Wall Street Cheers Netflix’s Numbers — But the Bland Era Is Coming

January 20, 2023
by Björn Jeffery
SvD Näringsliv

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

Strong subscriber numbers lifted Netflix after its earnings report. But the effects of its cheaper, more mainstream content have not yet arrived. And a bigger problem has emerged: Disney.

It is easy to be confident when your company is growing fast.

Netflix’s outgoing CEO Reed Hastings said the following in an interview after presenting quarterly results almost exactly three years ago: “We want to be the safe haven where you can explore, be stimulated, have fun, enjoy, relax — and without any of the controversy around exploiting users with advertising.” He added that “in the long run, there is no easy money to be found there.”

Fast forward to Thursday evening and Netflix is in a very different position.

Hastings, who co-founded the streaming giant in 1997, is stepping down as CEO and moving to the role of chairman. He was wrong about never introducing advertising — Netflix launched an ad-supported tier in November 2022. But he was right that there was no easy money to be found. Thursday’s quarterly results showed that all money is quite difficult at the moment: revenues were the lowest of the year, growth slowed to 1.9 percent, and profitability was weak, partly due to the strong dollar.

The subscriber numbers told a different story, however. Analysts had expected 4.57 million new subscribers; Netflix brought in 7.66 million. Wall Street cheered.

How subscribers split between price plans has not yet been disclosed. But even before the report, there were signs the new ad-supported model was not an immediate hit. Data from analytics firm Antenna showed in December that the ad-supported tier was the least popular of Netflix’s offerings — only 9 percent of new sign-ups chose it. The equivalent figure for Disney-owned Hulu is 57 percent. Netflix offered no further details in its report, only noting that it was “early” to evaluate and that they were “satisfied.”

Disney has become an increasingly significant concern for Netflix. Last summer, Disney surpassed Netflix in total subscribers across its streaming portfolio. Disney+ is the largest, available in Sweden and elsewhere, but the portfolio also includes Hulu, sports channel ESPN+ and Latin American service Star+.

Growing at Disney’s pace is expensive, however — the company lost $1.5 billion in streaming last quarter. One area being speculated about is gaming. Disney has circled that sector before. Now they could potentially add games to Disney+.

Netflix is pursuing a similar strategy. They already offer more than 40 mobile games to subscribers and have acquired six game studios. The logic behind the gaming push can be summed up in two words: high interest rates.

“When borrowing was cheap, you could borrow lots of money and invest it in content,” said Shahid Khan, global media head at consulting firm Arthur D. Little, to Reuters. “Given current interest rate levels, Netflix will need to be very selective about approving new content — and how to finance it.”

Film and TV were cheap to produce when rates were low. Now they are considerably more expensive, which affects the type of content Netflix commissions. That means cheaper and more mainstream series going forward. Gaming, by comparison, can be a lower-cost way to keep subscribers engaged — and a hedge against expensive prestige production.

The subscriber figures in the latest quarter show that Netflix’s pull still exists. But the content being watched now was commissioned and financed long ago — TV production cycles are long. The acclaimed war film All Quiet on the Western Front, recently nominated for 14 BAFTA awards, is a clear example of the old, premium model.

When the new, cheaper material starts dominating the screen, we will see whether subscribers prove equally loyal.

Microsoft’s Investment in OpenAI Is Starting to Look Like Genius

January 17, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on January 17th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Never underestimate Microsoft. That is the lesson many in Silicon Valley are learning right now. Satya Nadella’s masterstroke has put the M back on the map.

“FAANG.” In the 2010s, it was the only acronym that mattered in tech. It stood for the first letters of Facebook, Apple, Amazon, Netflix and Google.

A few years on, the acronym has become “MAAMA.” Two companies have changed their names — Meta (formerly Facebook) and Alphabet (formerly Google) — while Amazon and Apple remain. Netflix has shrunk and dropped off the list entirely.

What is left is one letter: M. M as in Microsoft.

The dominant tech company of the PC era has been on a long journey. Early in the internet age, competition regulators came down hard on it for using its browser, Internet Explorer, to entrench its dominance. That opened the door to rivals — Firefox, Google Chrome, Apple’s Safari.

When PCs gave way to smartphones, Microsoft failed to launch a successful mobile operating system. The Nokia acquisition was expensive and went badly. Bing never achieved verb status the way Google did. For a while, it seemed as though Microsoft dominating anything on the internet was a distant prospect.

