Tech.pinions

Wrong About Roku
One of the more interesting companies and stocks to watch has been Roku. In all honesty, I’ve been wrong about this company as my core thesis for the company was more on the negative side. Roku is interesting because, for now, their primary value proposition is the user interface. We can argue they are a platform, and that may be accurate as well.

If Roku had been stuck to streaming TV hardware like a separate set-top box, or HDMI stick, then I don’t think they would have anywhere near the success they have. What has changed Roku’s fortune has been their integration with TV brands where essentially they are becoming the default smart TV UI for a number of major TV manufacturers. The bullish view for Roku is that they are the Microsoft Windows or Google Android of Smart TVs.

While TV manufacturers may still offer some platform choice like Apple TV, or even Android TV, my gut tells me those hardware companies may still prefer to work with Roku because Roku is not playing favorites and being willing to customize and heavily partner with OEMs. Apple and Google have a specific agenda with their TV OSes while Roku’s agenda is available to be more partner and customer-centric since it’s essentially neutral.

Roku’s CEO Anthony Wood has been vocal that they are in the best position to benefit from the cord-cutting trend, and I’m beginning to come around to his position. I cut the cord earlier in the year and have had an overwhelmingly positive experience moving away from traditional cable. I tried this experiment in 2011, and it was miserable. This time is completely different.

I have an Apple TV. I use my streaming services on, and a TV with Roku integrated. They both have their advantages, but the different between Roku’s approach and Apple’s is quite different. While I still like many of the UI features of Apple TV, there is no doubt that Roku’s integrated software as the primary TV OS is much more clean, simple, and quick to get to the apps I want.

This gives me hope that as Apple can do deals with TV makers that they will see more success with tvOS. Even then, I think Roku is better positioned than I originally thought as they focus on being the smart TV platform which plays nice with everyone.

Uber’s Losses
Uber’s earnings made headlines on the back of their losses. No one who studies the fundamentals of Uber, or ride-sharing in general, is surprised that Uber is still losing a significant amount of money. Their strategy to subsidize the cost of a ride in order to be cheaper than traditional Taxi is no secret.

This strategy is critical to scale as they seek to acquire new users and provide a better service, including lower prices, to customers. While in Vegas for work recently, I took a taxi from my hotel to the airport just to see how much it would cost compared to Uber. Before getting in the Taxi, I looked at Uber to see what it would cost my estimate was just over $11. With the Taxi, I had no idea how much it would cost since the meter goes up as you travel and fees are added along the way. In the end, I ended up paying $24 dollars for the taxi ride to the Las Vegas airport. That was quite the price difference and enough to convince me never to use Taxies again.

The long game with Uber, or Lyft, or any rideshare, is a belief in Robo taxis. As rideshare companies eliminate human drivers, they will not lose as much money subsidizing the cost of rides and may even make money still being extremely cost-competitive against taxis. This is ultimately the death blow to taxis as those companies will likely not succeed moving to Robo taxis. Again, this is the long view of Uber and Lyft.

The data is positive though for Uber. Looking at research and customer behavior data, I have access to for Uber a few things stand out. Across Uber Rides, Uber Bikes, and Uber Eats the average customer is using Uber 6 times a month with a steadily increasing average cost per transaction now nearing $16 dollars. Customer retention is one of the more interesting data points as Uber customers spend more money with Uber the longer they are a customer. Dollar retention has been on a steady uptick from returning customers. Uber has also recently crossed the 30% mark of the population of US citizens who have used the service at least once.

The data suggests, Uber is well-positioned if they can just acquire the customer. That user growth, and costs to acquire new users, will the data points to keep an eye on going forward.

Apple Card Approvals
This morning CNBC published an interesting article digging into some more details of Apple Card. The report details Apple’s goal to make Apple Card available to as many of its customers (above the age of 18) as possible. That includes ways to approve customers with lower credit scores.

The report details a customer who did get approved with a FICO score of 620 who got approved but only for $750 with an interest of 23.99% which he said was lower than other credit cards. This is a really interesting approach and will be fascinating to see how it plays out. The potential here is that these customers are able to improve their credit scores and hopefully make better financial decisions. The downside, however, is what happens if poor credit customers end up being late regularly or possibly defaulting and then get hounded by debt recovery companies or painful experiences if their account goes delinquent. The risk is an experience like that turns a customer sourer on Apple because even though Apple is working with Goldman Sachs, they are still the front brand and may be blamed for negative experiences around Apple Card.

The report goes onto detail an earlier credit card concept Steve Jobs was involved in but ultimately didn’t do because he didn’t want Apple customers to face rejection over an Apple product. This attempt with Goldman Sachs seems designed to get as many approved as possible but, as I point out, that is not without risks.

This is one of the more interesting products to watch from Apple due to both its rewards, and potential upside, but because it also carries more risk than other products of Apple’s.

One of the more important products Apple has brought to market thus far in 2019 is the new Apple Card. This is a virtual as well as a real credit card that Apple created in partnership with Goldman Sachs Group. I have had the privilege of test driving the card for a bit and love its various reporting features and the way it allows me to become a more informed consumer by using its various analytical capabilities. Here is a short video about this card and its features if you are not up to speed on this new credit card service from Apple.

One of the major incentives to use the Apple Card is its daily cashback feature. Depending on what you buy, you can get cash back from 1-3% daily. There are other credit cards that offer cash back, but none give that back to the user on a daily basis. Apple Card can be tied to Apple Pay and makes Apple Pay more important to users too as it gives them these analytical features so they can stay much more up to speed on their spending and money management.

