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.

Can Sam Bankman-Fried’s house arrest save crypto?

July 10, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on July 10th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

He was on the cover of Forbes. Now he sits under house arrest at his parents’ home, facing over 100 years in prison. When the crypto market is in crisis, the former white knight — Sam Bankman-Fried — won’t be there to help.

Green tree-lined avenues crisscross the wealthy small town of Palo Alto, just over an hour south of San Francisco. On its outskirts you find the prestigious Stanford University, workplace of law professors Barbara Fried and her husband Joseph Bankman.

At home in their house, they have a new lodger. He sits under house arrest playing the video game Storybook Brawl while awaiting his trial.

Or SBF, as he has come to be known.

Once celebrated as a modern company-builder.

Now under investigation for fraud, embezzlement, and money laundering.

The luxury apartment in the Bahamas where he lived with his colleagues and former girlfriend has been confiscated. Bankruptcy administrators are trying to work out where all the customers’ money and assets have gone.

Getting to the bottom of it appears to be a complicated task.

John Ray III — the person appointed to oversee the effort — has made clear that the situation at FTX was worse than at the scandal-hit energy company Enron. And he should know — Ray was the one who had to untangle that mess too.

Bankman-Fried was long the public face of the entire crypto industry. Now he stands accused of, among other things, embezzlement running into the billions. A last-ditch attempt to have many of the charges dismissed failed in the middle of summer.

Bankman-Fried faces over 100 years in prison if convicted.

In many ways, the situation is symptomatic of the state of the cryptocurrency market as a whole.

Rise like a rocket, fall like a stone.

Sam Bankman-Fried was the white knight whose company FTX stepped in to buy up collapsed crypto projects like Voyager and BlockFi. They were compared to being a central bank within the world of cryptocurrencies.

But even central banks can apparently collapse.

And with FTX went the air out of a speculative market that has struggled to explain what it is actually for — beyond the speculation itself. Trading volumes for cryptocurrencies have halved in a year and are at their lowest level in three years.

Perhaps reality is starting to catch up with the crypto market?

At the start of summer, the American financial regulator the SEC sued two of the dominant cryptocurrency trading platforms — Binance and Coinbase. The SEC believes they have traded in the equivalent of securities, and that those securities have therefore not been handled correctly. The platforms deny any wrongdoing.

The SEC lawsuit puts its finger on a central question — how should a cryptocurrency actually be regarded? If it is not a form of security, then what is it?

This will now likely be worked out in court. The case could bring clarity — and with it legal precedent — to something that is, at best, unclear today, and at worst, the Wild West.

The number of crypto projects that have gone up in smoke after taking in millions from retail investors is uncountable. An updated regulatory framework could help prevent similar situations in the future.

A likely outcome, however, is that cryptocurrency is deemed to be exactly that — a security — and therefore needs to be handled in the same way as a stock or a bond. That would mean more laws and centralized oversight to ensure everything is done properly.

This would in turn likely lead to something of an identity crisis, since a large part of the appeal of cryptocurrencies is that they are meant to be decentralized — economic systems where no single individual, party, or institution can control the free flow of value being exchanged. That sounds utopian. But now the utopia has stalled, at least temporarily, in the somewhat dry and slow world of everyday regulation.

On this side of the Atlantic, in the United Kingdom, there is another interesting line being drawn. Their equivalent of the financial regulator, the FCA, has decided that crypto companies must ensure that their customers have “adequate knowledge and experience” to invest in cryptocurrencies. That too runs against the decentralized and anonymous ethos.

Not everything is pitch black, however. Many enthusiasts distinguish between bitcoin and all other cryptocurrencies. A cleanup among the less serious players could benefit bitcoin and a handful of other, more established currencies.

There is also something to suggest that bitcoin specifically has shown resilience against what has been a decidedly grim news cycle of late. Since the start of the year, the price of bitcoin has risen over 86 percent. Asset management giant BlackRock has applied to operate an ETF — an exchange-traded fund — based on the bitcoin price. Several similar products already exist, though none quite as prominent as BlackRock.

This messy and rebellious industry appears to be in the middle of a professionalizing ordeal. Many companies, cryptocurrencies, and ideas are unlikely to survive it. But for those that manage to pass through the new regulatory eye of the needle, a new and larger market may become accessible.

It may not be the decentralized vision that some had hoped for. But it could come to be what has so far been missing — a truly global digital currency that everyone can use.

Meanwhile, Sam Bankman-Fried’s house arrest continues.

And his story captivates. Bloomberg recently released the podcast series Spellcaster, which documents his rise and fall. Several books have already been written. Michael Lewis — the author who wrote The Big Short — spent months with him before the crash. His book is released in early October, just as the trial against Sam Bankman-Fried is expected to begin.