But behind the scenes, the picture looks quite different.

If you visited any websites today, there is a reasonable chance they were served by Microsoft’s cloud platform, Azure. Microsoft is the second-largest cloud provider in the world, just behind Amazon AWS — and more than twice the size of Google Cloud. Office subscriptions (Microsoft 365) are popular. Xbox with its Game Pass subscription likewise. Add Windows and the social network LinkedIn, acquired in 2016, and an entirely different kind of company emerges.

The architect of this transformation is Satya Nadella — Microsoft’s CEO since 2014. He was the third person to hold the role since the company’s founding in 1975, taking over from Steve Ballmer and Bill Gates. The timing was perfect. Nadella led a cultural overhaul to break old habits. The tech boom provided strong tailwinds. Despite the downturn in 2022, Microsoft’s share price has risen more than 560 percent since he took over.

Nadella is now on everyone’s lips because of an investment Microsoft made back in 2019. OpenAI was then seen more as a research project than a proper commercial company, with the stated goal of developing AGI — artificial general intelligence. Put simply, that is when a computer begins to think and act on its own, in a more human-like way.

Microsoft invested a significant sum and, crucially, agreed to run OpenAI’s systems on Azure. Training AI models requires enormous computing capacity and gets expensive fast. By hosting OpenAI, Microsoft absorbed a large part of those costs. In return, it gained a prestigious client, a system that would grow alongside Azure over time — and a relationship with a company sitting on potentially groundbreaking technology that Microsoft could apply across its own products.

The investment attracted little attention until a few weeks ago, when OpenAI launched ChatGPT and took the world by storm. Suddenly, AI became more concrete and comprehensible to ordinary people.

And Microsoft’s 2019 bet looked like a stroke of genius.

The two companies are now reportedly close to a further investment of $10 billion — around 100 billion kronor. The technology could help the Bing search engine become a genuine threat to Google for the first time in its history: a search engine that answers questions, rather than returning a list of links. Google’s leadership has reportedly issued an internal alarm and begun redirecting resources to meet the new competition.

After many years of quiet, the playing field for the tech giants may be about to shift dramatically. And they may soon experience what many learned during the PC era: never underestimate Microsoft.

The Winklevoss Twins’ New Crypto Battle

January 12, 2023
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on January 12th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

They believed Mark Zuckerberg stole their social network idea. Now they claim a business partner has stolen their customers’ money. The Winklevoss twins saw crypto as a fresh start — but now they are stuck.

Imagine Swedbank promised its customers around 7 percent interest on a special account, with the freedom to withdraw at any time. An attractive offer for most people.

To deliver that return, Swedbank needs to lend the deposited money to SEB. SEB in turn makes higher-risk investments, aiming to earn more than the 7 percent. The margin is split between the banks — everyone is happy.

Then something happens. It turns out SEB has lost the deposited money and refuses to pay it back. Swedbank is furious. Its customers are furious. And now Swedbank and SEB are fighting each other, very publicly, on Twitter.

None of this has anything to do with Swedish banks.

Swedbank in this scenario is Gemini — a crypto exchange founded by Cameron and Tyler Winklevoss, known from the film The Social Network. On the other side is Genesis Global, a crypto trading platform owned by the conglomerate Digital Currency Group (DCG). The Winklevoss brothers are the latest in a long line of prominent figures caught up in the storms that swept through the industry in 2022.

In total, around 9 billion kronor is missing from roughly 340,000 Gemini customers — and the atmosphere is deeply hostile.

The Winklevoss brothers say they tried to resolve the situation directly with DCG’s CEO Barry Silbert. When those talks broke down, they took to Twitter and resorted to open letters instead. Silbert’s position is that they owe Genesis nothing until 2032. The standoff remains unresolved, and there is a palpable sense of desperation in the air.

The dispute says a great deal about the state of the crypto market more broadly. In the chase for fast, high returns, enormous risks were taken — risks that stayed hidden as long as prices kept climbing.

For its own customers, Gemini described its lending partners as having been “evaluated with our risk management framework.” That may well have been true. But when 9 billion kronor disappears, perhaps the framework itself deserves a review.

Like the 2008 financial crisis, crypto markets were interconnected in ways that were not visible to individual participants. The collapses of FTX, BlockFi, 3AC and Celsius cascaded through the industry on multiple levels. Enormous amounts of capital were wiped out in direct losses as trading partners failed. The crashes drove the prices of many cryptocurrencies sharply lower, reducing the value of whatever holdings remained. And finally, trust in the market eroded — making recovery that much harder.