I personally try and not use too many credit cards for various reasons. As you may know, the more cards you have, the more it impacts your credit scores. I have two cards for the business, one tied to my bank and used as a debit card and then one that is for personal use and is tied to one of the airlines I fly the most so I can get mileage when making purchases. I fly a lot so earn a lot of miles by flying so I use my airline’s credit card the most for personal items, and that adds significant miles to my mileage balance. Over the years, I have used miles often for vacation flights and even products available through miles.

One of my other cards has significant travel insurance tied to it, which is also a very valuable perk of that card. I also get points from this card that pays off in gift cards often, which leads me to my Apple Card conundrum. Today I use Apple Pay more for convenience than for big purchases or big-ticket items. Those I do on the other two cards for the mileage points, or for travel for the insurance and points I get from it.

Apple’s 1-3% cashback on the Apple card is very tempting for use on larger purchases, but it comes with no miles, travel insurance, or gift points. While I do love its virtual and real credit functions and its analytical tools, I will, over time, need to weigh the true benefit of its cashback feature against the benefits of the other cards I use when it comes to big purchases and especially the miles I earn on my airline card.

I suspect I am not the only one with this conundrum. The airlines especially have been marketing their own credit cards for over a decade to entice flyers to earn miles and keep them loyal to their airline. And various cards from other companies have upped the ante in terms of other buying incentives and perks.

But Apple’s move to give cashback on a daily basis and adding the analytical tools to their card is going to put pressure on the airlines, and other credit card providers create programs similar to what Apple is providing.

I believe that Apple’s analytical tools are an industry game-changer. In a short time, I have used that feature, and it has become apparent that making a consumer more informed about their spending and real costs of a credit card is a really big deal. In fact, I predict this will become of the #1 thing people who use competing credit cards will be asking for their cards.

Apple’s daily cashback feature will also put pressure on those with cards that give cashback to follow suit. How fast they can respond with a competitive program is a big question. I understand that Apple had been working for a couple of years with Goldman Sachs Group to create an instant cashback program and that it was a relatively complex problem to solve. But this is a case that if Apple can do it, you can expect the major companies with cashback credit cards to try and do some kind of similar innovative program to stay competitive over time.

If I could have Apple add any other feature to this card, it would be to find a way to do a deal with the airlines to offer the option of airline miles like one can get from Chase Sapphire Preferred and Capital One Venture. If they added that perk, I would dump my airline card in a heartbeat and make the Apple Card my preferred card for travel and personal use. Not sure how possible that would be, but this would be on the top of my wishlist for future Apple Card features.

Regardless of my conundrum, I have no doubt that the Apple Card will become one of the only other credit cards I will use often. It will especially be valuable when I buy Apple products that get the most cashback in the program. Given Apple’s loyal installed base, I believe it will be a big hit with that crowd. It will also serve as a way to bring more people to the Apple stores, which is an important goal for the existence of this card. But Apple may need to do some aggressive marketing of this card to those especially who use airline mileage cards.

This new Apple Card, according to Bloomberg, sports that “the analysts see a 2023 earnings-per-share gain of just 1% for Apple, and 2% for Goldman, because the card has no fees, low-interest rates, and its profitability will likely trail the industry average. What the market “misses,” they say, is that by “layering in the benefit of shifting just 10% of U.S. hardware sales from third parties to the Apple stores, the profitability of the program increases from below average to average.”

Its dual goal to tie more people to Apple products as well as earn some profit will be interesting to watch as it has the potential to be another important product for Apple’s service business.

There are important trend lines to note as we unpack Apple’s latest earnings. Perhaps one of the more interesting observations was a dynamic I had not fully internalized before, which was the degree in which a good quarter for Apple impacts a number of other tech stocks. I read several investor notes that hinted at this but did not show exhaustive evidence, that when Apple does well, it seems to lift investor confidence and tech stocks, and sometimes the overall index seems to see a lift. This could be due to confidence, and Apple viewed as a bellwether for tech as a whole, or for other reasons, but I find that fascinating. A health Apple is helpful to a healthy tech ecosystem.

A few points are worth analyzing related to Apple’s latest earnings.

iPhone Stability
For iPhone, there were a few things that are worth noting. The first is what most news outlets pointed out which was iPhone revenue being less than 50% of Apple’s total revenue for the first time. This simultaneously a story and a non-story. It’s a story because it is notably the first quarter in many where this has happened. But, this will also only likely be a habit of a mid-year quarter. The Dec quarter will be a large iPhone quarter revenue-wise, as will the March quarter. The June and September quarters will see dynamics similar to this one where iPhone is closer to 50% for the foreseeable future.

The worry, I see, is the potential narrative to distort the incorrect narrative that Apple is the iPhone company. I’ve never viewed Apple this way, as I see Apple more as a customer experience company which can manifest itself in the shape of any number of products. The iPhone is simply the biggest hit Apple has had to date, but not necessarily its only massive hit. I worry when December and March quarters come around that the focus goes back to largely on iPhone and then we are back into confusing public narratives. The iPhone is great, but it isn’t the end of the story.

Taking the long view on iPhone, for a moment, it looks as though after a period of hyper-growth followed by an overall market slowdown, iPhone sales are stabilizing. This was the main thing I wrote about to watch when all the sky is falling articles were written as Apple reached peak iPhone. We knew it would decline, and the question was what number of annual sales would Apple stabilize at for iPhone. It looks like Apple’s annual iPhone sales will stabilize in the 189-200 million unit range for at least the next two years. This would indicate roughly a quarter of their base upgrading each year and around 4 to 4.5 years to refresh their base to modern technology and the average Apple user standardizing on around a three-year refresh cycle.

