Tesla Cars Recall and Apple's EU Antitrust Challenges

From Marhard where Innovation, money and power Collie in Silicon Valley, NBN.

This is Bloomberg Technology with Caroline Hyde and Ed Ludlove.

I'm Caroline Heinder Blomberg's Weltead quarters in New York, and I'med Ludlow in San Francisco.

This is Bloomberg Technology coming up.

Tesla recalls two million cars to fix autopilot's safety flows.

Well breakdown what it.

Means for drivers and indeed the eed maker as it faces its biggest recall ever.

And Apple is set to be hit by an EU antitrust order in its fight with Spotify over rules that govern the iPhone makers music streaming rivals. Will break down the potential ban.

Plus, for the first time ever, Netflix is revealing viewer data on every show in an effort to boost transparency that's in the way of the whole with strikes. We'll discuss that and so much more throughout this hour.

The other top top story is Tesla, and actually Tesla's declines have really accelerated. This is a recall in name only of two million vehicles. Tesla plans to fix the issues around autopilot with over the air software updates. Those started on the twelfth, which was yesterday. Let's get the full picture and bring in Bloombergs keep laying out of Washington, DC. What do we know about this Tesla auto pilot recall? Well, this recall is years in the making. Literally.

NITSA, which is the top auto safety regulator here in Washington, first began looking at autopilot in twenty sixteen, and the pace of the investigation is definitely picked up under the

I mean, what is it?

The agency has open more than fifty special crash investigations involving Tesla cars that are suspected to be linked with the autopilot. Ultimately, it feels as though this is just an awareness an education process to the driver. Why isn't this something that other regions are looking into, not just the United States.

I think a lot of this is centered on Tesla's marketing. As I mentioned of the systems in the view hicles. I mean, they have the system that they're calling full self drive, and even they acknowledge that the cars are not capable of driving themselves. So I think that's why there's a bigger focus on this in the United States right now, a.

Little bit more of a marketing message perhaps, and indeed just making people, oh, basically have their hands on the steering wheel that little bit more. Keith Lang, really great to have you on the show. Thank you so much for joining us. Meanwhile, let's stick on Tesla and at least it's leader Elon Musk because x we understand a course, his social media platform is on track to bring in roughly two and a half billion dollars in advertising revenue

How much of a fall off is it?

Yeah, I mean it's well over forty percent from the last full year that the company reported, which is twenty twenty one. Obviously last year we didn't get full numbers because the deal had closed in the middle of the year.

But you know, this is a huge deal.

Twitter or now X has historically made about ninety percent of its revenue from advertising, right, And so when you see this big decline in their core main business, it's obviously not a great sign.

And that's why you see Elon out.

You know, a couple of weeks ago, he was saying, hey, this advertising issue could lead to real trouble for the company. He's talked about bankruptcy before, right, And that's because this core part of their business is really struggling.

Ka, you and I have been crunching numbers and talking as sources about what's happening right now because a lot changed from the second to the third quarter, third quarter to fourth quarter. Minderstanding is it's seventy five percent ads, and then the twenty five percent that remains isn't just subscriptions for premium or premium plus, right, it's data licensing.

Yeah, actually more data licensing than subscriptions. You know, what our understanding is that the subscription part of that business is very small. I think the external estimates are about one hundred and twenty million a year. We'd heard that there's just over like a million PAIN subscribers right now. The data licensing historically has been you know, a much bigger business, five hundred.

Plus million dollars.

And that's for you know, people who are paying for access to what we call the fire hose of tweets, right, all of the tweets that are coming through public tweets. And so that business I believe has stayed maybe a little bit stronger because it's not as impacted by you know, Elon Musk coming out and saying the things that he says that advertisers are bothered by.

Right and real quick. An ex executive did respond to our story. You can read his full statement in the story, which says, we gave an incomplete picture of what their business currently looked like Bloombo's technologies. Kirt Wagner, thank you, Kara, what you got?