The Winklevoss brothers once used their settlement money from the Facebook dispute to invest heavily in crypto through Winklevoss Capital. It was meant to be a fresh start — and for a time, they presented themselves as serious, visionary entrepreneurs in a new and open market.

In an article on their site from 2020, they wrote that the price of Bitcoin could reach $500,000. At the time of writing, it is just under $17,500. Their company description also states that “those who dare to fail greatly, dare to achieve greatly.”

The Winklevoss brothers are perhaps used to turbulence by now. But when 9 billion kronor goes missing, it is doubtful their customers feel quite the same way.

Why 2023 Could Be a Terrible Year for Zuckerberg and Meta

December 28, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 28th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

A hiring freeze, a collapsing share price and billion-dollar fines from regulators. Despite a brutal 2022, almost everything points to 2023 being Zuckerberg’s biggest challenge yet.

He can be quite stiff, Mark Zuckerberg. But suddenly a different person appears. One who laughs. Even at jokes made at his own expense.

“It’s hard to imagine anything more important,” says Mark Zuckerberg.

It is November 2021, and Facebook’s founder and CEO has just been asked by YouTuber Sara Dietschy to rate various memes about the company’s impending name change to Meta. Meta has recently held a major presentation in which Zuckerberg himself laid out a vision for the next ten years. In the weeks that followed, he went on a PR tour to talk about it — including the meme review.

Since then, Meta’s share price has fallen to around $120 — a steep decline from those lighthearted days. The tech world has gone through a severe correction.

And yet there is much to suggest that Meta faces even bigger challenges ahead. In fact, 2023 may come to be Zuckerberg’s “annus horribilis” — a terrible year, as the late Queen Elizabeth II once described it.

The first concern is that Meta’s business model is under attack.

After a decade of enormous growth, 2022 brought a revenue decline for the first time in the company’s history — two quarters in a row. That is a bad indicator for the year ahead. There are primarily three things weighing on Meta’s ad-based revenues.

The general economic climate tends to hit the ad market hard. Rapidly rising interest rates, inflation and a looming recession in several key markets have prompted advertisers to pull back.

The second factor is TikTok. The platform — which is Chinese-owned and has attracted concern from officials including FBI Director Christopher Wray, who called it “extremely worrying” — has nonetheless failed to alarm users. TikTok’s ad revenue reportedly grew 142 percent year over year.

Third, Meta lost the ability to precisely track its advertising on Apple iPhones. This seemingly small change to Apple’s operating system could cost Meta around 103 billion kronor in lost revenue, according to Zuckerberg himself. Apple claims the change protects user privacy — though it also conveniently coincided with the expansion of Apple’s own advertising business. Unusually good timing for Tim Cook. Very bad timing for Mark Zuckerberg.

The second major cloud over Meta is that tech regulation is starting to bite. In 2023, the EU’s Digital Markets Act (DMA) comes into force, with the Digital Services Act (DSA) following the year after. Lawmakers have taken their time — to put it mildly — in addressing these issues. But when things finally start to move, they tend to move hard. The DMA is almost tailor-made to squeeze the largest tech companies, and Meta is firmly on that list.

A separate EU proposal would strip Meta of the ability to require users to see personalised advertising. That would further reduce the precision of Meta’s ads on both Facebook and Instagram, with likely severe consequences for revenue. The proposal will almost certainly be challenged in court.

Even without new laws, it can get expensive. Under GDPR, Meta has already been fined a total of 9.5 billion kronor since last year.

One advantage Meta has on the regulatory front is its sheer scale. The FTC, led by Lina Khan — who has become well known and feared in tech circles — recently sued Microsoft to block its acquisition of Activision Blizzard, a deal worth 710 billion kronor. But Khan’s FTC doesn’t only target the largest deals: they also sued Meta in an attempt to block the acquisition of Within, a relatively small VR developer.

That blocked acquisition is a serious warning sign. It signals that Meta’s previous strategy of buying its way to new innovation is unlikely to work in 2023. Instagram, WhatsApp and Oculus were all companies Zuckerberg purchased — for enormous sums. If that route is now closed off, he has to build the next generation of products himself.

Which explains why Zuckerberg is committing $100 billion to the metaverse. He doesn’t really have another option.

But the question remains: does he genuinely see something others don’t — or are there simply no people around him willing to disagree?

