Apple vs. Amazon

Going back to the well of revisiting an old column from my “Out of Ink” series from 2018/9 since several of you wrote to me that you were into it when I did this two editions ago.

This week, I’m coming back to a piece I wrote called “Apple, Amazon and the Great Media Wars to Come” that argued that Amazon and Apple were on a collision course for control of the free press.

This is a tough time to revisit this as layoffs hit journalism hard this week and several “benevolent” billionaire led institutions. But alas, here’s the full repost of a column that ran on March 27, 2019 with commentary in bold.

For a company that looked like it had frankly given up on selling to the commoners, Apple’s keynote this week was a refreshingly egalitarian product launch. The company announced a low-interest credit card, a TV streaming service, and the long-awaited Apple News+.

Even with the ludicrous 50 percent tax Apple levies on publishers, the potential ubiquity (read: 1 billion iPhones) of Apple News+ makes it about as close to a potential savior of journalism as the free market has the ability to create. No other company can offer the same scaled combination of distribution and bundled incentives to entice people to pay for news. No other company except the sleepless giant in Seattle.

Before diving into that, let’s take a quick look at the publisher side of the Apple News+ equation. There’s a tendency to treat the business dynamics of publishers as a homogeneous plight, but the economics of the New York Times and the New Yorker are vastly different, to the point that a single model cannot well serve the interests of each. Furthermore, even as the industry transitions from advertising to subscriptions, media economics is largely a zero-sum game where a user subscribing to the Wall Street Journal often does so at the cost of canceling their membership to the Akron Beacon Journal. All of this is to say that Apple News+ is not an industrywide panacea, but a fit for a particular type of publication.

For the premium magazines in the Apple News collection, paying half the revenue as a tribute to Apple for distribution is a no-brainer. Texture (the company Apple acquired to serve as the backbone for Apple News+) was originally established as a joint venture between Condé Nast, Hearst, Meredith, and Time Inc. to overcome the basic impossible unit economics of trying to sell magazines as a standalone entity. Even in the glory days, magazines were largely distributed through a multichannel marketing company called Synapse (founded by the son of famous Time editor Marshall Loeb), which bundled magazines with credit card offers and frequent flyer programs.

Here I think the Jim Collins quip that the only two ways to succeed in media are bundling and unbundling is particularly astute. Media is in a rapid period of decentralization with wildly declining institutional power and independent creator brands holding power. In time, these will get rolled up into powerful institutions……that then once again will get broken apart. And on and on it goes, it’s a way to pass the time that beats the hell out of pickleball

Conversely, for the New York Times, which now boasts more than 4 million standalone digital subscribers, staying off the platform and continuing to own its distribution was an obvious call. The decision to join Apple News is a bit of a head-scratcher for the Wall Street Journal, which charges hundreds of dollars per year for standalone subscriptions. While the publisher will offer only a curated selection of general interest news, it’s a brand-dilution risk for a company that has spent a century cultivating a premium image.

The companies that faced a truly fascinating decision here were the Los Angeles Times and the Washington Post. Both are elite regional newspapers whose grand strategy for the past decade had been trying to establish a stronger beachhead as national publications. Buoyed by a hyperambitious plan to hit five million paid subscribers, the Los Angeles Times has taken the gambit. The Washington Post has not.

There are plenty of sound business reasons why the Washington Post may choose to steer clear of Apple News. But as always, it’s hard to ignore the $146.1 billion elephant in the room, especially when that elephant owns both the Post and a company that will come head-to-head with what Apple is trying to build.

As long posited by the tech intelligentsia, Apple’s endgame here is pretty clear. The company can now offer the news as part of a power bundle designed to make you helplessly dependent on its ecosystem. Standalone access to the Los Angeles Times, Wall Street Journal, and New Yorker for the price of a Hale and Hearty soup is a pretty decent deal for consumers. If the price is knocked down to $5 per month if you subscribe to Apple Care, add Apple Pay to your phone, buy an Apple Watch, etc., it’s a steal. The broader ramification here is that Apple could use bundling to own a frightening share of a wallet that includes your banking, telecommunications, entertainment, professional equipment, fitness, and, potentially, health insurance data. How we feel about that as a society is a subject for another post.

Commerce operators in particular tend to be cynical about Apple’s privacy first approach but it’s helpful to remember just how much truly sensitive data Apple has on its customers that isn’t just shit you clicked online. Even if it’s faux moral grandstanding to ultimately launch their own ad tech product, I feel better that Apple at least gives lip service to privacy

If Apple succeeds, only one other company can build a bundle that is so deeply intertwined in our daily lives. Not coincidentally, it’s the company whose subscription product has a 90 percent renewal rate and counts 100 million members. While Apple owns the most ubiquitous content-consumption device in human history, this company actually makes one that is far better for reading.

Amazon is not a company to be dwarfed in scale of ambition and, like Apple, appears to have its eyes on the health care sector in the long term. For now, Amazon could package pretty tight bundles around adding premium publisher content to Amazon Prime and Prime Video. It could experiment with using the news as a lever to sell more Kindles and Alexas. If we’re really barreling toward a voice-dominant future, a morning where Alexa reads you personalized headlines may not be far off.

So in case you haven’t noticed, we aren’t barreling towards a voice dominant future. Two totally different hype cycles but worth remembering how convinced the punditry that voice was the future when you read about AI applications that have questionable utility.

In the months ahead, Amazon is going to make a far bigger play for media, partially out of patriotism and partially to provide another lever to make the Amazon Prime ecosystem even more frighteningly sticky. For Bezos, reviving the Washington Post is part civic mission, part petri dish for understanding how to build a successful media business.