Well, let's dive into time for talking tech head because we're going to stick on the world of Elon Musk. But SpaceX this time will sell insider shares ninety seven dollars apiece and a tender offer a price increase that moves the value of the space and Satellite company closer to one hundred and eighty million dollars, according to sources. Meanwhile, Tesla posted a video showing improvements it's made in its

Ed what for Got coming up on the show. Apple is in the crosshairs of EU antitrust regulators about its app store rules for music. Rival's going to bring all those details on that Bloomberg exclusive plus Netflix ready to tell the world how many people watch it shows. We

Yes, so essentially the fine itself could be up to ten percent of annual sales to Apple and that's a real concern for the company, of course, and in the past we've seen that the EU has really been at

Being discussed here.

This suit was originally brought forward by Spotify almost four years ago. And what we're essentially seeing now is that Apple may have to change its practices. It may have to allow for platforms to facilitate the app store to facilitate people being able to.

Go to other subscription platforms like Spotify.

And the reason for this for Apple to changing their praxices, this isn't the first time that they've actually thought about doing this off the back of EU legislation.

We also saw this, for instance when the app Apple app Store.

The Apple announced earlier this year that they would make we would most likely have to consider allowing third party app stores to access access to iPhones as of twenty twenty four off the back of the Digital Markets app.

Other than competition, the EU is being pretty busy. Aggie is also being busy when it comes to labor protection. Just tell us what they're considering or proposing when it comes to workers of well delivery for example or over.

Yes.

So essentially, the Platform Workers Directive is about trying to standardize the labor rights for gig economy workers. Essentially, there are a lot of people who work for these platum forms that are currently deemed self employed, and the EU believes that around five million so about nineteen percent of the self employed platform workers in the EU are misclassified and should actually be considered employees, and they have bailt out a system of criteria. These criteria include, does the

But this is still in a preliminary discussion.

The deal has been met, but it's still awaiting approvals from the European Parliament.

Business models under fire, Aggie Cantrell, thank you so much for joining us.

Meanwhile, let's stick on a part of Europe. Because Airbnb's Irish.

Unit has agreed to pay the Italian tax authorities five hundred seventy six million euros, which is two hundred and six hundred twenty one million US dollars, to settle allegations that it hadn't paid enough tax from twenty seventeen to twenty twenty one. Now the home showing company says it doesn't acknowledge quote any liability as part of the settlement, according to the regulatory filing ed what's going viral?

Yeah, what has been going viral is Netflix releasing viewer data on every single show a movie on its service. Is the first time that what the streaming giant says will be regular, reports Bloomberg's Flex Gillette joins us, Now, this is the biggest disclosure from Hollywood or any streaming service anyway. Infinite amounts of data on eighteen thousand titles. What do we actually learn from it? Or we learned a lot.

I mean, we've been waiting for this moment for ten years, wondering what exactly people are watching on Netflix. And I think the biggest takeaway from yesterday is that, you know, more than fifty percent of the view in the first six months of the year was driven by Netflix originals, so original movies, original TV series, And that's sort of a validation of all the spending that has been done on original programming by these streaming services over the past several years.

I got to say, I haven't watched a single minute and in any of those I mean, maybe that's what's more to a parent than it is to intend netflix lack of addiction. But ultimately this has been forced in some way by the strikes. Why was this transparency wanted.

Well, the creative community has been demanding more transparency for years. I mean, there was really no way to know of your show was a hit, was it a failure. You kind of had to take this streamer's word for it. And so Netflix, you know, yesterday acknowledged that part of this was that by keeping this data to themselves, it had built up all this mistrust with their creative partners. And so yeah, this is a way for everybody to know this is where you stand, this is what people

And it's important for the act is in the context of the strikes we just had, because this was at the center of tools.

Yeah, I mean, also the compensation model in terms of you know, rewarding you know, creators and actors you know, and writers residuals based on you know, if your show was really popular. Part of that was you need to know what's popular. Now that data is going to go to the guilds anyways, but it also now allows the

Thin begs for Lexilatt, thank you so much.