The ‘Twitter killer’ is perfectly timed

July 6, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on July 6th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Can Instagram’s new Twitter clone challenge Elon Musk? SvD’s tech analyst Björn Jeffery has tested the new service that launched last night and answers three questions about how it works.

Threads is Mark Zuckerberg’s and Meta’s latest app. Simply put, the app serves the same function as Twitter. Threads launches as an extension of Instagram, with the same login credentials.

If Instagram is about photos and videos, Threads is about text and discussion. Like other challengers such as Bluesky and Mastodon, the interface is to say the least familiar. Anyone who has previously used Twitter immediately understands how the service is meant to work.

The links to parent company Meta are almost invisible, aside from the extensive data collection — likely for future advertising — happening in the background. That data and the GDPR regulation are said to be among the reasons why Threads is not yet available in Sweden or the rest of the EU.

If there is one thing Zuckerberg’s Meta has been good at, it is copying from competitors. The app Snap has sometimes, somewhat cheekily, been called Instagram’s development department, the similarities have been so significant. The Reels feature that has been a success on Instagram is essentially identical to TikTok.

But not all copies have worked equally well. When Meta launched a clone of the audio app Clubhouse, it was a flop — and the original app has flopped too, suggesting the concept was simply wrong from the start. Twitter, on the other hand, is an established user behavior of more than 15 years.

Under normal circumstances it is difficult for apps that aim to challenge established giants. There are few reasons to abandon a service you are already used to. The similarity to the original also becomes the weakness — why switch if you already have a service that does the same thing?

Two things work in Threads’ favor in this case.

The first is timing. Twitter owner Elon Musk has been in almost constant turbulence over changes to his newly purchased product. There is skepticism, and some concern, that Twitter could deteriorate. The desire to carry on as before is therefore greater than ever, even if it means switching services.

The second reason is Meta’s scale and resources. In the first quarter of this year, Meta reached 3.8 billion people through one of the company’s services — Facebook, WhatsApp, Instagram, and Oculus. That is a head start that few others in the world can match. A single link from any of those services would bring millions of users directly.

Following the lukewarm reception of the “metaverse,” Zuckerberg has been forced to reduce the focus on his grand, game-like vision, at least in the short term. The metaverse investment remains, but is likely to take longer to break through than initially calculated. As a result, the product portfolio has been broadened with both AI initiatives and entirely new products, now including Threads. This allows the company to test more areas in parallel, while the larger metaverse can quietly simmer in the background.

Technically speaking, Threads is a walk in the park for Meta. The company could have launched the service at any point over the past ten years. But under the volatile leadership of Elon Musk, Twitter appears more vulnerable than it has been in many years. An alternative from Meta can therefore serve as a safe harbor. Meta is large, well-resourced, and long-term in its thinking. The timing is therefore perfect. And Threads looks set to become the biggest threat Twitter has faced so far.

Lina Khan has Silicon Valley trembling

July 3, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on July 3rd, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

34-year-old Lina Khan is the lawyer who has made Silicon Valley companies tremble. With a single article, she has turned how competition law is applied completely on its head.

“Do you ever get angry? Is there anything that makes you furious?”

The British law student Lina Khan was interviewing for a job at a think tank in Washington DC. Khan replied that she rarely got particularly angry. The interviewer said that the job — which she was about to get — might change that.

The think tank worked on competition issues and how market monopolies could both suppress wages and stifle innovation. Within just a year in the role, the promised anger began to emerge. Why were politicians doing nothing to stop this?

Khan channeled her frustration into a remarkable career — one that has come to redefine how the United States views competition policy.

Now — as head of the American competition authority the FTC — she is the gatekeeper who ensures that tech companies stay in line.

Microsoft’s $68.7 billion acquisition of Activision Blizzard? Khan sued Microsoft to try to block the deal.

Complicated subscriptions at Amazon? Khan sued the giant to make it easier for customers to cancel.

Meta has essentially stopped making acquisitions since Khan took office. It is generally understood that the chances of them getting a major deal approved are very slim.

Khan is a major force, and together with the EU’s Margrethe Vestager, she is one of the two people with the single greatest influence over the strategies of the tech giants.

It all started with a single article.

At 27, Khan was back as a student, this time at the prestigious Yale University. There she published an academic paper in the school’s journal, The Yale Law Journal.

The title was “Amazon’s Antitrust Paradox” — a nod to the 1978 book The Antitrust Paradox. In it, the lawyer Robert Bork argued, very simply, that the only thing that mattered in competition issues was whether prices went up for consumers. If they did not, there was no problem with competition or monopoly.

Khan’s article argued for the exact opposite.

Over nearly 100 pages, Khan described how even if consumers are satisfied, there can be problems in the longer term. For instance, the data Amazon collects could come to be worth more than if the company had charged more for its products. The consumer experiences no problem in the here and now. But over time, Amazon — with its data reserves — becomes so powerful that it may become difficult for others to compete.