The only material possibility to change this is if some dynamics around trade-in or another stimulus from Apple can move their base to upgrade on a shorter cycle regularly, but I do not see that happening for the bulk of their customer base. From the data and sales trends we see now, it seems as though the nearly billion iPhone users out there have settled into predictable buying patterns and that is a good thing.

Wearables are the Future
I’ve been long Apple wearables since day one that I tried Apple Watch. It was clear to me back then Apple has a future with computers we put on our bodies and the wrist was the first bit of body real estate Apple tackled. AirPods are Apple’s play at the ears, and sometime in the next five years, we may see their first attempt to bring computers to our eyes. My theory all along is all these Apple wearables will create a complete system (or computer) and work as a synchronous whole going beyond even where iPhone could go.

Apple’s wearable business saw 48% growth with AirPods continuing to penetrate into Apple’s base and Apple Watch now on a continued growth trend. The one stat that stood out to me the most with Tim Cook’s commentary was how 75% of Apple Watch sales in the June quarter were to brand new Apple Watch owners.

We have studied Apple Watch owners greatly and know they are a loyal bunch, who also hold onto their Apple Watches a long time. Series 4 was the first Apple Watch that materially moved the base to a new Watch, so it is encouraging a good portion of quarterly sales are to new customers. The Apple Watch installed base is likely in the 60 million range by now via my model and growing.

With wearables, Apple is laying a new foundation for a new paradigm of computing.

Services Ebbs and Flows
Commentary around Apple’s services growth-focused more on it being a bit “light.” A key debate here is whether services have seasonality like much of Apple’s other product lines or whether we should assume some level of a bell curve trend. This clearly depends on the quality of Apple services and ability to compete, but beyond those things like overall subscription billions (now over 420 million) as well as the continued growth of iCloud an Apple Care will likely steadily contribute.

Apple didn’t seem to give us much about Apple News+, but I take the lack of commentary around conversion rates to suggest Apple News+ is not off to the start Apple hoped. When Apple Music came out, management was quick to give us some numbers around subscriptions and with the Apple News+ absence of that I take it as a negative.

We know Apple Card is coming out in August, and Apple Arcade and Apple TV+ will be launching in the fall. Commentary strongly suggests these will be paid services, likely charged a la carte to start, which is not a surprise. The service I am most interested in is Apple TV+, and beyond Apple Music, TV+ has the most potential upside of all Apple’s services in my mind. Consumers simply love entertainment content and video in particular.

Modeling services are going to remain tricky, and given the huge investment producing a quality, video is, we should assume Apple’s services gross margin will go down as they grow the video platform.

Lastly, on services, the points I made about iPhone stability and Apple’s commentary the installed base continues to grow, is important to the services narrative. iPhone customers continue to go deeper into the Apple ecosystem of products and services the longer they are customers. Which means as Apple grows its base, they have a highly engaged and easily accessible addressable market in their user base. This is not a dynamic I see of any other consumer tech company.

The biggest question for me is how far Apple takes their services beyond their ecosystem. As I pointed out last month, Apple’s inroads to India may be through their services, but those services need to all run on Android. Tim Cook’s commentary seemed to suggest, for now, that some Apple services will be cross-platform and others will be tied to their devices. I think this is the correct approach to start, but I’m not convinced this is the best strategy for the long-term. But again, this is a key debate.

Like many in Silicon Valley, I have watched the most recent moves by the FTC and other government agencies that are probing some tech companies for antitrust violations.

I have a great deal of experience with the U.S. government going back to 1985 when I was asked to be the intermediary between the Defense Department and Intel. It is a long story, but in those days, outside of the government asking for Silicon Valley’s help on military projects, they had little contact with actual Silicon Valley leadership. I was known to them as a top analyst with relations with tech execs and was asked to help them connect with proper Intel execs about an issue that was highly private but had national interests in mind.

Over the years, I have served on presidential advisory councils and given feedback on tech issues to three government agencies. Have even advised some congregational leaders on tech issues.

From these years of experience with the U.S. government at many levels, I can say that they clearly do not understand technology, how it gets developed and more specifically, how technology actually works.

I will admit that over the last ten years, they have become a bit more savvy about tech issues, but they still do not really understand how technology is created and ultimately works.

The current quest to try and prove tech companies are in violation of very dated anti-trust laws will be difficult to prosecute. Anti-trust laws, as defined during the days of railroads and Ma Bell, are not easily applied to current tech companies when legitimate competition exists in many forms.

Even the angle that these companies need to be broken up is a stretch if traditional Anti-Trust laws are used to achieve this goal.

A lot has been written about this subject so I won’t go into the problems the FTC will have, or how the Tech companies can fight this under current laws.

But I do want to point out that our legislators really are clueless when it comes to the inner workings of tech, and more specifically, the potential ramifications of their actions and its impact on the economy.

Earlier this week, the San Jose Mercury had an editorial that points out this very issue:

“Let’s hope they don’t forget that innovation is at the heart of our economic growth. Our ability to remain a world power requires that we maintain a technological edge over China and our other global competitors.
Whatever the federal government does, it must maintain incentives for U.S. tech firms to keep spending on research and development, which is one of their primary tools to evolve and prepare for the future.

Tech leads U.S. companies in research and development spending. Amazon ($14.1 billion), Google ($10.15 billion), Apple ($7.65 billion), and Facebook ($4.76 billion) were among the top 10 investors in R&D in 2018. They are using those billions as a strategic weapon to win what could accurately be described as the World War of Artificial Intelligence.

