Thursday, March 14, 2019

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Spotify's antitrust complaint poses risk for Apple - Business Insider

Posted: 13 Mar 2019 01:29 PM PDT

Spotify's antitrust complaint against Apple could pose a financial risk to the Silicon Valley company's services business, according to a new note from KeyBanc Capital Markets. The complaint comes as revenue from services has become increasingly important for Apple as it looks to counteract slowing iPhone sales.

In a blog post detailing why Spotify filed the complaint, CEO Daniel Ek described Apple's competitive advantage: it operates the App Store through which iPhone owners download and pay for apps, while also offering its own music service that directly rivals Spotify's.

"In theory, this is fine," he wrote. "But in Apple's case, they continue to give themselves an unfair advantage at every turn."

Apple takes a 30% cut of revenue from most App Store transactions, and even takes a slice from your monthly Spotify Premium fee if you subscribe via the iOS app. Ek says this makes it difficult to keep Spotify Premium priced competitively with Apple Music. Apple also requires app makers to use the App Store for all transactions, and limits the ability of developers to point users at outside payment portals.

"We believe this holds no practical purpose other than to force competitive services into higher cost structures and unfairly tax service activity on the iOS platform," KeyBanc Capital Markets' Andy Hargreaves and Tyler Parker said in the note published on March 13. As such, the firm believes Spotify's complaint has merit and could "carry significant weight" in the eyes of regulators.

If Apple were forced to change its terms as a result of the complaint, it could pose a risk to the revenue Apple earns from subscriptions and in-app purchases.

"We believe the most significant financial risk to Apple would come from a forced requirement to allow first party and other third party payment processing from within apps," the note read. "This would create competition for subscription and in-app payments that would likely drive the current 30% rate Apple collects down substantially."

KeyBanc Capital Markets estimates that the App Store will drive 12% of Apple's total gross profit in the 2019 fiscal year, and any major changes to the store's communication and payment terms could "meaningfully affect" the growth rate of Apple's services.

Repercussions stemming from the complaint could extend beyond financial risk to the App Store and impact Apple's reputation as a brand as well, the note says. While consumers may not be concerned with the details of the complaint, it could create a prolonged period of negative Apple headlines which may in turn "negatively impact Apple's retention rate at the margin," according to the note.

Apple's focus on services

Jimmy Iovine announces Apple Music during Apple WWDC on June 8, 2015 in San Francisco, California. Apple's annual developers conference runs through June 12.
Justin Sullivan/Getty Images

Revenue from services like Apple Music and the App Store are more important than ever for the company as it seeks to grow other product areas as iPhone sales are lagging.

The company said in its January earnings report that iPhone sales in the holiday quarter declined 15% compared to the year before, while global smartphone sales have stalled. Apple's services business achieved a milestone of $10.9 billion in revenue, marking an all-time high and a 19% increase from the prior year.

Spotify has filed its complaint just as Apple is expected to unveil new products aimed at bolstering its app and services revenue later this month. This includes a streaming video service for iPhones, iPads, and the Apple TV that would grant access to Apple original programs and shows from other media giants, according to Bloomberg. If Apple's video streaming service proves to be a hit, it could result in 100 million subscribers over the next three to five years, Wedbush analyst Daniel Ives wrote in a note from February.

Apple is also expected to launch a paid tier of the Apple News app that's being described by industry executives as a "Netflix for news," according to The Wall Street Journal. It will allow users to subscribe to magazine and newspaper bundles similar to the app Texture it acquired last year, as Bloomberg reports.

But multiple reports have suggested that Apple has been struggling to come to an agreement with partners for both its video and news services. The company is rushing to secure content to offer on the service alongside its own programming according to Bloomberg, while a report from CNBC last month suggested that talks between Apple and HBO had slowed. News publishers have also been reluctant to agree to the financial terms Apple has proposed for its news service, according to The Wall Street Journal, under which it would keep half of the subscription revenue from the service.

A call to break up big tech companies

Sen. Elizabeth Warren is calling on Trump officials to invoke the 25th Amendment.
Pablo Martinez Monsivais/AP

Spotify's antitrust complaint against Apple also comes after Democratic Senator Elizabeth Warren proposed a new plan that would regulate large tech firms like Facebook, Amazon, and Google and force them to roll back or otherwise divest some of their acquisitions.

The plan would designate major tech services as "Platform Utilities" and would prevent companies from operating a marketplace and competing in that same marketplace.

Although Warren didn't initially mention Apple in her proposal, she said in an interview with The Verge that Apple should be regulated too.