I think investors need to get confident that the.

FED is done raising rates. I don't think they need to lower them a.

Bunch for the IPO market to happen, but I think are to pick up. But I do think they need to get a sense that may rate rising is done, which you know, who knows. I expect we'll see more tech IPOs in twenty twenty four than we saw on twenty twenty three, but that's not very hard to do. You don't need many.

Important As we look ahead to FED Day, which is today a little few hours ahead of time, Mitchell Green of lead Edged Capital with his outlook on what fed's decisions.

Mean for the IPO market.

Joining us now with her perspective Rachel Gering's just Ey ipo practice cohed and is Rachel the IPO market, particularly tech IPOs go be dictated by Macro or is there some more well LP pressure that's going to come in.

I think it'll actually be a combination of both.

But the improving macro backdrop is certainly going to help the situation and making it encouraging. Sitting here today, as I look ahead to twenty twenty.

Four, Rachel, just like me getting organized with my holiday shopping. My understanding is and behind the scenes, there's a lot of work going in to preparing for IPOs in twenty twenty four, the groundwork and confidential filings. Does that tally with what you're hearing from clients and from your network.

Absolutely, not only what we're hearing from clients, but what we're experiencing firsthand. Really encouraged by the amount of preparation companies are putting into their IPO plans, whether that's for twenty twenty four or even beyond into twenty twenty five. Clients are really taking this opportunity.

Of the lacking of IPOs happening today, that's being used and the time is being used today to prepare for the future and really to be able to optimize when the market does return, allowing these companies that optionality to take hold of that market opportunity when it's right for them.

There is a market mechanics story happening where companies are filing confidentially and then doing nothing sitting on it. In your experience, how much flexibility does that actually give a company filing confidentially on the timing and method of going public.

I think it really does provide a lot of optionality,

And then be ready to be a public facing company in many ways. Member, speaking to Fijisimo over at Instacart after their listing, I was like, well, how is it off? Your first cord rouping in public companies, just like I've kind of been doing this for ages because they've been waiting to go public for so long, they've had all that documentation and rythmarole.

Anyway to that point, are you likely.

To see, well, some of the companies that do eventually becoming go public have a similar sort of business model to an instacot in terms of showing some sort of.

Evidence of profitability.

Do they have to be talking up AI a lot at the moment or will more types of companies come.

I think we're going to continue seeing companies come to market from a broad range of sectors. I anticipate looking ahead to twenty twenty four, it will probably be much of the same, so meaning large companies scale already with profitability or eminently reaching profitability. So I don't anticipate that

Ultimately, do you think the sort of pressure that a lot of these companies are on the to go public for a liquidity event to give money back to LPs to employees. Has it become in some way unsustainable? Have there been too many VC backed companies of late?

Well, when we definitely are seeing you know, a rise in VC backed companies and then long long holdings, right, So there's definitely pent up demand. When you think about pe VC investors, they've been holding these investments for a long period of time, definitely anxiously awaiting a monetization event of some sort. We're seeing the IPO market, you know slow, the m and A market slow, So definitely a lot

I think to get.

Deals done going into twenty twenty four, having realistic pricing expectations as an absolute must.

Rachel, what about the competing forces? What are the biggest factors that are causing technology companies in particular to hit pause, hit the brakes and hold them ongoing public.

Really, I think the broader macro backdrop, I think is one reason why companies are waiting on the sidelines.

We'll see what happens today.

I think everyone is expecting the Fed to hold tight on interest rates. You know, we've had IPOs and high interest rate environments before, so it doesn't mean that we can't continue.

It's the predictability.

I think companies want to know that rate hikes have stopped and then even see some encouragement that they might even start to come down sometime in twenty twenty four. So that level of predictability will be definitely helpful for the IPO backdrop, and then broader macro trends that the data is trending in the right direction. So it provides hope for twenty twenty four, absent any unforeseen shack.

Rachil Gering of Ey, thank you so much.

Welcome back to Blue meag Technology. IM Caline Hide in New York.