Time is of the essence. The digital landscape of 2030 is likely to be fundamentally different than it is today. After all, consider how fast it’s changed in the past dozen years. As recently as 2007, MySpace dominated the social networking landscape, receiving more than 70 percent of all visits to social networks. Facebook, which was only three years old, was a distant second.

Those companies launched a wave of innovation that helped the United States emerge from the 2008 financial crisis and create what has been the longest bull market in history. Unfortunately, Big Tech’s dominance over those years has led to abuses that deserve greater federal regulation.

As a result, the Department of Justice and Federal Trade Commission now needs to rein in Amazon, Apple, Facebook, and Google. But, in the process, the feds must take extreme caution not to stifle innovation.”

I was in Washington last summer and made this exact case to legislatures that I met with. While I agreed that these companies might need oversight and in some cases, see their power monitored and even restrained when it makes sense, clipping their wings in a way that stifles their ability to innovate and help the U.S. keep ahead in areas like A.I., 5G, IoT, self-driving vehicles, etc. would be a mistake.

These technologies will power the U.S. economy for decades, and tech companies need to be free to drive this economic engine without heavy-handed and misguided government regulation.

As I stated earlier, most government legislators and officials don’t understand tech to the degree that they can truly legislate these issues. My fear is that they will handcuff some of the companies they target from inventing new technologies that will power our economy and keep us ahead of China and Russia.

For many of us not in the Gen Y or Gen Z category, it is hard to relate to the growth of E-sports and the commentary that E-sports will be as big if not bigger than other sports categories. As hard as it may seem to believe, this image will help cement why this is a likely tipping point for E-Sports players.

This post details the winner, 16-year-old Kyle Giersdorf who only started playing the game two years ago and currently spends 7-8 hours a day playing Fortnite. But given the size of the winnings, and the sheer size of Fornite’s player base is going to turn heads and continue to draw attention to E-sports tournaments.

The Global Scope
One of the main themes I’ve been writing about the last year is the true digital global platform that is emerging for video games and as a result, E-sports. I’ve noted the cross-platform trend of games to allow gamers everywhere in the world, on any hardware and software platform, to play together is a relatively new development. That theme is going to extend to every game, and there will be no world where platform exclusives make business or customer sense any longer.

The result of developers taking advantage of the cloud to bring their game to gamers on all platforms is the sheer size of their market opportunity. This market opportunity opens up financial scope not seen before in the video game world which, as the $3 million purses for the Fortnite World Cup proves, means even larger financial winnings.

As if Epic, the owner/developer of Fortnite, is not already making more money than they know what to do with, once a game reaches this scale they can make money off the entry fees, which 40-50m people participated in qualifying games, as well as the tickets to watch the final. All similar business models exist for E-Sports as do with other sports genres just at a completely different scale.

Fortnite will be used as the template for success for many developers and publishers, and that model is the way forward when it comes too gaming.

Race to a Billion
The only other sport that has the global scale of E-sports, currency, is soccer. The FIFA World Cup is a global event and draws ~1 billion viewers. I have no doubt that E-sports will catch the world cup in viewership at some point, and ultimately surpass it. But the same fundamentals that help the World Cup achieve its scale apply to E-Sports.

Soccer/Futbol is also the highest paying sport for its athletes. Another dynamic I think will come to E-Sports in the not too distant future. Again, the economics of global scale in the digital age is just simply larger than any physical sport can achieve and as the young generations get older and gaming becomes more a central part of the world, it is likely its popularity surpasses non-digital sports.

Fortnite’s success and the Fornite World Cup is the tipping point that in ten years, we will look back on as the thing that fueled E-sports to whatever size and scale it becomes.

The Sports Debate
The last thing I want to mention is the criticism I hear the most, which is E-sports should not be considered a sport. I’m sensitive to this, and I see the arguments on each side. While the physical side of E-sports, meaning the strength training, conditioning, physicality, athleticism, and other elements of physical sports are not a part of E-sports, one could argue the mental side is as challenging.

But the bigger point, despite how one feels about what should constitute as a sport, is why E-Sports enables a similar dynamic is the rarity of humans who can make up the small percentage to be the best at any given E-sports title.

Scarcity is valuable, and there will be this dynamic in E-Sports just as much as there is in physical sports. That alone justifies the similar dynamics and economics that will be enabled with the E-Sports genre.

I have been a baseball fan since I was eight years old. Being born in the San Francisco Bay Area, the SF Giants were my team growing up, and I became a fan during the era of Willie Mays, Willie McCovey, and Orlando Cepeda.

I also got a chance to play baseball in Jr High and High school and was a catcher with a pretty good hitting average. I was too thin and short then to even consider playing baseball beyond high school and instead became an ardent baseball fan as well as a student of the game instead.

As a fan, I have watched games and viewed plays hundreds of times that I thought the umpire got wrong. For most of my life, we did not have instant replays where an umpire could review a play if one of the managers challenged their decision. But this process takes time and slows down the game.

As a technologist, I have watched baseball games more closely with an eye on how technology could be used to call balls and strikes, which is one of the most subjective actions done by an umpire during a game. It appears that each umpire has their own version of a strike zone, and as they say, “call it as they see it.” But with TV broadcasts superimposing a true strike zone graphic based on a batter’s stance, a TV viewer can actually see if the pitch is a strike or a ball.