"It's got to be one or the other," she said. "Either they run the platform or they play in the store. They don't get to do both at the same time."

11 questions to ask when buying a used car - Business Insider

Posted: 13 Mar 2019 07:21 AM PDT

If you plan to buy the car outright from a private seller, you need to determine what your lump-sum limit is. If you're financing, then the ballpark price is important, but so is your monthly outlay.

The last time I bought a used car, I decided roughly how much I wanted to spend in total and then gave myself a range for the monthly payment, because I wasn't sure how the financing would shake out.

But I also decided to limit my upward wavering by just a few thousand dollars on the sticker price — that way, if I saw something that was a perfect fit, I'd end the search and simply buy the car. And that's what I wound up doing.

Keep your range narrow; if you're realistic, you should be able to find something you'll be happy with.

What about haggling over the price? With a dealer, I'm all for it — within reason. They're typically going to have better-quality used vehicles, so trying to negotiate some crazy deal is pointless.

Interestingly, private sellers have often used websites, such as Kelley Blue Book, to arrive at with a fair value for their vehicle. You can often tell right away whether they've been honest with themselves about their car's condition. If what you see wasn't what was advertised, the best course of action is simply to walk away rather than trying to hammer out some kind of deal.

T-Mobile expanding Caller Verified feature to seven more smartphones - Business Insider

Posted: 13 Mar 2019 06:31 AM PDT

This is an excerpt from a story delivered exclusively to Business Insider Intelligence Apps and Platforms Briefing subscribers. To receive the full story plus other insights each morning, click here.

T-Mobile announced it is expanding its industry-first Caller Verified feature, which alerts customers to likely scam calls, to seven additional smartphone models in the coming weeks.

Business Insider Intelligence

The feature, which uses STIR/SHAKEN protocols that rely on digital certificates to ensure the number calling you is trusted, was initially launched in January 2019 on the Samsung Galaxy S9 series.

Since the feature launched, the carrier says it's alerted customers to 225 million potential scam calls per week.

Here's why now is the perfect time for the expansion of T-Mobile's Call Verified feature:

  • Scam calls are growing their share of total calls in the US. Scam calls are predicted to account for almost half (45%) of all calls made to US mobile numbers in 2019, up from just under one-third (29%) in 2018 and 4% in 2017, according to First Orion.
  • US consumers are feeling the burden of robocalls. US consumers lost an estimated $1.5 billion to fraud in 2018, according to the FTC.
  • And they're getting vocal about it. Of all fraud complaints, imposter scams — when a scammer claims they're with the government or a well-known business to get a victim's money, for instance — are now the FTC's top report category.

And T-Mobile is poised to benefit by expanding its Call Verified feature:

  • T-Mobile can keep its customers loyal. The carrier had the largest share of loyal customers for the second consecutive year, with 16% saying they'd stick with T-Mobile no matter what in 2018, according to Business Insider Intelligence's Telecom Competitive Edge Report (enterprise only). But T-Mobile also took the hardest hit in loyalty compared with its rivals, as its share fell 7 percentage points YoY in 2018. Providing a tool to manage malicious calls can help T-Mobile keep its top spot for loyalty and prevent further slips in its lead.
  • T-Mobile will offer more consistently up-to-date anti-scam call solutions than its rivals. Both Verizon and AT&T currently combat malicious calls through apps, but T-Mobile is launching its solution at the network level. Since T-Mobile plans to update its network every 6 minutes, it'll be consistently providing customers with an up-to-date solution instead of relying on them to repeatedly update an app.

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Facebook is reportedly under criminal investigation over deals that gave Apple, Amazon, and other companies access to user data - Business Insider

Posted: 13 Mar 2019 04:24 PM PDT

Federal prosecutors have opened a criminal investigation into data-sharing deals struck between Facebook and makers of mobile computing devices like smartphones and tablets, reports the New York Times.

Under the terms of those deals, which the Times reported about in June, Facebook allowed device makers including Apple, Amazon, and Microsoft to access personal user data, including friend lists, contact information, and sometimes even private messages — and not always with the user's consent, the report alleged.

According to the New York Times report, a grand jury in New York has already subpoenaed information on these types of deals from at least two smartphone and other device manufacturers involved.

"We are cooperating with investigators and take those probes seriously," a Facebook spokesperson told Business Insider. "We've provided public testimony, answered questions and pledged that we will continue to do so."

