match” without needing to specify which one. Everyone already knows.

For broadcasters, a deep run by the home nation is instantly a boost to the bottom line. More viewers means higher advertising and sponsorship revenue.

This, combined with fans’ loyalty, has made sports rights one of the most important factors in the success of pay TV.

Time and again, it has been shown that viewers are more loyal to their favorite club than to the TV provider broadcasting the matches. Successfully acquiring — and keeping — key sports rights therefore often becomes an existential question for broadcasters.

A clear example of this is Viaplay, which has had a turbulent year on the stock market. The share price has fallen over 73 percent since the start of the year. The company’s then-CEO, Anders Jensen, resigned when the company issued a profit warning and lowered its annual targets at the start of the summer.

Many Viaplay subscribers pay their monthly fee solely to access Premier League.

For Viaplay, it was primarily the international expansion that failed. In the Nordics, its position has been relatively stable. The reason for that comes down to one word: Premier League — the English football league. Viaplay holds exclusive rights to broadcast its matches in Sweden, Finland, and Denmark until 2028. Such an investment is enormously costly, but subscriber interest is also very high.

The battle for coveted sports rights has been ongoing for many years, and prices have been driven up by fierce competition.

On the horizon, however, you can sense that this safe card for driving subscribers could be threatened for Viaplay. Not because interest in sport on television is waning, but because those who might start bidding up prices have considerably deeper pockets than the Nordic players.

We are, of course, talking about the tech giants. Historically their interest in sport has been quite limited, but as their ambitions in video have grown, sports rights have become increasingly relevant.

In 2022, Apple paid $85 million — roughly 920 million kronor — annually to broadcast selected baseball games from the American MLB league. And just a few weeks ago they signed an exclusive streaming deal with Major League Soccer (MLS) — the football league in the US — worth 27 billion kronor over ten years.

Amazon with Prime Video has also invested in sport. The popular Thursday Night Football — American football in this case — costs Amazon 10.8 billion kronor per season.

Sums like these paint a potentially difficult competitive picture. So far, the American tech giants have mainly invested in domestic sports rights — but that should be seen only as a starting point. Both Apple and Amazon have far-reaching international ambitions, and have launched their video services in numerous countries — Sweden among them.

Having additional bidders in the race for the most coveted rights is not in itself a huge problem. Telia-owned C More and Viaplay have long driven up prices for each other in this regard.

For a competitor like Viaplay — which only has video to offer — it could become very difficult to compete.

What could end up being different is the scale and the underlying business model.

Neither Amazon nor Apple has video as their primary business. For Apple it is a complement to selling hardware; for Amazon it is a complement to e-commerce. Video is a way to reach even more potential customers who can then go on to buy a wide range of products and services. For a competitor like Viaplay — which only has video to offer — competing on those terms could prove extremely difficult.

It could also become very expensive. Apple’s 27 billion kronor to show the American football league over ten years sounds like a lot. But that sum is only around 0.09 percent of the company’s market capitalization — or about four percent of what Apple holds in cash. For the sake of the local players, one can only hope it takes a while before the tech giants start paying attention to European sport.

No feel for it: Twitter is becoming ‘X’

July 24, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on July 24th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Twitter is being renamed “X” as Elon Musk pulls his latest stunt. The choice of letter is no coincidence. But it reveals a lack of judgment at a moment when the questions are piling up — not just for Twitter, but for Tesla too.

Musk appears to have a particular fondness for the letter X — his new AI company is called “xAI,” one of his children is named “X Æ A-Xii,” and X.com was the name of the company where he was CEO in 1999. That company later became PayPal, and in 2017 Musk bought back the domain for “sentimental reasons,” in his own words.

The change is about more than just a favorite letter, though.

After a series of controversial decisions around Twitter, Musk has seen the value of his $44 billion acquisition drop by two thirds. Thousands of employees have been laid off, verified users have had to become paying subscribers, and Meta recently launched a competing product, Threads. Something needs to change.

The simplest explanation for why it is happening now comes from a famous line in the TV series Mad Men, where the main character Don Draper says in a meeting: “If you don’t like what is being said, then change the conversation.”

That is exactly what Musk is doing. Instead of talking about Twitter’s poor performance, he shifts the world’s attention to the relaunch of X.com.

The company’s newly arrived CEO, Linda Yaccarino, writes that the new product will incorporate payments to create a “marketplace for ideas, goods, services, and opportunities.”

That sounds like a description of what is commonly called a “super app” — a place where all kinds of services are gathered in one place. China’s WeChat is a well-known example.

Turning Twitter into a Western WeChat sounds exciting enough. And already, the conversation about the future of Twitter/X has started to shift. It is a clever communications exercise, but in every meaningful sense still a cosmetic change.

Building a “super app” is not an original idea, either. But it is hard. That is why no one in the Western world has managed it.

Recently, another question has come onto the radar. It concerns not the product but the person Elon Musk — or more precisely, how he is supposed to find time for all his commitments.

During Tesla’s most recent earnings call, Musk was asked whether his newly founded AI company could come to affect Tesla and its AI ambitions. Musk replied that there are talented people who do not want to work for large, established companies, and therefore the two businesses can complement each other.

That is, to say the least, an optimistic view.