While umpires traditionally have an accuracy rate of between 90-95% with their calls, the calls they do miss could clearly impact everything from a batter’s statistics to the final outcome of the game. Instant replay does help with field calls, but cannot be used today to change a ball or strike decision.

Knowing technology as I do, and the power and accuracy of things like sensors, radar, laser guidance systems, and imaging, it has been clear to me for some time that the technology is already here that could enable robot umpires to assist real umpires in calling truly accurate balls and strikes.

Earlier this month, the Independent Atlantic League became the first American professional baseball league to let a computer call balls and strikes at their All-Star game.

ESPN was there and wrote about how the plate umpire used technology to help him call balls and strikes:

“Plate umpire Brian deBrauwere wore an earpiece connected to an iPhone in his pocket and relayed the call upon receiving it from a TrackMan computer system that uses Doppler radar.

He crouched in his normal position behind the catcher and signaled balls and strikes.

“Until we can trust this system 100 percent, I still have to go back there with the intention of getting a pitch correct, because if the system fails, it doesn’t pick a pitch up, or if it registers a pitch that’s a foot-and-a-half off the plate as a strike, I have to be prepared to correct that,” deBrauwere said before the game.

It didn’t appear that deBrauwere had any delay receiving the calls at first, but players noticed a big difference.
“One time I already had caught the ball back from the catcher, and he signaled strike,” said pitcher Daryl Thompson, who didn’t realize the technology was being used until he disagreed with the call.

Infielder L.J. Mazzilli said a few times that hitters who struck out lingered an extra second or so in the batter’s box waiting on a called third strike.

“The future is crazy, but it’s cool to see the direction of baseball,” Mazzilli said.”

Up to now, Major League Baseball and especially the umpires have been opposed to using technology to call balls and strikes. From the Umpires view, they see this as eventually taking away the need for them altogether. But the way technology was used in The Atlantic League All-Star game fully engaged the umpire and really just gave him a new tool besides his eyes and subjective reasoning to make sure his calls were more accurate.

I believe there are two solid reasons why we will eventually have robot umpires call balls and strikes to make the game more accurate in terms of calling pitches correctly.

The first is one that technology can help keep baseball interesting and relevant to a younger generation who, at the moment, are not embracing baseball as wholeheartedly as their parents have in the past. And attendance at games has been down for the last three years.

“Of the league’s 30 teams, 18 are experiencing an attendance drop. And this is after a 2018 season in which attendance was down more than 3 million fans, an average of 1,237 per game.”

Millennials and Gen Zer’s are technology savvy and have many ways to entertain themselves these days. Their interests are spread thin, and baseball is just one of the things they may have an interest in. And given the tech-savviness of this younger generation, they most likely see how technology could enhance a game and make its outcome more accurate, which could increase their interest in baseball games and draw them to viewing them on TV or the Internet or going to a ballpark itself.

But the most important reason that I believe robot umpires are inevitable is legalized sports gambling. I personally am not a gambler but have watched this “industry” with great interest over the last three decades. I have become even more interested in sports gambling now that it has started to infiltrate eSports.

The Supreme Court recently ruled that a federal ban on sports wagering is unconstitutional.

Here is the conclusion of the majority opinion:

The legalization of sports gambling requires an important policy choice, but the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own. Our job is to interpret the law Congress has enacted and decided whether it is consistent with the Constitution. PASPA is not. PASPA “regulate[s] state governments’ regulation” of their citizens. …. The Constitution gives Congress no such power. The judgment of the Third Circuit is reversed.

With this ruling, the courts have been given the choice of allowing sports gambling up to the states themselves. Here is a link to the States that already allow sports gambling and the current bills in the works from the States that do not allow sports betting yet, but proposed laws are working its way through their legislators.

Right after the Supreme Court ruling was announced, MLB released this statement.

Major League Baseball:

“Today’s decision by the Supreme Court will have profound effects on Major League Baseball. As each state considers whether to allow sports betting, we will continue to seek the proper protections for our sport, in partnership with other professional sports. Our most important priority is protecting the integrity of our games. We will continue to support legislation that promotes air-tight coordination and partnerships between the State, the casino operators, and the governing bodies in sports toward that goal.”

Once sports gambling becomes legal throughout most of the US, the pressure will be on MLB executives to integrate technology to call balls and strikes in both leagues. One thing that gamblers hate is subjective opinions that impact the potential outcome of a game. They want every call to be as accurate as possible so that their bets can be made based on quality data.

Of course, old-timers and baseball traditionalists will fight bringing robot umpires into the game. I have talked to quite a few of these folks, and their attitude is that without technology, the game is played as it has for over 100 years and robot umpires to them would be blasphemy.

However, Major League Baseball is not only a game but also a $10 billion industry and has to be willing to change with the times. They know that without some serious changes and adjustments, they could lose the next generation of younger fans. If that happens, their growth in the future will decline.

Sports gambling will also put pressure on MLB leadership as it expands throughout the US and professional and weekend sports gamblers want more ways to make the game more accurate to assist in their own analysis on their betting decisions.

I don’t know how long it will be before we get robot umpires calling balls and strikes, but the technology is here to do it today. Robot umpires are inevitable, and it will only be a matter of time before it happens.

It’s official. Apple is buying Intel’s smartphone modem business. Note, Intel still has their modem business for products like PCs and tablets and the IP they were selling was specific to smartphone modems. Apple has been working with Intel for years now integrating their modems, so they had a very good sense of the underlying technology and if they could build on it over the long-haul.