I met love though in San Francisco, Caro. I was going to bring you a magic market moment, but then trading on the NAZAQ one hundred in the session conspired against me. This is what the NAZAT one hundred looks like here to date, and we're way off session highs this this morning, but for just a moment, we're at a fifty percent year to date gain on the Nasdaq one hundred. And the reason I bring you up bring that up so you look at the far left n

Well?

Thanks, Ed, good to see you again. Yeah exactly.

So, I mean, you know, we're expecting the FED to pause and to start cutting twenty twenty four. And when the first against cutting twenty twenty four, then market parta' spens like us probe Que hundred capital funds, we began to build in these rate path into our financial models and really began to do more deals and all things.

Eeople.

You know, prices of companies are just a future casual divided by discount rate, which is basically the fund rate plus a premium. So when the gnometer goes down, the present of these stat should go up. And that's why you're seeing the market reactions in public markets, and I expect that will extractly to the private markets in twenty twenty four as well.

Jo.

The reason we love you is not only because you're so active in the VC community but also used to work within monetary policy over at the FED, and I'm interested as to how much your view on valuation has shifted. All your pitches have ultimately been based upon the fact that all these valuations we see at very heavy heights. It feels like the AI is still happening when interest rates are pretty high, and they might come down.

Well, a couple of points.

One is, you know, the last time I was I was on your show and made the point that if AI is this big in a very tough monitored policy environment, imagine when monitor policy and financial conditions received, how much bigger they a phenomenon is going to be.

And AI did be here.

The total jule market is unthinkably big. But when it comes to fintech and VC investments, you know right now, you know, you know, I speak with a lot of LPs, whether they're some wealth funds and two stands, pensions, family offices. You know, if you're an LP, if you put yourselfing,

I just think of, for example, those that did decide to take it on the chin when it came to valuation. I think of a Stripe for example, and still some of those shares are available on the secondary market for a lot less than their peak valuation, but not all are below. I think of SpaceX for example, that I know is in your portfolio, and they're currently looking to be selling inside shares at the moment at what huge valuation.

What do you make of that?

Yeah, I would say, you know, you know, when I look at the name, let's stripe, you know the fact that it's evaluation, the new round is down fifty percent from the last round is actually not a surprise.

There's a couple of reasons.

One is, know, you know, just you just put in a higher interest rate in the financial model that the fifty billion or so invaluation is actually you know, fair value, right o versus the ninety five billion dollars that they had to raise that lash round. And the second thing is, you know, in public markets, whether you look at you look at the peer group, of so far marketa you look at you know, New Bank, the local et cetera, Robins.

Hey, Joe, been writing any checks in the world of AI, do you want to tell us about.

I've been working a lot on these names again. You know, AI is you know, as we look at you know, let's not. I was going to show me the point.

That AI is really software squared.

AI is the next generation of technology as we think about you know, the evolution of tech from mobile to internet, the cloud, the AI. AI is just the next generation of technology. And so you know, right now, I guess what I'm seeing in in the private markets. You know, we started in twenty twenty one. A lot of the deal flow that begin se in twenty twenty one was getting a little bit repetitive. For example, you will see many many payments businesses for every single bit, for every

Joe, what's going to be keeping you busy in twenty twenty four, you know, whether it's thematically or you're just under pressure to find some exit somewhere from your existing portfolio.

Yeah, you know, we have several companies in the preactial pipeline and we expect them to file in twenty four and twenty five. And then second to that is when we look at new opportunities. There's two strategies. One is we're working at a lot of secondary opportunities because some of the early shareholders would like to cash out, they'd be in the company for ten to fifteen years. Some of the early vcs also need to seek access because their funds have to be shut down their LPs for

Has and has not show jaw. Thank you so much, Millennia Capital. Great to have you on. Meanwhile, let's just you gears a little bit and go back to the world. That was all the hype back in twenty twenty one.

Not so much now.

Crypto three Hourrows Capital co founder Sushow for the first time faced questioning in the Singapore court about the crypto fund's collapse, giving liquidators their best chance yet to gather information as they seek to.