His former operational partner, COO Sheryl Sandberg, left Meta in autumn 2021. She was widely described as the adult in the room during Facebook’s most chaotic years of growth. Zuckerberg also controls Meta outright through a special class of shares that gives him effective veto over the company’s direction. In practice, he cannot be fired.

In that situation, it is easy to end up surrounded by yes-people. Why challenge the vision of the all-powerful CEO? It is easier to keep your head down and hope he is right — even if not everyone believes he is. There is an element of unchecked authority here that is hard to ignore. And that is rarely a good starting point for innovation.

Do you remember Facebook Slingshot, Lasso and Rooms? No, you probably don’t. They were three in a long line of failed internal projects that never amounted to anything. That is the trend Zuckerberg must now break.

Not everything is bleak, however. Two things do work in Meta’s favour.

First, the stock is now genuinely cheap by tech standards — the whole company is valued at little more than 2.5 times revenue. Google and Apple trade at roughly twice that. That could attract new investors and contribute to upward momentum.

Second: inertia. In the third quarter, Meta had almost three billion monthly active users — roughly a third of the world’s population. It is easy to keep using Messenger, Instagram and WhatsApp once you’ve started. They may not feel quite as fresh as they once did, but will people actually leave? Meta’s numbers suggest most won’t. That gives the company a solid base from which to build new revenue streams.

In the end, Mark Zuckerberg himself — as the company’s largest shareholder — has billions of personal reasons to keep trying. Whether he succeeds remains to be seen. But 2023 could be a very long year for him.

Fortnite Fined Billions for Deceiving Children — Swedish Parents Can Claim

December 20, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 20th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The makers of Fortnite are facing billion-dollar fines for deceiving children. But the true scale of the problem is far larger — and the white lies are many.

Did your children accidentally buy a llama or a battle pass in Fortnite? If so, you may be owed a refund from the American consumer watchdog, the FTC.

The Federal Trade Commission has come down hard, issuing the largest fine in its history: 5.4 billion kronor.

According to the FTC, Epic Games — the company behind Fortnite — unlawfully collected data on children under 13 and operated a digital storefront designed in ways that led to unintended purchases.

Epic Games said it agreed to the settlement because it wants to be a “leader in consumer protection.”

The billion-kronor fine sounds impressive. But the money is almost certainly a drop in the ocean compared to what it would cost if all the games and internet services that exploit children actually had to pay for it.

The situation for children and young people online is, frankly, not good. And every party bears a share of the blame.

The laws are often old and hard to comply with. Companies behave as though children simply do not exist on the internet. And parents have no real idea what their children are actually doing.

Why isn’t this being fixed?

The first reason is that almost nothing online is designed with children in mind. Services like YouTube, Google and Instagram all have adults as their primary audience. But there are no watertight identity checks. A twelve-year-old can simply claim to be thirteen — and that one year is the line between being a child and an adult in the strict legal sense.

These questions are governed in the US by a law called COPPA — the Children’s Online Privacy Protection Act. In Europe, the equivalent is GDPR-K, part of the broader data protection package that came into force in 2018.

COPPA has age working against it. It was written long before the first iPhone existed, and therefore long before Snapchat, TikTok or Fortnite. The law has been updated over the years, but companies still need to hire expensive consultants just to be confident they are getting it right.

The third challenge is one shared by games and internet services alike: the human factor.

If there is one universal truth about parents and children, it is that adults overestimate their children’s abilities, and children want to do what their older siblings do. Anyone who works on children’s products — digital or physical — will confirm this.

In the digital world, it means that younger siblings get access to TikTok or Fortnite earlier than older ones did, simply because it becomes harder and harder to justify saying no. Parents can also be spectacularly unaware of what their children are doing online — even when it costs money.

Well-resourced groups like the Electronic Frontier Foundation have pushed back against new legislation, arguing that the risk of excessive content censorship is too great.

What is clear is that even with new laws, bringing order to this space will be difficult.

And so Epic Games will now pay 5.4 billion kronor.

“No game developer creates a game with the intention of ending up here,” the company wrote in a statement about the settlement. That is an optimistic view of the gaming industry.

The problem is rather the opposite: very few game developers create games with the intention of not ending up here.

Ignoring the fact that children and young people are online solves nothing. And as Epic Games has now discovered, it can also turn out to be very expensive.