This was relatively predictable. I started writing about this possibility in 2014 and then kept hinting at it even as Intel and Apple got closer in their joint modem efforts. It became very clear, quickly, that Apple would be Intel’s only smartphone modem customer and Intel was bleeding cash trying to keep up with Qualcomm and failing. It simply did not make sense for Intel to keep investing in smartphone modems, really modems overall, in my opinion. The only question I had, with regard to Apple buying this business, came after their license and chipset deal with Qualcomm. Apple appeared to be in a position to utilize Qualcomm technology, which is better than Intel’s, and it’s unclear if Apple can develop a better solution than Qualcomm. Their partnership with Qualcomm came off as a win-win for both companies.

In this article, I’m going to cover two points. The first being Apple’s long game here for building their own modems, including how 5G fits in. The second is what it means for Qualcomm.

Apple’s Long Game
The main point I want to make here is that Apple is yet to ship a product that includes a modem on their own designed custom A-series processors. Apple has always had to include a thin-modem (a dedicated chip to just modem) in all its products containing A-series processors like iPhone, iPad, and Apple Watch. There are great benefits to having a complete SOC (system-on-a-chip) that includes CPU, GPU, modem, and other things. The modem was the big missing piece, and Apple can get a number of benefits by building a total chip solution that includes the modem and fine-tuning their hardware and software for this new fully integrated chip.

Things like battery life, connectivity optimization, even security, and more are all benefits to tuning a system with a complete SoC. Qualcomm sells a complete solution to everyone, but Apple (they just sell Apple the thin-modem) and Qualcomm always highlights the benefits they get in overall system performance by having a completely integrated SoC. In fact, many of Apple’s competitors benefit from this same dynamic, and now that Apple has the capabilities to integrate their own modem designs onto their own SoCs they will get a great deal of system optimization and performance benefits. I’m not saying Apple’s modem will be faster than Qualcomm’s, only that they can tune the system better than they could before.

This is the reason why I’ve known for a long time that Apple’s end goal was to build their own modem. But you don’t just wake up one day and build a modem from scratch since baseband patents, and IP has the whole industry covered. With Intel’s IP, Apple is now able to forge a path to do their own modem designs with minimal license and IP fees to other companies. More on this in a bit.

Will Apple’s First Internal Modem be 5G?
No, I don’t think so. Primarily because Apple has other products that are low-hanging fruit for 4G/LTE. Particularly iPad and Apple Watch. Both these products do not need 5G in the next few years but would also benefit massively from a fully integrated Apple chipset with a modem integrated onto the SoC. Apple Watch, in particular, is my likely bet for the first product to see an Apple-designed modem, but it will be 4G/LTE, not 5G.

About Apple Watch, the products I’ve always figured were the primary reason Apple was working on designing their own modem is their wearable product line. Not just Apple Watch but AirPods and whatever else Apple has in the five-year pipeline. Remember I said Apple needed a separate chip for their modem connectivity. This separate chip takes up valuable space on the motherboard, and when you are talking about shrinking electronics to small sizes that we will wear, you need all the space on the motherboard you can get. Integrated the modem onto the SoC is essential for Apple’s wearable business and product roadmap. This is the ultimate endgame for a fully integrated Apple SoC.

Where Does this Leave Qualcomm?
Apple buying Intel’s smartphone modem business and IP is not necessarily all bad for Qualcomm. The deal Apple struck with Qualcomm includes a multi-year chipset license and a long term deal to access Qualcomm’s IP portfolio. The chipset deal is likely 5G modems for iPhone until at least 2022. And the license to IP is where Qualcomm may have some technology that Apple can use to build its own 5G modem.

Intel was nowhere close to building a 5G modem. In fact, I’m not even sure they would have got there anytime soon. The deal Apple made with Qualcomm is because, at a technical level, Qualcomm is the only 5G game in town for the next few years. Apple may not even be able to do a 5G modem on their own, and having a licensing relationship with Qualcomm can help them fill the gaps. Obviously, if what I’m suggesting pans out, Apple relationship with Qualcomm could be a long one, but it also won’t be as financially lucrative as Qualcomm would like.

During this 5G transition, Qualcomm is well-positioned and a strategic partner for Apple. Come to the 2023-2025 timeframe, 5G will be quite mature, and perhaps this is the proper timing for Apple with their own designed modem for iPhone. The bottom line here is Qualcomm still has some of the best wireless technology in the world, and Apple has a long-term license deal to that technology. If for whatever reason, Apple can’t do better than Qualcomm’s IP then I’d like to see them still leverage it somehow.

The last point, I’m watching Apple to make a move on an RF antenna provider like Qorvo or Skyworks. RF is critical to modem design, and Apple has worked both these companies before. Verticalizing on RF could help Apple even more efficiently optimize and tune their hardware, software, and services.

With the record-breaking, yet also only a financial slap on the wrist, of $5b Facebook-FTC settlement along with the still strong earnings report from Facebook, they look ever stronger as an entrenched incumbent. Facebook also disclosed the FTC is opening another probe into their company around their position as an anti-competitive market player. Facebook has the largest social network and seems to be moving toward having the largest ad-network of any company in history. From the outside looking in, it does feel like competition is ever harder in social media and the idea that Facebook will ever be challenged feels doubtful.

I’ve written quite a bit about what how some companies become a monopoly by default, and Facebook is undoubtedly a prime example. But that does not mean there are no significant cracks in the foundation, and the competitive moat has not been weakened. Several things over the past few weeks show how competition to Facebook and even Instagram are possible.