Amazon has nipped at the margins by selling subscriptions through its platform, but it’s finally starting to get a bit more serious. The company is already making its first foray at directly hosting content on-site by republishing articles from top commerce publishers. While this looks like a tactic primarily designed to increase conversion rates from search, it’s a potential Trojan horse for building relationships with large publishers. Aesthetically, this has a long way to go before one could imagine reading a 3,000-word political think piece in this format. But it signifies that Amazon places a certain premium on the ability of content to boost its core business.

And, like Apple, Amazon has enough cash on hand to essentially acquire any media entity at any time. Access to content, publishing interfaces, design chops, and anything else you’d want for building a media business is just a swipe of the pen away.

Inthe 2010s, publishers found themselves as commodities in a grand battle between Facebook and Google to sell ads. In the 2020s, publishers will find themselves as a commodity in a grand battle between Apple and Amazon to sell superbundles.

This core thesis of the piece ultimately fell flat. For starters, “media” as I defined it here is just too small of a market to play into the grand strategy of Apple and Amazon. The whole magazine business is almost a rounding error in the Airpods P & L. To the degree that Apple and Amazon really did go head to head, it was in streaming, a much bigger industry.

Overall though, the whole China inspired “superbundle” idea has less steam than it did in 2019. Elon may have bought Twitter with those kind of grand ambitions but superbundle is a sort of 2017-2019 Silicon Valley vernacular relic. As Benedict Evans says, “AI and Everything Else” now.

Of course, this isn’t necessarily a bad deal for publishers, but more than anything else, this will once again intertwine media’s fate with the ethos of big tech leadership. For Facebook and, to a lesser extent, Google, the plight of journalism was acceptable collateral damage for the growth of their ad businesses. We must hope Apple and Amazon view publishers differently.

The best argument for Apple as media’s tech guardian is the fact that the company has consistently placed a premium on using highly qualified editors over algorithms to curate news. Of course, this looks radical only in the context of the dystopian approach of its peers.

Many have speculated whether Facebook’s legacy would be different if Mark Zuckerberg had hung around Harvard long enough to take a few of those pesky ethics classes. Tim Cook attended Duke, which means he learned that he has carte blanche to charge through opponents without ramification. Kidding (and tears for Tacko) aside, Cook hasn’t quite waxed poetic about the Fourth Estate à la Bezos, but he has gone to the Twitter bully pulpit several times to opine about the importance of a free press.

The now dead hyperlink here was Duke being the beneficiary of a number of bullshit calls and advancing in the NCAA tournament. Mercifully, they lost to Michigan State soon after with a team full of first round draft picks. Ha, Duke sucks.

As for Amazon, its overall sentiment on the press is quite hazy. On the one hand, Bezos has shown no hint of interfering in critical coverage of Amazon in the Washington Post, going so far as to hire a reporter explicitly to dig deep into Amazon’s skeletons. In 2016, New York went as far as to name Bezos “the Valley’s lone defender of journalism.” At the same time, Amazon is one of the greatest corporate manipulators of media in business history, using everything from leadership lessons to flying drone patents to control the narrative around Bezos’ company. If Amazon pushes deeper into publishing, which tenor would win?

I thought Bezos caught some unfair criticism for the Washington Post’s coverage— there were never obvious, proven signs of editorial meddling and for a while, the paper did well under his stewardship. But last year, the post lost $100M and Bezos looks primed to be the latest guy to find out that media is a damn hard business. And he’ll likely do what many billionaires have done before— get bored and move on.

Amid an unknown future for media, one thing is for sure: When it comes to the dissemination of information, it is big tech’s world. We’re all just reading in it.

Amazonia 

My quick take on the week’s most interesting story in the Amazon ecosystem

Profoundly Boring: Those were the scintillating words that Google staff engineer Diane Hirsh Thirault shared on LinkedIn following the layoffs. First off, I’m not gonna lie— it’s validating for me to write a piece and then see Google go and make my argument for me the next day and have its current employees lash out. Ocasionally good to feel like you know what you’re talking about.

Secondly, Diane’s a badass and a great writer through and through. But her post reminds me of something interesting. I’ve known several employees at all the big tech firms for years at the deep romanticism of eras past for employers has seemed gone for years at Apple, Amazon, Facebook and Microsoft. Folks I know at these companies are appropraitely mercenerial— most feel they have a great job they love but it’s a W2 job that can end at any time and folks are under no illusion to the contrary. Google somehow seemed to retain a certain early 2010s tech mythical status in its employees’ eyes long after other employer brand stars faded. I’d venture that’s all gone now.

Dispatches from America

A potpurri of vibes from across the land

Trump Wins New Hampshire Primary: I continue to be shocked by how many well-educated, politically aware folks do not understand that Trump vs. Biden is an inevitability in November. Trump is ahead of Haley 67-12 in the latest 538 aggregate poll. Spin whatever coping narrative you want that Haley’s results in New Hampshire show Trump’s weakness with independents or whatever but here’s the deal, Trump’s on a heater right now. Plenty of time left for that to change but denying the reality does Democrats zero good. I’ve written about how and why I think Biden wins in the end but I disagree with most of the punditry that New Hampshire showed real weakness for Trump.

Ultimately, Trump will run against Biden because the majority of American voters are casting ballots that say they want Donald Trump to run against Joe Biden for president. You’re free to feel a certain way about this—I certainly do— but it does no good to deny reality.

“The best argument against democracy is a five minute conversation with the average voter” is a fake quote that has been attributed to both Churchill and Thomas Jefferson. I still believe on a long enough time horizon, the people ultimately find a way to get it right.