Recoup some of the billions of dollars for creditors.

Now, the two day court hearing this week requires you to respond to lawyers for the liquidator to know people familiar with the matter, said ed, all.

Right, coming up here on Bloomberg Technology, Charlotte Slayman from Public Knowledge joins us in the efforts to rain in the power that Google and Apple wheeled over the wrapp stores. We will get back to that top story about Apple's antitrust action in the EU as well. This is Bloomberg Technology.

Let's just take another look at the shares of Apple and Spotify, because, as we were mentioning earlier, Apple is set to be hit by an EU antitrust order in its fight with rival music streaming platforms such as Spotify. Greenberg's Mark German joins us now to discuss what seems to be everyone taking aim and these app stores.

What's the nuance in this one? Mark?

Yeah, So today we reported the European Union is going after Apple about this interesting rule, right that actually Apple mitigated a couple of years ago.

Right, So, Apple for.

A long time did not allow outside developers to advertise lower pricing from outside the app store. The other thing Apple didn't allow or developers like Spotify to include a button in their app where you can click the button to go to Spotify's website. To sign up, they made you sign up via the app store through in app purchase, which gives Apple a thirty percent cut. Now, Apple mitigated this starting in late twenty twenty one, they allowed developers

Bloomberg's Mark Guman there with a pretty decent explanation of anti steering provisions and on that fine up to ten percent of global revenue, which if you take fiscal twenty two or the estimate for twenty three, is forty billion dollars potentially in fines. Whether or not it happens, we will see. Let's keep the conversation going on Apple and also talk about Google after its defeat to Fortnite maker

Yeah, so this is a problem that we've seen in the US as well, and we don't have that legislation in place right there's legislation in Congress right now, the Open App Markets Act, that would address this rule that Apple usually uses in the US that prevents apps from being able to tell customers you can get a cheaper price if you come directly to our website. So that continues to be a problem here. Consumers are paying more as a result.

These are big stories, but what is always so surprising is the lack of response in the stock or the share price. I know that's not your domain, but it begs the question, how likely is it that the courts in the United States or the European Commission in Europe will actually follow through in making Apple, as an example, Google, a just policy.

Yeah, so I think they've been learning over time.

We absolutely have seen antitrust cases in Europe that have been successful until you get to the remedy stage and the remedy that they choose is not effective and so competition doesn't really come in and that's really frustrating from the perspective of a consumer advocate. But I think that's something that the enforcers are learning. Those remedies can be really difficult to craft, but they're learning over time, and so I'm hopeful that they can be more effective going forward.

And how will they become more effective? Because thus far, I mean Congress has been looking into competition policy more broadly, but to put it bluntly, that nothing much of significance has been done. The FDC, meanwhile, has been trying to stop certain deals going through and failing there.

I'm interested as to whether you think there will be.

A shift from a actual putting the right laws in place, even if the courts We're.

All not going to hold our breath in the Supreme Court, I guess where Epic Games goes next.

Yeah, So I think we need to be using both of those tools right. Congress needs to pass the legislation that they've been working on. It's not just the Open App Markets Act, but there's the American Innovation and Choice Online Act. There's the America Act, which focuses on ad technology stack. So Congress needs to work on that legislation so that they can get it over the finish line. At the same time the agencies are bringing these cases.

These can both be long processes.

Unfortunately, to move the law forward by bringing case after case it can take a long time, and it makes perfect sense that the agency would lose the first few cases. This is a strategy that the FTC and DOJ have used in the past. In other areas, in pharmaceuticals, in hospital mergers, they are slowly improving the law. That's why I think Congress really needs to jump in because we cannot wait for that long process of bringing case after case to show fruit.

We need to move now.

Do you think business models will change because of well legislation in the EU? When we think of the DMA, do you think I mean South Korea is twenty twenty one when they had the first law to require other payment systems within these app stores?

Yees.