Snapchat and FaceApp
The two things I mentioned are what we saw with FaceApp and some new details from Snapchat’s earnings. I wrote about FaceApp last week, in a negative context due to the privacy issues it raised and the observation that many consumers didn’t even consider their privacy at risk. But there is a positive take away specifically to the idea of social media competition.

While we have no exact numbers of how many people downloaded the FaceApp app, it gained enough steam to be a viral sensation and a large enough group of people downloaded it simply to use a few minutes to try the age filter that it got national attention. Apparently, all you need to have as an initial hook is a fun camera filter to get potentially millions of people to at least try your app.

Similarly, Snapchat saw significant growth thanks to their transgender filter. While it is tricky to estimate how many of their new quarterly users joined just for the transgender filter, what is notable is Snapchat reported much more significant new user growth in the second quarter than was expected. They said they added 13m new users vs. 2m estimate. I’d wager to guess a lot of that new user growth was from people just wanting to try the transgender filter.

FaceApp proves a simple feature, like an interesting filter, can drive significant downloads, so it is not a leap to think the same dynamic played out for Snapchat with their transgender filter.

Competitive Potential
My takeaway from these two examples is further evidence of how fast an app can virally spread into the mainstream public. We have to look at this as the potential for competition to Facebook and Instagram. Granted, the challenge something like FaceApp or Snapchat have with their viral growth is how to keep those new users around. The stickiness of the solution is a big part of how someone would potentially compete with Facebook and Instagram, but the significant amount of viral growth indicates that gaining a large initial user base quickly is not a problem.

I mention this point because the key to any social media platform is an audience. If a platform has no users, it isn’t as interesting as one the has a larger social base. Therefore, the ability to quickly gain a critical mass seems to be an important dynamic of competing and it is one that both FaceApp and Snapchat show us can happen quickly if you have something that gets the attention of the mainstream. While competing is not easy, my overall point is recent events should give us confidence, it is at least possible.

The anti-trust probe and potential regulation around competitive tactics for Facebook should also help open up opportunities that may not have existed before. One interesting thing I observed the past few years was the lack of interest, so many VCs I work with had in any startups looking to compete with Facebook or Instagram. The common thought was why invest in something Facebook will just copy and kill if they feel it is threatening.

I already see renewed interest in by VCs in some more socially focused startups, which means the tide is potentially turning. However, entrepreneurs need to come around to the idea that competing in social is possible and that venture money may again be interested in helping them scale their company to compete.

That being said, and I’ll end on this point even though it needs more fleshing out in the future, but the future is niche. What I mean by that is Facebook’s scale and reach is a once in a generation type event. I’m not saying a single company won’t amass a 2-3 billion person user base, but I am confident it will be a long time until we ever see it again. Which means a potential TAM of hundreds of millions, rather than billions, is the reasonable user base goal. The good news is niches can be extremely profitable.

For the first seven years of my life, I lived in the home of my German grandmother and two of her daughters who, along with my mother and father, guided me in this early stage of my childhood.

One of the reasons my two aunts lived with my grandmother was that she was totally blind and devoted almost three decades of their lives to caring for her. She developed an eye disease related to glaucoma in the early 1940s. So, when I was born, she had been blind for many years, and this was the only way I ever knew her.

Living with a blind grandmother has made me highly aware of the role the eye plays in our health, and every day, I am thankful for healthy eyesight. But if technologists have their way, the eye will soon become more than just a vehicle for delivering sight.

In April of 2016, Samsung received a patent for smart contact lenses with a built-in camera. Samsung began developing these smart contact lenses as a means to create a better-augmented reality experience and in the process, added the camera feature into its design.

As a diabetic, I have watched closely Google’s patent for smart contact lenses that in its first iteration, will serve as a way to check blood sugars for diabetics. Theraoptix is working on contact lenses for delivering eye medication for treatment of eye diseases.

But the one I am also watching very closely is the patent that Sony filed that includes a camera for taking pictures and video recording. Although Samsung has filed a similar patent, Sony’s experience in cameras and optical lenses and video recording could be the most important of the two.

A post by anohq.com shared more details on the Sony patent:

“Sony’s patent doesn’t mean we’ll be seeing them anytime soon. Nevertheless, Sony’s release of the lens will contain a picture-taking unit, a central controlling unit, the main unit along with an antenna, a storage area, and a piezoelectric sensor.

The last-mentioned unit above is responsible for monitoring the time on how long the eyelids have remained opened, and it will also detect the blink that was done to take a picture, as well as the blinks that were done subconsciously. This will allow the unit to distinguish between taking pictures and a normal blink.

As mentioned in Sony’s patent, the subconscious blink is between 0.2 to 0.4 seconds. Thus the patent states that if the blink exceeds more than 0.5 seconds, then it was done on purpose and will be considered an unusual blinking, therefore, gesturing the unit to capture the image. The antennae will supply the power to the lens wirelessly, source it from the smartphone, a smart tablet or a computer. The technology that was first discovered by Nicola Tesla will use either radio waves, electromagnetic induction or electromagnetic field resonance, and to top it off, the smart lens will sport an autofocus and zoom ability.

But before happy blinking customers can get their hands on this latest device, and for the intelligence agencies to ‘blink’ on everything in their sight, the technology is still to go through stringent tests. Then again, technology such as this is an interesting concept wrapped up in the scary, depending on how it will be used.”

Market Research Future has published a report called “Smart Contact Lenses Market, Forecast Up to 2023” that details much of what is going in the smart contact lenses world and its potential future.