The analysts’ question hints at a worry among Tesla’s shareholders — and almost certainly the shareholders of his other companies too — about what Musk’s priorities actually look like.

Musk is a well-known workaholic, and has capable managers carrying out the day-to-day work at the companies he is involved in. But by tying himself so closely to each company, questions about conflicts of interest become unavoidable. This is particularly true in AI, an area where Tesla is investing heavily and where Twitter/X will also need to find its position.

In an ordinary large publicly traded company, the board would have put its foot down and demanded that the company’s chief representative put all his energy there. But none of Elon Musk’s companies can be considered “ordinary.” That has been part of the appeal for many around him.

The expanded ambitions for Twitter/X are yet another addition to an already hectic schedule. The risk is that Tesla’s shareholders eventually start speaking up.

Musk has, to his credit, shown an impressive touch when it comes to electric cars — and rockets.

That touch has been entirely absent, however, when it comes to media, the category that Twitter/X falls into. Since Musk took over in October last year, the service has lost almost half of all its advertising due to the constant turbulence.

Abruptly swapping out one of the company’s most valuable assets — its brand — looks like yet another chaotic change. And that is the last thing Twitter, or “X” as it is now called, needs.

TikTok’s owner wants to build China’s Google

July 11, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on July 11th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

TikTok’s owner Zhang Yiming wanted to build a Chinese Google, inspired by Silicon Valley. His success has now placed the parent company ByteDance at the center of a geopolitical conflict.

He doesn’t like to be called “the boss,” even though that is the custom in major Chinese corporations.

Zhang Yiming — the founder of the tech conglomerate ByteDance — prefers to liken his business empire to American peers like Google and Meta.

On ByteDance’s website, the company’s stated values are listed, and first among them is “Always Day 1” — a phrase that could come from any Silicon Valley company. It refers to the entrepreneurial mindset of constantly staying open to new ideas and not getting stuck in what has come before.

This is something Yiming appears to have taken to heart. He has, in many ways, built something as unusual as a Chinese company that has made a significant mark far beyond its home market. And because of that, he has also ended up squarely in the middle of a geopolitical conflict between the US and China.

Zhang Yiming began his career at various Chinese tech companies in different technical roles. In 2008 he moved to Microsoft, but found the big-company rules too rigid. He therefore chose to resign and return to the startup world.

His first breakthrough came in 2012, when he spotted an opportunity to create a news service that aggregated different sources and let AI help with the selection and presentation of content. The result was the service Toutiao, which went on to become one of China’s most popular internet services.

But the ambition went further than that, which explains the model with ByteDance as a parent company. The structure needed to be able to accommodate more businesses.

Where the inspiration came from is easy to see. ByteDance’s offices featured posters, including one displaying the book cover of “How Google Works” by then-CEO Eric Schmidt. Google has a similar corporate model with its parent company, Alphabet.

The success of Toutiao allowed Yiming to attract venture capital from well-known names around the world. Sequoia Capital — one of the world’s most famous venture capital firms — became the largest new shareholders in the company when they invested $100 million in ByteDance in 2014.

Since then, investors including SoftBank, General Atlantic, and the giant KKR have become co-owners. In 2021, ByteDance’s valuation was rumored to be around $250 billion — roughly a staggering 2,600 billion kronor.

That is approximately one third of Meta’s valuation of around $730 billion, or eight times larger than Spotify’s $31 billion.

ByteDance now has a range of different operations in many countries. But it is one single holding that has accounted for by far the largest increase in value, and that has put both Yiming and his company on the map.

In September 2016, the app Douyin was launched — a service where you can watch videos in vertical format. Douyin was, and still is, only available in China. Since users of the service could upload their own videos, oversight of what was said had to be strict to avoid trouble with Chinese authorities.

At the same time, a similar service — also from China — existed but with a focus on the US market. It was called Musical.ly, and was acquired by ByteDance for what was rumored to be around $1 billion. The app was renamed and relaunched globally as TikTok. The rest is history.

While many other Chinese tech companies like Baidu and Tencent have had China as their primary market, Zhang Yiming has created a genuinely international tech conglomerate. But the company’s geographic home has now put it in turbulent waters.

For an app that initially focused on lip-syncing and dancing, TikTok’s impact on the world has become remarkably large. In autumn 2020, the US Department of Justice called Zhang Yiming a “mouthpiece” for the Chinese Communist Party. A few months later, he stepped down as CEO, handing over to co-founder Rubo Liang.

As recently as this spring, TikTok’s CEO Shou Zi Chew was questioned by the US Congress amid suspicions that the app posed a threat to national security. There are proposals to force TikTok to separate American users’ data, but no decisions have been made yet.

While the debate continues, another ByteDance app — CapCut — is racing up the charts around the world. Geopolitics and technology move at two different speeds.

Yiming managed to break out of his China and achieve what few Chinese entrepreneurs have managed. He has an internationally successful tech company, with users all around the world.

But the company must now come to terms with standing in the shadow of the Chinese regime. If you let ByteDance into your country, are you simultaneously letting in the Chinese Communist Party? That is the question Yiming — now as a major shareholder — needs to answer.

Yiming can change many things. But the company’s origins are something he cannot change.