After Tesla’s Stock Fall, Shareholder Patience May Finally Run Out

December 15, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 15th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Tesla is the EV market leader, but faces tough competition ahead. The bigger storm cloud, though, is coming from inside: the CEO is selling shares and pouring his energy into Twitter.

Have you heard of Marc Tarpenning and Martin Eberhard?

The most devoted enthusiasts will know the names, but for most people, they are two figures who disappeared without leaving a visible mark on the world. They are, in fact, the founders of Tesla. Eberhard also served as CEO during the company’s first four years.

But the name associated with the company is Elon Musk — the man who always seems to be at the centre of things.

As a colourful — and controversial — figure, it is hard to separate him from the companies he becomes involved with. That Tesla has benefited from this fascination is obvious. But now the other side of that coin is starting to show.

This week, Musk sold 22 million Tesla shares for $3.6 billion, roughly 37 billion kronor. He remains the largest shareholder, but the timing of the sale raises questions. Tesla’s stock has fallen around 55 percent since the start of the year and is now at its lowest point since autumn 2020. When a company’s CEO — an insider — sells shares, it is always noteworthy. And it invites scrutiny.

Part of the explanation comes down to Twitter. Following Musk’s $44 billion acquisition of the platform earlier this year, he made two large share sales. The first was in April, for around $8.5 billion, and then again in August for $3.95 billion. Both were necessary to finance the deal — a deal he spent months trying to walk away from.

On both occasions, Musk stated he did not intend to sell further Tesla shares. This week’s transaction was therefore not something other shareholders were expecting. That an acquisition of this scale requires cash is something most people can understand. What is harder to see is how Tesla’s shareholders benefit from any of this.

Beyond the share sales, there is a growing concern about where Musk’s time and attention actually go.

KoGuan Leo, the third-largest individual Tesla shareholder, put it plainly: “Elon has abandoned Tesla and Tesla has no functioning CEO. Tesla needs and deserves a full-time CEO.”

More shareholder voices are now being raised. They see a company that needs complete focus to navigate an increasingly competitive electric vehicle market, where Chinese rivals are gaining ground fast. Having a CEO spread across so many other companies is a liability. Twitter and Tesla have nothing in common beyond their owner — but the associations bleed across regardless.

The question this raises is what Tesla’s board should do. Musk is certainly a major shareholder, but not the only one. The board’s primary responsibility — in any company — is to represent all shareholders and ensure the right person is in charge. That is a difficult task under ordinary circumstances. It is particularly difficult when the CEO’s brother, Kimbal Musk, is one of the board members.

Removing Musk is not going to happen any time soon. But even prominent CEOs get pushed out from time to time. One need only look at Twitter itself, where Jack Dorsey stepped down just over a year ago. He was then running both Twitter and the payments company Block (formerly Square). The loudest voices calling for his departure were activist fund Elliott Management, who believed the company needed new leadership and faster product development. Back then, the argument was simple: you cannot have a CEO with two jobs.

Elon Musk has considerably more than two. On the other hand, he also appears to work extraordinarily hard, and has an army of loyal allies around him. Neither Tesla, SpaceX nor Neuralink need him present every day for the companies to continue developing.

The success Musk has delivered has earned him enormous goodwill. That goes a long way. But after a share price fall of more than half, there is a real risk that patience eventually runs out — even for Elon Musk.

ChatGPT Is the Biggest Buzz in Tech Right Now — Could It Be the Next Google?

December 6, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 6th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

A research organisation is behind the biggest thing the tech world has talked about in years: ChatGPT. The new AI software is taking the internet by storm. Could this be the foundation of the next Google?

Ask and you shall receive, as the saying goes. That has rarely been more literally true than with ChatGPT. In just one week, the new AI software has gained over a million users.

Part of the innovation lies in the interface: you can chat directly with the software, asking questions in natural language. The responses also feel more human than the correct-but-mechanical answers we are used to from search engines. It feels like talking to someone who is genuinely trying to help — and who can refine their answers based on your feedback.

Ask it directly what to make for a Swedish Christmas dinner and it responds in an instant, with a confident, reasonable list. The impression is striking.

But the most interesting thing about this phenomenon is not the novelty of the user experience. It is what the underlying technology could form the basis of — and what comes next.

For a company like Google, which built a world-leading position by being the best at finding things on the internet, services like ChatGPT represent a new and unusual challenge. Google has been essentially uncontested in search for a long time. But as so often with new technology, the challenge is coming from the side — in this case from a partly non-profit research organisation, OpenAI — rather than from a direct competitor.