At a time when tech companies were offering a great many services for free, this was a new and radical idea. The price that customers — and by extension, society — paid could come to be considerably higher than it first appeared.

Her position has its critics, of course. Within academia there are researchers who believe her article and definitions are flawed. But the biggest critics come, perhaps unsurprisingly, from the tech companies themselves.

Both Amazon and Meta have tried to argue that Khan cannot be impartial with regard to them, and should therefore not be permitted to participate in proceedings involving them. So far this has not succeeded — and Khan has held her ground.

Amazon is reportedly under investigation in the US for exactly these kinds of competition violations, though nothing official has been presented yet.

For a public official, Lina Khan has an unusually principled approach. In the US, potential competition violations must go through the legal system to have any effect. Generally, institutions like these do not bring cases to court unless they are very confident of winning.

Khan takes a different approach. She has said she may lose some of her cases, but that the process can clarify how this type of legislation should be applied.

While the US works through these questions, the market for large corporate acquisitions has come to a near standstill. The tech giants do not dare invest large amounts of time and money in major acquisitions that then risk getting stuck with competition authorities.

Lina Khan has even gone so far as to say she is looking at unwinding previously approved acquisitions. That could mean Meta might be required to sell Instagram, or that Google could be forced to sell YouTube.

The tech giants now follow everything that 34-year-old Lina Khan does and says. Since Joe Biden appointed her as head of the FTC in 2021, there has already been a wave of lawsuits and proceedings. But everyone knows that the really big cases are being prepared in Washington DC and have not emerged yet.

In the meantime, the big companies in Silicon Valley are on unstable ground — waiting for Khan’s next move.

More reality TV is coming — and less ‘Succession’

June 19, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on June 19th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Fewer streaming services and cheaper programming — that is the future that awaits as high interest rates and inflation force the TV giants to cut costs.

“Max is the one to watch, because everyone in the family can see exactly what they want, whenever they want.”

David Zaslav, CEO of Warner Media Discovery, presented the company’s new streaming platform Max earlier this year. It was previously called HBO Max. And before that, there were variants called HBO Go, HBO Now, and HBO Nordic.

It has, as you can tell, been a bit chaotic. And it may get worse.

With his brief platitude at the opening, Zaslav — inadvertently — summed up the state of streaming services. They all now offer households exactly the same thing: “everything for the whole family.”

And there are good reasons to position yourself as the one service people need.

In times of inflation, consumers cut back on their subscriptions. A survey by auditing firm KPMG last autumn found that 20 percent of respondents were planning to cancel a streaming service. If inflation kept rising — which it did — as many as 37 percent would cancel one or all of their services.

It likely won’t be quite that dramatic. Television entertainment still has a good future ahead of it. But there is much to suggest that there will be fewer competing services — and cheaper productions.

Looking at the American market gives us a preview of what may also happen here in Sweden.

We start with Paramount+, which in a few weeks will merge with the service Showtime. This sounds more dramatic than it actually is. The two have the same owner — the equivalent service in Sweden is called SkyShowtime, to make it even more confusing.

Having multiple streaming services within the same corporate group was a phenomenon that belonged to the era of zero interest rates. Now consolidation is the name of the game.

The aforementioned Max is also itself a merger of HBO Max and Discovery+. It is part of a cost-saving plan of 32 billion kronor that the company is undergoing.

Disney has a similar deal on the horizon.

Disney currently owns two thirds of the American streaming service Hulu. The remainder is owned by telecoms company Comcast. That Disney will buy out the final portion is already decided — it will likely happen early next year. The question is more about what the price tag will be, and what happens after.

A likely scenario is that Hulu will then be merged with Disney+ to create a mega-service. There is also speculation that Disney might use such a deal as an opportunity to sell its third streaming service — sports channel ESPN+. If that happens, Disney would have only one streaming service left, compared to three today.

So it looks as though consumers will have substantially fewer — but larger — services to choose between.

That trend could become a challenge for local services, such as Sweden’s Viaplay. Following a profit warning earlier in June, CEO Anders Jensen was let go immediately, and the share price fell over 60 percent in a single day. Viaplay operates in 33 markets, but has relied heavily on local sports rights to attract customers in the Nordics. That could prove a tough strategy as sports prices rise and the paid streaming market slows in Sweden.

The next worry is profitability. Disney+ lost 4.3 billion kronor — just in this year’s first quarter. All the major streaming services — including Netflix, which promised it would never do this — now offer ad-supported alternatives. In more economically pressured times, viewers more often choose that type of subscription. Looking at all new subscriptions taken out in the US, ad-supported ones grew from 18 percent in 2020 to 32 percent in 2022.

More ads can also mean a different type of content. Internal cost pressure, a consolidated market, and a greater focus on advertising point to one thing: cheaper programming. Think more reality TV and less “Succession.” It is tried-and-tested, popular, and substantially cheaper than competing with too many expensive drama productions.