There are two very interesting things tied to this concept of smart contact lenses worth mentioning. The first is the types of positive applications that it could deliver, such as its use to monitor blood sugars and to deliver eye medicine directly to an eye. And the convenience of being able to capture a picture or record a video at a moment’s notice without having to take out your smartphone or a dedicated camera to handle this task. One could see many positive applications for smart contact lenses, at least on the surface.

But the last line in this Anonhq piece is important. It say’s “Technology such as this is an interesting concept wrapped up in the scary, depending on how it will be used.”

It would be a great tool for the spy community but could be misused as well. China has surveillance cameras everywhere but imagine if every person who used smart lenses could be enticed to share any captured images or video with the government as part of their surveillance program. The surveillance angle alone makes this a scary technology. It could also be misused in other ways, so one ethical question those working on smart lenses needs to grapple with is not only the pro’s and cons but ways to make them un-intrusive, so they don’t violate anyone’s personal rights.

The eye does seem to be a new frontier for the tech industry to explore in terms of making the eye smarter. I personally wish they would invest in finding a cure to blindness, glaucoma and other eye diseases that impact a person’s sight and lifestyle, but making the eye smarter might contribute to finding these cures in the process. One can only hope this will be true!

Last week it was reported that Substack closed a funding round of $15.7 million. I have been watching Substack with interest, and have a number of friends in journalism who have Substack newsletters. Substack is a platform that allows anyone to create and distribute a newsletter for free or for a fee. Having been running a site, with a newsletter as part of the service since 2012, I have some broader thoughts on the opportunity and the challenge.

Journalism Unbundling
Netscape co-founder Jim Barksdale famously coined this phrase, “there are “only two ways to make money in business: One is to bundle; the other is unbundle.” The continuous cycle of bundling and then unbundling and then bundling again, repeat, seems to have been accelerated thanks to the Internet. This idea of going direct to consumer is made easier thanks to the Internet. I spend a lot of my time studying D2C (direct to consumer) companies because it is one of the more fascinating trends of our time. The Internet has given anyone direct access to consumers without the need to aggregate, and in this case, it applies to news, analysis, and the individual voice.

Newsletters are becoming the de facto way journalists are going directly to the consumer, or perhaps direct to reader, with their style of reporting. It is interesting to subscribe to a number of journalists newsletters, and they are often much more interesting to read than what they write for a major newspaper or publisher. This is likely due to the lack of an editor, or a limitation of their style in a major news outlet, but more personality and unique commentary often come through in their newsletters than it does in their mainstream published articles.

Substack offers them a platform, the backend service, as well as a way to monetize should they choose. These are all things I had to invest in to build to start Tech.pinions in 2012, and thankfully I didn’t have to build it from scratch, but it did take a lot of work customizing and integrated many different components. This was a barrier for many that are now gone thanks to Substack.

When I started Tech.pinions in 2011, and then the subscription service in 2012, it was because of the extremely poor state of journalism at the time. At least, in my opinion, much of the writing as new upstart publishers/blogs were started was headline-driven and rarely covered the key parts of a story with any real insight or interesting commentary. My goal was simply to add more voices to the public landscape and get better quality technology content and analysis in front of more people. From my viewpoint, anything that makes it easier for better content to go mainstream. I’m all for this idea, and Substack has this potential.

That being said, the challenge of unbundling journalism will still exist, and this is the harder part as voices try to go independent.

The Newsletter Challenge
As more journalists, writers, and content producers looking to go direct to the reader, several things happen which add complexity to the market. First is there becomes quite a bit of competition. Competition for time, attention, share of wallet, etc. One of the biggest pain points I regularly discuss with readers of our Think.tank newsletter is how they often struggle to read everything we write on a weekly basis. On average, our newsletter open rates are 65% on the first day with that same newsletter reaching nearly 85% by the end of the week. My interpretation of that is that most of you read it on day one, but still, 40% or more take a few days to a week to get caught up. I note that email inboxes can be overloaded, often with higher priority emails fighting for your time every day.

Here, then, lies one of the bigger problems for newsletters going forward. Email is not the best RSS tool, but that is exactly what email newsletters shaping up to duplicate. Email is such a key part of everyone’s daily workflow that newsletters are often a distraction even if valued. Certainly, it is possible to sign up with a non-work based email and just check it later, but I’d wager most people use unified inboxes now and most are checking all their accounts frequently. Any newsletter distributed to email is competing against daily work based workflows and often timely communication from colleagues and bosses. Honestly, not the best place to distribute news, journalism, or analysis but it is the best option we have today.

Websites serve as great aggregators that allow people to get caught up on the news on their time. I already get eight newsletters to my email, and I struggle to read all of them each day. There is some value to bundling, in this case, that gets lost with newsletters, and I maintain that will be a challenge as more journalists looking to go on their own.

Of course, that may not be a goal. Maybe they just want a direct line to their readers and still plan to write for their newspaper and make a living that way. But for those who wish to go out on their own, and make their newsletter their primary business, my hunch is many of them may struggle.

This is one of those situations where I completely understand the desire and the opportunity, but I’m not sure we have solved the best way forward yet. While not perfect, something like the Athletic is something I think that makes the most sense. Largely because all my favorite sports writers have moved to the Athletic and I enjoy being able to curate my experience to just the sports teams I am passionate about. Yes, it is an aggregator, but it is also one that has the best voices, and passion-fueled content customized to the reader’s interest.

I’m arguing for a bundle yes, but a completely different kind of media bundle. It really is about bundling and unbundling, but the consumer convenience of media bundles is so high I struggle to see how we get around this for the mainstream consumer.