The challenge for Google is not the technology itself. Google employs thousands of people working on machine learning. The issue is scale and the company’s revenue model.

Google handles around 8.5 billion searches every day. Getting a service with a million users to run quickly and reliably is a challenge. Getting Google to work for everyone on Earth is a fundamentally different and vastly harder problem.

But the deeper issue is financial. Google generated nearly 6 trillion kronor in revenue over the past twelve months. The vast majority came from ads linked to search results. Changing how search results — and the accompanying ads — are presented therefore carries enormous risk. The smallest change could result in billions in lost revenue.

Precision is what Google charges for. That dependence points toward incremental changes rather than radical redesigns. The question is not whether Google could technically overhaul its search engine. The question is whether anyone inside Google can justify that kind of risk. Large companies, as Google has now become, tend to favour the safe over the bold in moments like this.

Some healthy scepticism about ChatGPT is also warranted. Stack Overflow — a question-and-answer site for software developers — has temporarily banned answers generated by ChatGPT. The responses are simply wrong too often. And what makes it worse is that the wrong answers tend to look plausible and well-sourced. That undermines the entire point of the site: being able to find a correct answer quickly.

It is early days. But the direction is clear: AI-powered conversational interfaces are coming for search. Whether it is OpenAI, Google, or someone else that ends up defining what that looks like is still very much an open question.

Suddenly Musk Gets It: Apple’s App Tax Is Calling the Shots

November 29, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 29th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Now that Elon Musk has woken up to Apple’s “tax,” Spotify gains a loud new ally. But Musk is playing a high-stakes game — and his newly acquired Twitter cannot afford to lose it.

Twitter’s new owner Elon Musk is a busy man. On top of owning Twitter, he is also a major shareholder and CEO of Tesla, SpaceX, Neuralink and the Boring Company. There are surely more companies and titles to add to the list.

Perhaps it is because he is so busy that he is only now discovering things that have been going on in the tech world for years.

Musk tweeted this week: “Did you know Apple puts a secret 30% tax on everything you buy through their App Store?”

Eh, yes? Everyone in the tech world knows this by now. It is exactly what the court case between Apple and Epic Games was about. It is the same issue Spotify brought to the EU with a formal complaint. It is the ongoing regulatory battle that has occupied regulators across Europe, the US and South Korea for years.

When Musk discovers something, it does at least tend to get noticed. And there is no harm in having an influential voice draw public attention to this issue. The 30 percent cut Apple takes from in-app purchases is genuinely significant.

But complaining loudly is ultimately just noise. For players like Spotify and Epic Games, having vocal support on these issues is no doubt welcome — but it is unlikely to change the outcome of ongoing legal processes.

Musk will probably also come to realise why relatively few developers actually pick a fight with Apple: it can be very expensive to have them as an enemy. If Apple decides that something in Twitter warrants closer scrutiny, the tech giant will scrutinise it. That process can be appealed — but only to another part of Apple. In practice, business-critical features can be kept off the market based on little more than Apple’s discretion.

For Twitter, this could be catastrophic. The platform is entirely dependent on users on Apple’s operating system, and uses the App Store as its most important distribution channel. If the app were removed — as Musk himself says Apple has threatened — it would be enormously difficult for Twitter to function as a business.

In the end, Musk is in a position where he needs Apple far more than Apple needs him. Picking this fight loudly and publicly may feel satisfying, but the leverage runs firmly in one direction.

After the FTX Collapse: Tokenomics Could Change Everything — If We Want It To

November 26, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 26th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

After billion-dollar crashes and fraud across the crypto world, many are wondering whether the market is simply over. But what is called “tokenomics” has the potential to reshape large parts of society. The more interesting question is: do we even want that?

In the autumn of 2021, a piece of American history came up for sale at the prestigious auction house Sotheby’s. One of the thirteen surviving copies of the US Constitution was on the block. The slightly yellowed pages are considered a national treasure.

So far, perfectly normal.

Then the crypto world got involved.

A so-called DAO was formed — a decentralised autonomous organisation — with one single purpose: to buy the Constitution. Think of a DAO as the crypto world’s equivalent of a homeowners’ association. There are rules to follow, but no single person is in charge. Decisions happen through voting. Tokens give you a vote.

The DAO raised the equivalent of over 400 million kronor in just a few days. Tens of thousands of people participated from around the world, each buying in with crypto. It was a remarkable demonstration of what this technology can enable.