The last ten years have been a golden era for anyone who enjoys television and film. Never has so much good content been made available to so many, at such a low price. Now much points to that era being over. Time to prepare for fewer services, lower quality — and the occasional ad break.

Started at a dive — now worth trillions

June 8, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on June 8th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The flamboyant visionary Jensen Huang likes to dress in black leather jackets. He is a rock star in the chip and semiconductor industry. Now Nvidia’s founder faces his greatest challenge — living up to the market’s expectations.

The black leather jacket is on. The grey hair is well-groomed. Jensen Huang steps onto the stage at the Computex trade show in Taiwan with a wide smile. The music playing in the background sounds like it belongs in a Star Wars film.

“We’re back! I haven’t given an in-person presentation in four years. Wish me luck!”

Jensen Huang likes to joke with the audience. During the pandemic, he filmed his company presentations at home in his kitchen and pulled new chips out of the oven. Even if it had been a while since he was on stage, it looks like home turf for him.

He has every reason to feel comfortable.

Huang’s chip company, Nvidia, is the central player behind the scenes of the current AI explosion. The company manufactures the hardware used to train AI models. And given the interest in AI, demand for Nvidia’s products seems almost limitless.

By the time Huang takes the stage, Nvidia has just crossed the coveted threshold of a market cap above one trillion dollars — that is, a thousand billion dollars.

Jensen Huang’s start in life was considerably more modest than that.

For a start, his name is not Jensen, but Jen-Hsun. He adopted the slightly Danish-sounding nickname to adapt to the United States, where he moved at the age of nine. His parents felt that their home country of Taiwan and their temporary home country of Thailand were politically turbulent. They decided to send Huang and his older brother across the Pacific to give them a different kind of life.

The Huang brothers ended up at a boarding school in the small town of Oneida in eastern Kentucky. The school belonged to the Baptist movement, and all students had dedicated duties beyond their schoolwork. Huang’s job was to scrub the toilets — every day. In an interview with American radio station NPR, Huang recounts that it was a tough school, where some children carried knives and fights often resulted in someone getting hurt.

“In the end, I loved my time there. We worked very hard, we studied very hard, and the other students were very tough,” Huang told NPR.

He describes taking away a work ethic and experiences he could build on.

Huang went on to university to study electrical engineering. He earned a master’s degree from the prestigious Stanford, and then worked in the surrounding Silicon Valley.

At 30, he did what so many around him were doing — started a tech company. At a run-down restaurant, he founded Nvidia in 1993, alongside two friends.

The insight behind the company was that the future would require better computer graphics, but that the hardware to enable this was not yet available. The thesis proved correct, and Nvidia found success by beginning to manufacture graphics cards for PC computers.

The focus on graphics made them popular among gaming enthusiasts. In a 2002 interview in Wired magazine, a game developer described how Nvidia’s graphics cards played a large part in the success of Microsoft’s Xbox gaming console.

Gaming components are a large market in themselves. But the idea of using them for entirely different purposes was the real breakthrough.

Nvidia expanded its portfolio to what are called GPUs — graphics processing units — a type of chip capable of handling multiple calculations in parallel. In 2007, the company developed software that allowed these GPU chips to be used in far more areas than just graphics. With this insight, the potential market had multiplied overnight.

Since then, Nvidia has been part of several major technology shifts, particularly those requiring significant processing power.

The chips are used, for instance, in the new supercomputers that produce advanced weather forecasts and conduct research in chemistry and physics. They can also facilitate the production of cryptocurrency, in the process known as “mining.” Being exposed to new technologies does come with risks, however. When the cryptocurrency market plunged sharply in 2018, Nvidia ran into trouble as demand for their products fell steeply — and quickly.

Now the AI hype has taken over where crypto left off. Suddenly the company’s products are being mentioned by companies like Alphabet, Google’s parent company, when they present their quarterly figures. More people than ever are interested in what components are under the hood of computers.

Huang therefore faces what may be the greatest challenge for him and the company: managing the world’s expectations.

Nvidia trades at a P/E ratio of around 200 and is priced at over 37 times revenue. Comparable figures for industry peer Qualcomm are around P/E 12 and 3 times revenue. Qualcomm does have a different strategy, primarily focusing on other types of components than Nvidia. It is an enormous success already priced into Nvidia’s stock — and a strong belief in continued demand for GPU chips.

The market has spoken — it believes in continued success for AI, and through that, for Nvidia. Huang is the visionary who was right in his initial prediction, and who managed to rebuild the company into something that now creates the infrastructure for the greatest technology shift of our time.

Having the right vision is not enough, however — you also have to be able to deliver on it. The market expects flawless execution. The pressure is now on Jensen Huang. Can he make Nvidia the next tech giant?