What happens when Hollywood meets Silicon Valley?

(Photo credit @glenncarstenspeters)

Like many of you, I was excited to ‘cut the cord’ years ago when I joined Google and got my first Chromecast as a Christmas gift. I thought it would help me save time by not seeing ads and by scheduling time to watch what I wanted, when I wanted. I’m not quite sure it’s turned out that way as the proliferation of streaming devices, apps, and content providers continues to increase. 

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The early leaders in streaming TV & movies emerged in early 2007, with Netflix’s launch of its streaming service, and Hulu launching in early 2008. Before that, your options to watch content “when you wanted” was to rent VHS or DVDs from a Blockbuster store or Redbox kiosk, or have Netflix mail you DVDs. Apple iTunes and Amazon video-on-demand were in place before Netflix, but only available as downloads (which often meant you had to purchase the show and wait an hour for it to download back in the low internet bandwidth days). 

Streaming content offered a whole new way for Netflix and others to really compete with TV channels in that it was actually available “now” - though their content selection was very limited at the beginning. Hollywood was happy to unload older TV shows and movies to Netflix on the cheap, but didn’t realize it allowed Netflix & its algorithms to learn huge amounts of information about viewer consumption habits. And then in 2013, Netflix launched its own original content in ‘House of Cards’ and the streaming wars (and Netflix bingeing) really began. (Really good podcast on the history of Netflix from Vox. Fun fact: the year Netflix launched original content, Blockbuster closed its last store). 

Once Netflix showed its hand with ‘House of Cards’ & started launching more and more original content in the US and abroad, the rest of Hollywood woke up and tried to compete. Disney+ has been one of the star competitors because of the strength of its brand and the content it develops, with HBO struggling with confusing offerings. The vertical integration approach is also becoming an obvious competitive strategy and some players are better at one end (content development) vs the other (devices). AppleTV+ is a great device but the content is lacking. Quibi is a super-expensive disaster. There was an interesting partnership development last week with Roku (who builds devices) and Comcast (who provides content and distribution). Comcast owns NBCUniversal and thus its new streaming service Peacock. 

The problem for me as a consumer is: by avoiding a cable subscription which jammed all sorts of channels into a package that wasn’t suited to me, I think I am now just subscribing to multiple different streaming services that ultimately cost more AND cause me more hassle to find what I want to watch. Do I dare ask for less choice again??

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Do you know why it’s called ‘Silicon Valley?’

(Photo credit @viazavier)

I would wager that most people have no idea why the Bay Area is actually called Silicon Valley. Do you? I’ll give you a hint: look down at whatever device you are holding to read this newsletter. Silicon is at the heart of most electronic devices, from smartphones to factory equipment to appliances. Semiconductors (aka integrated circuits, aka microchips) are what power all of the electronic devices you own, and are typically made from silicon. 

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Fun fact: my birthday is tomorrow (Sep 19). Best birthday ever as I share it with Soledad O’Brien, Jeremy Irons & Jimmy Fallon. It’s also the anniversary of the day in 1957 that 8 engineers founded Fairchild Semiconductor, whose innovations in transistor technology launched the tech revolution and spawned Silicon Valley. Those 8 engineers are hilariously called the ‘Traitorous Eight’ for leaving their Nobel-prize-winning employer -- but their new company ended up incubating future tech giants like Intel and AMD. Gordon Moore (one of the 8 who also later co-founded Intel) developed the uber-famous Moore’s Law, “the observation that the number of transistors in a dense integrated circuit (IC) doubles about every two years.” This law has influenced the projected rate of production of electronic devices for decades and helped predict that the smartphone in your pocket would become more powerful than a room full of 1969 mainframe computers. 

So much of the news today focuses on the software that people utilize on their devices -- but it’s critical to realize: software is only so innovative for users because the devices themselves continue to get smaller and smaller -- and that’s due to the ever-evolving chip technology. This week, US gaming company Nvidia announced the biggest semiconductor deal ever, by spending $40B to purchase Softbank’s chip division ARM (a UK based company). (Great article on why Nvidia CEO made the purchase.) The locations are important as there has been a shift in chip manufacturing to China in recent years, with companies from Apple to Nvidia to Qualcomm all relying on chips manufactured in China/Taiwan. With a growing trade war between the US and China (and specific export restrictions being targeted towards Chinese chip manufacturers like SMIC), the US tech companies are very worried that their chip supply chain will be negatively affected. The US chip industry wants $50B to help keep chip manufacturing in the US and still remain competitive with Asia. And investors are now starting to keep more of an eye on semiconductor stocks vs just the FAANGs.

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Mobile gaming, 1984, and David vs Goliath

(Photo credit @jamesponddotco)

I have a confession: gaming is probably the one area of tech that I pay the least attention to. I have this sense that if I start playing, I may *never* stop - so it’s easier to just avoid it entirely. That said, you would have to be living under a rather large rock to have not heard about the “epic” battle between Apple and Epic Games. 

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The global mobile gaming industry is set to hit $76.7billion this year (up 12% from last year and 10% from the year before). There are 1.36billion users who play mobile games, and mobile games account for 33% of all app downloads, 74% of consumer spend and 10% of all time spent in-app. 

What do all these stats tell us? This fight between Epic Games and Apple/Google is a war of control over who receives the dollars: those who create the content vs those who own the access portal for getting to the content to consumers. And it’s a big chunk of change they are fighting over if 74% of mobile consumer spend is on gaming -- and Apple/Google get a 30% cut of all those transactions. The 30% helps A/G build the rails and maintain some semblance of order & rules to help consumers have better, safer experiences with apps. It makes sense for A/G to charge a % fee to Epic and any other app-maker who would like to appear in their app portals -- the big questions are whether 30% is too high and whether charging that much is stifling competition/business growth for app-makers.  

This is a very uncomfortable place for the Apple brand and its employees -- Apple is known for its legendary 1984 ad which pitted them as the ‘David’ to IBM’s Goliath. Epic smartly poked at that recently, placing themselves as the ‘David’ to Apple’s Goliath in a parody ad. 

And now Apple seems to be forced to decide between being the upstart who “thinks differently” and the trusted “keeper of privacy” -- two brand identities which are unlikely to co-exist for too much longer.

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#neverforget

I was living in New York City in the fall of 2001. I was at my desk in midtown, right across from Grand Central, when the first plane hit the towers. It was an awful day. Working at a company that helped laid-off workers find new jobs, we had multiple clients who became stranded when all transport stopped and were unable to call anyone as phone lines were overloaded. That day, AOL IM became a lifeline to connect with friends & family as it was one of the few communication tools that kept working. That day was a defining moment for so many, and in a similar way to the pandemic now, it helped accelerate the evolution of tech communication tools and the bifurcation of our society. I have hope that new tools & approaches are coming to help us mend this rift. I appreciated this article on the topic of how primitive our communication tools were in 2001: Pagers, Pay Phones, and Dialup: How We Communicated on 9/11

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