In the end, a private bidder outbid the DAO, and the document went elsewhere. But the experiment stuck.

Equity trading happens on exchanges with rules, customs and laws. That creates reasonably fair conditions. Trading in unlisted shares carries higher risk — which is why we have the term “venture capital.” Cryptocurrencies carry even higher risk, and far fewer rules. Fraud and pump-and-dump schemes are part of everyday life, even among established players.

There are differences between projects. Many enthusiasts would argue that Bitcoin is fundamentally different — technically and philosophically — from everything else. That may be true, but many speculators are not there for the philosophy. They are trying to make money.

Looking at price versus value in crypto, it is no exaggeration to say that prices have been high relative to the underlying value, which has often been low. But the function — the underlying promise of what this technology could enable — is worth examining independently of price.

That is where the real rescue of crypto’s reputation may eventually come from.

One area where it could have genuine impact is traditional finance. These initiatives are known as “DeFi” — decentralised finance. The idea is to trade financial products without centralised intermediaries like banks or central banks. Transactions can be faster and cheaper, at least in theory.

The underlying technology — blockchains — makes this possible. As a developer, you can build your own financial company on the Ethereum blockchain without needing external approval. Trying to do the equivalent inside Nordea or Swedbank would be nearly impossible, requiring both their goodwill and their permission.

DeFi removes the middlemen from financial transactions. Instead of trusting institutions, you trust the technology. Predefined smart contracts execute the transactions — no one interferes.

Another area is NFTs — non-fungible tokens. The NFT market has also crashed after intense speculation. Sales volumes fell 99 percent between May and September this year. But the underlying function remains, and it is a genuinely novel way to regulate ownership in a digital world that has historically been driven by copying. It also works for representing ownership of physical things. In the US, the first physical house has already been sold as an NFT.

There are interesting tendencies on the horizon, despite all the crashes. When, or perhaps if, these markets can regain consumer trust, tokenomics could become building blocks for a new kind of internet.

But perhaps the most interesting question is also the simplest: do we actually want it? When more and more things are represented as tokens, more things become tradeable commodities. Life starts to resemble a trading floor — one that can also get hacked. Tokenomics makes it possible to own a fraction of nearly anything. That is a significant statement about where the world might be heading.

Streaming’s New Normal: How Netflix Is Going Full Seinfeld

November 22, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 22nd, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Hoping for a new Squid Game this winter? You might be disappointed. Everything points to Netflix’s content becoming more like Seinfeld than big prestige dramas. The reason: a new business model.

“We basically sold nuclear weapons to a third-world country, and now they’re using them against us.”

It sounds like a declaration of war — for good reason. But the slightly dramatic statement came before the war in Ukraine, and carries less geopolitical weight than it implies. We’re talking about streaming. Nothing more serious than that.

The quote comes from Bob Iger, the then-former CEO of Disney. He was talking about how the entertainment giant licensed its content to Netflix for years. It was good money in the short term, but it also meant Disney+ took a long time to launch.

When those contracts expired, Netflix went from being a customer to being a competitor.

Last weekend, Bob Iger reclaimed the CEO role after his successor Bob Chapek was fired after just over two years. The internal power dynamics at Disney are a story in themselves — but what matters for this analysis is what it means for the streaming market.

Until now, Netflix has been able to focus solely on its subscribers. Now it has added a new target audience: advertisers.

For anyone who has worked in commercial television, this is nothing revolutionary. It’s how the industry has always worked. For Netflix, it is not trivial.

Suddenly, the streaming giant needs to ask itself what advertisers think about its content. And the answer to that question has major consequences for what content gets made.

Netflix ads haven’t arrived in Sweden yet, but the effects are already becoming visible — through the shows they commission and acquire.

Julia Alexander at the newsletter Puck calls this the “Seinfeld strategy.” What works well right now is comedy — preferably light, something you can watch actively or have on in the background. Timeless themes where familiarity is part of the charm. Seinfeld and The Office are the clearest examples.

Netflix’s own comedy Blockbuster — set inside the video rental chain they helped kill — fits the mould exactly.

The ad-supported tier points in one clear direction: safer, more mainstream content. Nothing that alienates advertisers, nothing too challenging or niche.

The hope is that you’ll sit there with half an eye on the TV while scrolling on your phone. A few ads roll by in the background. Bingo.

That, in essence, is Netflix’s new business model.