So I think that's another example where I'm hopeful that some learning will take place because Apple was able to make some small changes but still prevent competition from coming in. But yes, I think these companies may sometimes as they're making changes for one jurisdiction, they may find it more efficient to make that change across the globe, or they may not. So I think it's also on the other jurisdictions, governments, and on consumers to notice. This is what I'm hoping

For ourselves, we.

Want to thank you Public Knowledge Competition Policy director Charlotte's Layman. Really interesting take on what has been a thick and fast week when it comes to competition. Meanwhile, let's just go out to Germany right now, because Actual Springer is granting chat GPT maker open Ai the right to use content from its news outlets to develop artificial intelligence models and respond to queries from users.

Now.

It's all part of a deal announced today.

San Francisco based open Ai will pay Actual Springer for articles and other content from the publications that include like political business inside it properties like build and develot, the company said in a joint statement Fit Dance Well. It's reportedly backing away from plans for its next virtual reality headset from its Pico subsidiary.

Now.

The information says that Pico will instead focus it efforts on an updated version of the latest headset, the Pick of Four.

This comes them in some pressure, of course, and in terms of competing with Meta in.

The VR market right I reported earlier this year that Meta and Tencent are teaming up on a headset in China. It's a good segue into the broader topic of augmented reality. Our next guest founded a company that uses AR to help monetize tasks in the manufacturing industries. Joining us now with more is Devin Bouchan, CEO of Squint, which recently announced a thirteen million dollar Series A funding round led

Thanks for having me ed, It's great to be here. So Squint is an augmented reality product that lets you create a how to guide for every machine on the factory floor. So manufacturing today is going through a period of really high turnover and as a result, they're having

You're clear, you are not an OEM, You're not a maker of a headset. What you're doing is providing a very specific software platform best use of the headset exactly.

So Squint actually works on any phone or tablet today and manufacturers can pull it up instantly and basically go through this process and make any operator and expert.

You have a pretty lean team when it comes to building this sort of software and technology. I'm interested, Devin in Ultimately, therefore, what you do with this capital?

Where do you need to be driving now?

Because you've already got a lot of well known customers and think involve those emas Culgate.

Palm on it for example.

Yeah, you know, we're really excited that we raise this Series A and really now we're looking to invest in our go to market efforts as well as our engineering, product and design org. And you know, we're thrilled to basically grow this footprint of impact that we've created with our customers.

How expensive is talent now to get with Squint is that one of the top costs right now?

Yeah, yeah, so I think you know, talent is always a hard thing to procure, especially in the Bay Area, and with Squint, you know, I think the attraction with working on new technology like this is a big help. And you know, when we work with our customers, we repeatedly hear that they've cut their training time in half, and that's really attractive to new talent.

And you know, in Silicon Valley, Devin Squint's essentially a developer, right And I wonder how much fiction straint. The hardware is a you kind of technology agnostate, whether your customers use devices that are iOS or Android, how does it work in practice inside a customers factory.

Yeah, so we are technology agnostic. This works on an iOS tablet or an Android tablet or phone. The way that it really works is, let's say, I'll give you an example. So a couple of weeks ago, I was at a large food and beverage manufacturer.

Which one I can.

I'll keep going, But they had a robot arm that only one expert knew how to use, and I was only there for a couple hours. So what we did was we actually walked up to this arm and I made a map in Squint. This takes about a minute. It just uses the camera, no additional expertise required. And then I filmed a video of that operator doing their job.

Therein lies the selling point for Squint. Right now, we thank you so much CEO Devin Brashan joining us on the technology in the manufacturing, particularly arena.

Meanwhile, that does it for this edition of Bloomberg Technology.

In Yeah, it's been a busy world week from AI to anti trust, Loot's recap on the podcast. Lots of you listening to the podcast wherever you get it, Apple, Spotify, iHeart, and every day we're publishing it to the Bloomberg platform and don't forget the show is also on YouTube on the Bloomberg Technology YouTube account. Big week still to come for San Francisco and New York City. This is Bloomberg Technology