News of the criminal investigation is the latest in a series of controversies surrounding the 2-billion member social networking giant. Facebook has been struggling to rehabilitate its public image amid revelations that it allowed Cambridge Analytica to improperly access the personal data of many of its users and the growing evidence of how its social network has been used to spread misinformation during the 2016 US Presidential elections.

Facebook's stock declined 1.5% in after hours trading on Wednesday.

As if to underscore the company's challenges, Facebook's social network suffered one of the worst technical outages in its history on Wednesday, leaving users and advertisers unable to access the site for much of the day.

Focus of the criminal inquiry is unknown

Facebook is already facing the prospect of multi-billion dollar fines to settle privacy investigations by the Federal Trade Commission and other agencies. But a criminal investigation would raise the stakes significantly.

Wednesday's Times report, which cited anonymous sources, said it was not clear what exactly the grand jury inquiry overseen by federal prosecutors is focused on, or when it began.

In December, following the Times report, Facebook said in a blog entry that these partnerships were necessary to enable certain social features in outside apps, like logging into a Facebook account from a Windows phone, or sharing what Spotify song you were listening to via Facebook Messenger.

"To be clear: none of these partnerships or features gave companies access to information without people's permission, nor did they violate our 2012 settlement with the FTC," wrote Facebook in that blog post.

Most of those partnerships have ended over the last several years.

The United States Department of Justice declined to comment on the report.

Google cofounder Larry Page threatened to leave if the company didn't find a way to keep him in control, newly unsealed court docs reveal - Business Insider

Posted: 13 Mar 2019 11:48 AM PDT

Google's board of directors created a third class of stock in 2012 in part to placate cofounder Larry Page, who was worried about losing control of the company, Bloomberg reported Wednesday, citing recently unsealed court records.

Page fretted that fellow cofounder Sergey Brin and top executive Eric Schmidt, who along with himself held shares that collectively gave the threesome control over the company, would sell their super-powered stock, Bloomberg reported. Starting in late 2010, Google's founders and board started negotiating over a plan to create a third class of stock that would help ensure that he would retain control over Google even if they did so.

In June 2011, with negotiations still ongoing, Page suggested he might resign if the company's board didn't resolve the dispute to his liking, according to the court records cited by Bloomberg.

Page "leveled a veiled threat in that 'why should I sacrifice and work so hard if I might not be in control,'" Paul Otellini, a Google director at the time, said in a 2011 email.

At the time, Google, now a part of holding company Alphabet, had two classes of shares. Class A, held by everyday investors, had one vote per share. Class B, held by Page, Brin, and Schmidt had 10 votes per share. Those super-powered shares gave the threesome 66% of the shareholder votes at Google.

But under the terms of Google's corporate structure, if any of the three top officials sold their Class B shares, their stock would be converted into Class A shares, and the threesome would lose a portion of their control. Their control could also be diluted if Google issued new Class A shares as part of an acquisition.

Other tech companies have followed Google's lead

Google, now a part of holding company Alphabet, ultimately created a third class of stock— Class C shares — that it distributed as a dividend to existing shareholders. Those shares come with no votes, meaning that Google can issue an endless number of them without affecting the voting control held by Page, Brin, and Schmidt.

The revelation about Page's threat to leave the company was found in documents filed in a shareholder lawsuit over the establishment of the Class C stock. The investor who sued complained that Google was giving its founders additional control over the company at the expense of regular shareholders without compensating investors for it. The investor was also worried that the new shares would allow the founders to sell off significant numbers of shares — and thus dramatically decrease their economic stake in Google — while still retaining control of the company.

As part of a 2013 settlement of that suit, Google agreed to require Page, Brin, and Schmidt to sell their Class B shares whenever they sold Class C stock. It also agreed that any attempt to change the requirement would have to be approved by Google's entire board.

Google was one of the first tech companies to have a dual-class stock structure. But that set-up has since been copied by Facebook and Snap and has become increasingly popular among Silicon Valley startups looking to go public. Advocates have touted them as a way to allow corporate founders to focus on their organization's long-term success, rather than on the day-to-day concerns of short-term investors.

But such stock structures have drawn increasing scrutiny and criticism of late, because they can insulate corporate insiders from legitimate shareholder and societal concerns. Such worries have been highlighted at companies including Facebook, which has seen a string of scandals over the last two years, and Snap, which has struggled financially and operationally since becoming a public company.

Read this:The era of the all-powerful tech CEO has only just begun, even though Facebook and Snap show why that's a bad thing

Some institutional investors have been pressuring stock markets and indices to exclude from their ranks companies that restrict the voting rights of everyday shareholders.

Got tip about Google or other tech companies? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

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